|U.S. SECURITIES AND EXCHANGE COMMISSION
|---------------------------------------
|Washington, D.C. 20549                 
|                                       
|FORM 10-KSB/A                          
|                                       
|AMENDMENT NO. 1                        

|[X]   | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)                
|----- | -------------------------------------------------------------
|      | OF THE SECURITIES EXCHANGE ACT OF 1934                       
|      | For the Fiscal Year Ended September 30, 2004                 
|      |                                                              
|      | OR                                                           
|      |                                                              
|[   ] | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)            
|      | OF THE SECURITIES EXCHANGE ACT OF 1934                       
|      | For the Transition Period from _____________ to _____________
|      |                                                              

|Commission File Number 0-32491                
|----------------------------------------------
|                                              
|TREK RESOURCES, INC.                          
|(Name of small business issuer in its charter)
|                                              

|Delaware                                 | 75-2416059         
|---------------------------------------- | -------------------
|(State or other jurisdiction of          | (I.R.S. Employer   
|incorporation or organization)           | Identification No.)
|                                         |                    
|4925 Greenville Avenue, Suite 955        | 75206              
|Dallas, Texas                            |                    
|(Address of principal executive offices) | (Zip Code)         
|                                         |                    



|(214) 373-0318                                                                                                                                                                                                                                                                                                                                                                                                  
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|(Issuer's telephone number, including area code)                                                                                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                                                                                
|Securities registered under Section 12(b) of the Exchange Act:                                                                                                                                                                                                                                                                                                                                                  
|None                                                                                                                                                                                                                                                                                                                                                                                                            
|Securities registered under Section 12(g) of the Exchange Act:                                                                                                                                                                                                                                                                                                                                                  
|Common Stock, Par Value $.10 Per Share                                                                                                                                                                                                                                                                                                                                                                          
|(Title of class)                                                                                                                                                                                                                                                                                                                                                                                                
|______________________________                                                                                                                                                                                                                                                                                                                                                                                  
|                                                                                                                                                                                                                                                                                                                                                                                                                
|Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 the past 90 days. YES [X]         NO [   ]                                                                                
|                                                                                                                                                                                                                                                                                                                                                                                                                
|Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B not 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.   [X]                                                      
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|State the issuer's revenues for its most recent fiscal year.    $8,881,898                                                                                                                                                                                                                                                                                                                                      
|                                                                                                                                                                                                                                                                                                                                                                                                                
|State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was sold, or the average bid and asked price of such common equity, as of December 15, 2004 (for the purposes of this calculation only, directors, executive officers, and 10% or greater stockholders are deemed to be affiliates): $2,566,742
|                                                                                                                                                                                                                                                                                                                                                                                                                
|As of December 15, 2004, the issuer had 3,536,469 shares of common stock outstanding.                                                                                                                                                                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                                                                                
|Documents incorporated by reference: None                                                                                                                                                                                                                                                                                                                                                                       
|                                                                                                                                                                                                                                                                                                                                                                                                                
|Transitional Small Business Disclosure Format (check one):   YES[]NO[X]                                                                                                                                                                                                                                                                                                                                         
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|The Form 10-KSB of Trek Resources, Inc. for the year ended September 30, 2004 is being amended to (i) amend Item 1.-Description of Business in response to a comment letter received from the Securities and Exchange Commission (SEC), (ii) amend Item 6.-Management's Discussion and Analysis or Plan of Operation in response to a comment letter received from the SEC, (iii) amend Item 10-Executive Compensation in response to a comment letter received from the SEC, and (iv) amend Item 13.-Exhibits to update the certifications of certain executive officers as of the date of this amendment. The Form 10-KSB is hereby amended and restated in its entirety (other than the Exhibits previously filed with Form 10-KSB).
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|TABLE OF CONTENTS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
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|PART I   |          |                                                                                                                
|-------- | -------- | ---------------------------------------------------------------------------------------------------------------
|         | ITEM 1   | DESCRIPTION OF BUSINESS                                                                                        
|         | ITEM 2   | DESCRIPTION OF PROPERTY                                                                                        
|         | ITEM 3   | LEGAL PROCEEDINGS                                                                                              
|         | ITEM 4   | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                                            
|         |          |                                                                                                                
|PART II  |          |                                                                                                                
|         | ITEM 5   | MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND SMALL BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES 
|         | ITEM 6   | MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION                                                      
|         | ITEM 7   | FINANCIAL STATEMENTS                                                                                           
|         | ITEM 8   | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE                           
|         | ITEM 8A  | CONTROLS AND PROCEDURES                                                                                        
|         | ITEM 8B  | OTHER INFORMATION                                                                                              
|         |          |                                                                                                                
|PART III |          |                                                                                                                
|         | ITEM 9   | DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
|         | ITEM 10  | EXECUTIVE COMPENSATION                                                                                         
|         | ITEM 11  | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENTAND RELATED STOCKHOLDER MATTERS                  
|         | ITEM 12  | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                                                                 
|         | ITEM 13  | EXHIBITS                                                                                                       
|         | ITEM 14. | PRINCIPAL ACCOUNTANT FEES AND SERVICES                                                                         
|         |          |                                                                                                                



|SIGNATURE PAGE
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|              

|APPENDIX A | F-1
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|PART I                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
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|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|ITEM 1.      DESCRIPTION OF BUSINESS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|General                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|Trek Resources, Inc. is an independent energy company engaged in the exploration, development, exploitation, and acquisition of on-shore oil and natural gas properties in conventional producing areas of the United States. We originally incorporated our company in the State of Utah in 1983 under the name of Quasar-Tech, Inc. From 1983 until 1992, we engaged in various types of business activities, including the manufacture of oil and natural gas recovery equipment. In 1992, we concentrated our efforts in the production of oil and natural gas when McGowen Oil & Gas Company, Inc., a Texas corporation, merged with and into Quasar-Tech, at which point we changed our name to McGowen Resources Company, Inc. We continued operations under this name until June 2000, when we changed our name to Trek Resources, Inc. In February 2001, we merged with and into a wholly owned subsidiary in order to change our state of incorporation from Utah to Delaware. We conduct our primary operations in Oklahoma and Texas. To date, we have grown almost exclusively through the acquisition of producing properties and prospects. Our corporate offices are located in Dallas, Texas.
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|At September 30, 2004, we owned proved reserves of approximately 10 Bcf of natural gas and 1,436 MBbls of oil aggregating to approximately 3,102 MBoe with a PV-10 of $40 million and a standardized measure, which is a PV-10 value that is adjusted to reflect the estimated effects of federal income taxes, of $30 million. At September 30, 2004, approximately 46% of our proved reserves were oil and 54% of our proved reserves were natural gas. At September 30, 2004, we had interests in 370 wells, including 298 wells (including injection wells) that we operate. Reserves that are classified as proved developed producing totaled 1,316 MBbls of oil and 6.7 Bcf of natural gas.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|We strive to enhance stockholder value by expanding our oil and natural gas reserves, raising production levels, and increasing cash flow. Our business strategy emphasizes refurbishing and improving the production potential of properties that already produce oil and natural gas, along with exploitation through development of non-producing and undeveloped reserves on existing properties. To implement this strategy, we have focused on acquiring properties that have multiple geological zones of oil and natural gas reserves that can be produced from shallow to medium depths. We attempt to maintain a balance of oil and natural gas prospects and reserves to limit the risks of price volatility.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|In the past we have financed our acquisitions of properties through bank borrowings. To date, drilling and workover (expenditures to restore or increase production) activities have been financed by cash flow from operations. We participate in exploration on a limited basis as a partner with other oil and natural gas companies in order to reduce the risk inherent in these activities.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|We prefer to act as operator of the oil and natural gas properties and prospects in which we own an interest, although we do operate as a contract operator for approximately 19 wells for other owners. We presently operate approximately 80% of the oil and natural gas wells in which we have an interest.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|Duties of the operator of an oil or natural gas property include:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              



|- | supervise production;                                                                                        
|- | -------------------------------------------------------------------------------------------------------------
|- | maintain production records;                                                                                 
|- | contract with field personnel to oversee the general operations of the properties;                           
|- | perform other functions required for the production of oil and natural gas; and                              
|- | monitor performance, both operating and financial; strive to optimize cash flows derived from the properties.
|  |                                                                                                              



|Industry Language                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
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|The oil and natural gas industry is characterized by the use of very precise specialized language. The following is a brief explanation of certain industry terms which we use in this annual report on Form 10-KSB. We believe this explanation will help you understand our operations, risks, and strategies. (Certain other technical terms are defined in a "Glossary" located at page 28).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
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|We use five different terms to describe the status of our oil and natural gas wells. A "development well" is a well drilled within a known oil and natural gas reservoir with the intention of installing permanent equipment to produce oil and natural gas. An "exploratory well" is a well drilled in an area not known to be an oil and natural gas reservoir. A "producing well" (also called a production well or a productive well) is a well that is currently producing oil or natural gas or that is capable of production. A "dry hole" is an exploratory or development well that is incapable of producing oil or natural gas in sufficient quantities to justify an economic completion of the well. Finally, a "completed well" refers to a well in which permanent equipment for oil and natural gas production has been installed, or in the case of a dry hole, reporting the abandonment of the well to the appropriate agency.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
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|When we count our wells, we use the terms gross wells and net wells. A "gross well" is a well in which we own an interest that gives us the right to drill, produce and conduct operating activities for the well and gives us the right to a share of the oil and natural gas produced from the well. The interest that gives us these rights is called a "working interest." Gross wells means the total number of wells in which we own such an interest. A "net well" exists when the sum of the fractional ownership interests in gross wells equals one. The number of net wells we own equals the sum of the fractional working interests owned in gross wells expressed as whole numbers.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
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|When we describe the nature of our oil and natural gas properties, we use the terms developed and undeveloped acreage. "Developed acreage" are those acres assignable to producing wells. "Undeveloped acreage" are those acres on which wells have not been drilled or completed to a point that permits the production of commercial quantities of oil and natural gas. When we count the acres in which we own a working interest we use the terms "gross acres" and "net acres." A "gross acre" is an acre in which we own a right to drill, produce, and conduct operating activities on the property and to a share of the oil and natural gas production. A "net acre" exists when the sum of the fractional working interests in gross acres equals one. The total net acreage is the sum of the fractional working interests owned in gross acres expressed in whole numbers.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
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|When we describe our oil or natural gas reservoirs within current developed and undeveloped acreage we use the term "reserves." We obtain geological and engineering information which we use to estimate the amount of reserves contained in our developed and undeveloped acreage. These estimates are known as "proved reserves." We use four terms to describe our proved reserves. "Proved developed" reserves are proved reserves which may be recovered from known oil and natural gas reservoirs under existing economic and operating conditions. "Proved undeveloped" reserves are proved reserves which may be recovered from existing wells but would require a relatively large expense to develop or are proved reserves in current undeveloped acreage. "Proved-developed producing" reserves are those reserves which are expected to be produced from existing completion intervals now open for production in existing wells. "Proved developed non-producing" reserves are (1) those reserves expected to be produced from existing completion intervals in existing wells but due to pending pipeline connections, regulatory agency considerations, or other mechanical or contractual requirements hydrocarbon sales have not yet commenced, or have been interrupted, and (2) other non- producing reserves which exist behind the casing of existing wells, or at minor depths below the present bottom of such wells, which are expected to be produced through these wells in the predictable future, where the cost of making such oil and gas available for production should be moderate compared to the cost of a new well.
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|Investment Considerations and Risk Factors                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
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|Forward-Looking Statements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
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|Before you invest in our common stock, you should be aware that there are various risks associated with an investment, including the risks described below. You should consider carefully these risk factors together with all of the other information included in this annual report before you decide to purchase shares of our common stock.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
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|Some of the information in this annual report may contain forward-looking statements. We use words such as "may," "will," "expect," "anticipate," "estimate," "believe," "continue," "intend," or other similar words to identify forward-looking statements. You should read statements that contain these words carefully because they: (1) discuss future expectations; (2) contain projections of results of operations or of our financial conditions; or (3) state other "forward-looking" information. We believe that it is important to communicate our future expectations to our investors. However, there may be events in the future that we are unable to accurately predict or over which we have no control. When considering our forward-looking statements, you should keep in mind the risk factors and other cautionary statements in this annual report. The risk factors noted in this section provide examples of risks, uncertainties, and events that may cause our actual results to differ materially from those contained in any forward-looking statement.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
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|Risks Related to Our Business                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
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|We Have Incurred Losses in the Past                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
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|We have an accumulated deficit of $3.3 million at September 30, 2004, which is the result of significant losses for the years ended September 30, 2002, September 30, 1999 and prior periods. We may incur net losses in the future, and these losses may be significant. Consequently, our liquidity has been reduced, which has made it more difficult for us to raise capital. If our ability to raise capital is impaired we may be required to incur additional debt and may be unable to implement our current business strategy.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
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|We Have a Significant Amount of Debt Which We May Be Unable to Repay                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
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|As of September 30, 2004, we had a total of $7,900,000 of bank debt outstanding and our ratio of total indebtedness to total capitalization was 59%. Our level of indebtedness may affect our operations in the following ways:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
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|* | a substantial portion of our cash flow from operations may be dedicated to the payment of interest and principal on our indebtedness and would not be available for operating capital and other purposes; and                                                                                                                                                                                                                                                          
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|* | the covenants contained in our credit facility, which are further described in "Part II - Item 6 - Management's Discussion and Analysis or Plan of Operation - Our Liquidity and Capital Resources - Credit Facility," require us to meet certain financial tests and other restrictions that limit our ability to borrow additional funds, to grant liens and to dispose of assets and affect our flexibility in planning for and reacting to changes in our business.
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|Our ability to meet any future debt service obligations will be dependent upon our future economic performance. Our future bank credit may not be available in an amount sufficient to enable us to service our indebtedness or make necessary expenditures. Further, we have pledged all of our assets as collateral for our credit facility. This pledge will make it difficult in the foreseeable future for us to obtain debt financing on an unsecured basis. If we are in default under our credit facility, the bank may foreclose on some or all of our properties.                                                                                                                                                                                                                                                                           
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|We May Need Additional Financing Which We May Be Unable to Obtain                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
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|Our business requires capital on a continuing basis. We may be unable to obtain additional capital on satisfactory terms and conditions. Thus, we may lose opportunities to acquire oil and natural gas properties and businesses. Our pursuit of additional capital may result in the incurrence of additional indebtedness. Moreover, we may conduct potentially dilutive issuances of additional equity securities in an effort to raise additional capital. For example, we issued 100,000 shares of Series A preferred stock on December 2, 2002 that may be converted into approximately 1,428,571 shares of our common stock. We also may utilize the capital currently expected to be available for our present operations. The amount and timing of our future capital requirements, if any, will depend upon a number of factors, including:
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|* | drilling costs;                                
|- | -----------------------------------------------
|* | completion costs;                              
|* | workover costs;                                
|* | transportation costs;                          
|* | equipment costs;                               
|* | marketing expenses;                            
|* | staffing levels and competitive conditions; and
|* | any purchases or dispositions of assets.       
|  |                                                



|Our failure to obtain any required additional financing may impede our ability to acquire oil and natural gas leaseholds or producing properties, fun drilling and workover operations on our properties, and increase our oil and natural gas reserves. If we are unable to increase our level of reserves, our future cash flow and earnings may be significantly reduced.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
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|Hedging Our Production May Cause Us to Forego Future Profits                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
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|To reduce our exposure to changes in the prices of oil and natural gas, we have entered into and may in the future enter into hedging arrangements for a portion of our oil and natural gas production. In the past our credit arrangements have required us to hedge a certain level of our production, but in our current loan agreement hedging is not required. For the year ended September 30, 2004 we did not hedge any of our equivalent production.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
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|For the year ended September 30, 2003 our earnings and cash flow were reduced by $ 216,000 in net losses on derivatives. This resulted from a recording a gain in fair value of the derivatives of a total of $276,000, net of approximately $492,000 of settlement losses arising under our then existing hedge contracts. We had no outstanding derivative contracts as of September 30, 2004.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
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|If we enter into hedging arrangements in the future, reduced earnings and cash flow resulting from our hedging activities could have an adverse effect on our financial condition and operations. We may have to make payments and incur losses under these types of contracts in the future depending on the difference between actual and hedged prices of oil and natural gas. In addition, hedging arrangements may limit the benefit we would otherwise receive from increases in the prices for oil and natural gas. Market prices may exceed the prices at which we contract under the hedging arrangements, resulting in our need to make significant cash payments.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
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|Some of our hedging arrangements may contain a "cap" whereby we must pay the counter-party if oil or natural gas prices exceed the price specified in the contract. Often, we will be required to maintain letters of credit with our counter-parties, and we may be required to provide additional letters of credit if prices for oil and natural gas futures increase above the "cap" prices. The amount of these letters of credit is a function of oil and natural gas prices and the volumes of oil and natural gas subject to the contract. As a result, the value of these letters of credit will fluctuate with the market prices of oil and natural gas. We intend to issue these letters of credit pursuant to our credit facility and as a result may utilize some of our borrowing capacity, reducing funds available to be borrowed under our credit facility.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
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|We Are Subject to Third Party Credit Risks                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
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|We sell our production to multiple purchasers, five of whom accounted for approximately 81% of fiscal 2004 sales. Our largest purchasers during fiscal 2004 were Plains Marketing, L.P., Eastex Crude Company, Sonoco, Inc., Duke Energy Field Services, and Texas Energy Inc., who accounted for 27%, 15%, 14%, 13% and 12% of our respective total revenues during fiscal 2004. The same top five oil and natural gas purchasers accounted for 25%, 14%, 14% and 13% and 12% of our respective total revenues for fiscal 2003. If we were to lose any one of our oil and natural gas purchasers, then the loss could temporarily cease or delay production and sale of our oil and natural gas in the purchaser's particular service area, which could lead to a material loss. In addition, in recent years, a number of energy marketing and trading companies have discontinued their marketing and trading operations, which has significantly reduced the number of potential purchasers for our oil and natural gas production. This reduction in potential customers has reduced market liquidity and, in some cases, has made it difficult for us to identify creditworthy purchasers. While we monitor the creditworthiness of our purchasers, we may experience a material loss as a result of the failure of our purchasers to pay us for prior purchases of our oil and natural gas.
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|If We Are Unable to Compete Effectively Against Other Oil and Natural Gas Companies, We 
          May Be Unable to Acquire New Properties at Attractive Prices or to Successfully Develop 
          Our Properties                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
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|We encounter strong competition from other oil and natural gas companies in acquiring properties and leases for the exploration, exploitation, and production of oil and natural gas. Many of our competitors have financial resources, staff, and facilities substantially greater than ours. Our competitors may be able to pay more for desirable leases and to evaluate, bid for and purchase a greater number of properties or prospects than our financial or personnel resources will permit. As a result, we may not be able to buy properties at affordable prices or to successfully develop our properties. Our ability to explore, develop, and exploit oil and natural gas reserves and to acquire additional properties in the future will depend on our ability to conduct operations, to evaluate and select suitable properties and to consummate transactions in this highly competitive environment. Specifically, many larger oil and natural gas companies have recently been actively marketing some of their existing producing properties for sale to independent producers. We may not be successful in acquiring any of these properties.                                                                                                                                                                                                                               
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|We May Encounter Marketing Risks                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
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|Our future ability to market our oil and natural gas production will depend upon the availability and capacity of natural gas gathering systems and pipelines and other transportation facilities. With the exception of a few small gathering systems, we do not currently operate pipelines or transportation facilities, thus we are dependent on third parties to transport our products. Transportation space on the gathering systems and pipelines we utilize is occasionally limited or unavailable due to repairs or improvements to facilities or due to space being utilized by other companies that have priority transportation agreements. Presently, the majority of our natural gas production is transported by the gas gathering system owned by Gulfterra Texas Pipeline, the WTG Jameson gas gathering system, various gas gathering systems owned by Duke Energy Field Services, and the Gilliland gas gathering system owned by Enbridge Resources, Inc. If our access to these pipelines is terminated, our ability to sell our natural gas could be limited, substantially impacting our revenues until we secure new transportation arrangements.                                                                                                                                                                                                                        
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|Our Properties are Geographically Concentrated                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
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|Currently, our properties are located in Texas and Oklahoma. Because of this concentration, we will be impacted more adversely by regional events that increase our costs or level of competition, reduce availability of equipment or supplies, and reduce demand or limit production, than if we were geographically diversified.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
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|We Are Highly Dependant on the Services of Michael E. Montgomery                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
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|We are substantially dependent upon the skills of our President and Chief Executive Officer, Mr. Michael E. Montgomery. Mr. Montgomery has significant experience in acquiring oil and natural gas properties. We do not have an employment agreement with Mr. Montgomery nor do we maintain a "key-man" insurance policy for Mr. Montgomery. The loss of the services of Mr. Montgomery could have a material adverse impact upon our future growth, cash flow, and earnings and could hinder our ability to successfully implement our business strategy.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
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|Our Business Exposes Us to Liability and Extensive Regulation on Environmental Matters                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
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|Our operations are subject to numerous U.S. federal, state and local regulations relating to the protection of the environment, including those governing the discharge of materials into the water and air, the generation, management and disposal of hazardous substances and wastes and the cleanup of contaminated sites. We could incur material costs, including cleaning costs, fines and civil and criminal sanctions and third-party claims for property damage and personal injury as a result of violations of, or liabilities under, environmental laws and regulations. Such laws and regulations not only expose us to liability for our own activities, but may also expose us to liability for the conduct of others or for actions by us that were in compliance with all applicable laws at the time those actions were taken. In addition, we could incur substantial expenditures complying with environmental laws and regulations, including future environmental laws and regulations which may be more stringent.                                                                                                                                                                                                                                                                                                                                                        
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|Risks Related to the Oil and Natural Gas Industry                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
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|Our Revenue Depends on Oil and Natural Gas Prices Which Fluctuate                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
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|Our future financial condition, access to capital, cash flows, and results of operations depend upon the prices we receive for our oil and natural gas. Historically, oil and natural gas prices have been volatile and are subject to fluctuations in response to changes in supply and demand, market uncertainty, and a variety of additional factors that are also beyond our control. Factors that affect the prices we receive for our oil and natural gas include:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
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|* | the level of domestic production;                                          
|- | ---------------------------------------------------------------------------
|* | the availability of imported oil and natural gas;                          
|* | actions taken by foreign oil and natural gas producing nations;            
|* | the cost and availability of transportation systems with adequate capacity;
|* | the cost and availability of competitive fuels;                            
|* | fluctuating and seasonal demand for natural gas;                           
|* | Conservation and the extent of governmental regulation of production;      
|* | weather;                                                                   
|* | foreign and domestic government relations;                                 
|* | the price of domestic and imported oil and natural gas; and                
|* | the overall economic environment.                                          
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|A substantial or extended decline in oil and/or natural gas prices may have a material adverse effect on the estimated value of our natural gas and oil reserves, and on our financial position, results of operations and access to capital. Our ability to maintain or increase our borrowing capacity, to repay current or future indebtedness and to obtain additional capital on attractive terms is substantially dependent upon oil and natural gas prices.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
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|We May Be Unable to Acquire or Develop Additional Reserves                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
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|Our future success as an oil and natural gas producer depends upon our ability to find, develop, or acquire additional oil and natural gas reserves that are profitable to produce. Factors which may hinder our ability to acquire additional oil and natural gas reserves include competition, access to capital, prevailing oil and natural gas prices and the number of properties for sale. If we are unable to conduct successful development activities or acquire properties containing proved reserves, our proved reserves will generally decline as reserves are produced. Also, our production will decline as our proved reserves decline. In addition, if our reserves and production decline, then the amount we are able to borrow under our credit agreement may also decline. We may not be able to locate additional reserves or that we will drill economically productive wells or acquire properties containing proved reserves. If we are unable to increase or otherwise extend the life of our oil and natural gas reserves, our cash flow will eventually decline.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
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|We May be Unable to Overcome Risks Associated with Our Drilling Activities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|Our drilling involves numerous risks, including the risk that we will not encounter commercially productive oil or natural gas reservoirs. We must incur significant expenditures to identify and acquire properties and to drill and complete wells. The cost of drilling, completing and operating wells is often uncertain, and drilling operations may be curtailed, delayed or canceled as a result of a variety of factors, including unexpected drilling conditions, pressure or irregularities in formations, equipment failures or accidents, weather conditions and shortages or delays in the delivery of equipment. In addition, we may use 3-dimensional seismic and other advanced technology to explore for oil and natural gas which may require greater pre-drilling expenditures than traditional drilling strategies. While we use advanced technology in our operations, this technology does not allow us to know conclusively prior to drilling a well that oil or natural gas is present or economically producible. As a result, we may be unsuccessful in our future drilling activities.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
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|Our Estimates of Oil and Natural Gas Reserves Involve Inherent Uncertainty                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
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|Numerous uncertainties are inherent in estimating quantities of proved oil and natural gas reserves, including many factors beyond our control. This annual report contains an estimate of our proved oil and natural gas reserves and the estimated future net cash flows and revenue generated by the proved oil and natural gas reserves. These estimates are based upon reports of our independent petroleum engineers. These reports rely upon various assumptions, including assumptions required by the Securities and Exchange Commission (the "SEC"), as to constant oil and natural gas prices, drilling and operating expenses, capital expenditures, taxes, and availability of funds. These reports should not be construed as the current market value of our estimated proved reserves. The process of estimating oil and natural gas reserves is complex, requiring significant decisions and assumptions in the evaluation of available geological, engineering and economic data for each reservoir. As a result, these estimates are inherently an imprecise evaluation of reserve quantities and future net revenue. Our actual future production, revenue, taxes, development expenditures, operating expenses and quantities of recoverable oil and natural gas reserves may vary substantially from those we have assumed in the estimate. Any significant variance in our assumptions could materially affect the estimated quantity and value of reserves set forth in this annual report. In addition, our reserves may be subject to downward or upward revision, based upon production history, results of future exploitation and development activities, prevailing oil and natural gas prices and other factors. A material decline in prices paid for our production can adversely impact the estimated volumes of our reserves.
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|We Are Exposed to Operating Hazards and Uninsured Risks                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|Our operations are subject to the risks inherent in the oil and natural gas industry, including the risks of:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
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|* | fire, explosions, and blowouts;                                                                                                                                                
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|* | pipe failure;                                                                                                                                                                  
|* | abnormally pressured formations; and                                                                                                                                           
|* | environmental accidents such as oil spills, gas leaks, ruptures or discharges of toxic gases, brine, or well fluids into the environment (including groundwater contamination).
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|These events may cause us substantial losses resulting from:
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|* | injury or loss of life;                                                      
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|* | severe damage to or destruction of property, natural resources and equipment;
|* | pollution or other environmental damage;                                     
|* | clean-up responsibilities;                                                   
|* | regulatory investigation; and                                                
|* | penalties and suspension of operations.                                      
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|We maintain insurance against some, but not all, of these risks. We maintain general commercial liability insurance, as well as limited insurance for well control expenses, costs of re-drilling or restoring damaged wells, and environmental pollution liability. Our insurance may not be adequate to cover these losses or liabilities. Further, we cannot predict the continued availability of insurance, or availability of insurance at commercially acceptable premium levels. We do not carry business interruption insurance. Losses and liabilities arising from uninsured or under-insured events could require us to make large unbudgeted cash expenditures that could materially impact our future financial condition, earnings, and cash flow.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
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|From time to time, due primarily to contract terms, pipeline interruptions or weather conditions, the producing wells in which we own an interest have been subject to reduced or terminated production. These curtailments may last from a few days to several months, or longer.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
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|We May Not Identify All Risks Associated with the Acquisition of Oil and Natural Gas 
          Properties                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
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|Generally, it is not feasible for us to review in detail every individual property involved in an acquisition.Our business strategy focuses on acquisitions of producing oil and natural gas properties. Any future acquisitions will require an assessment of recoverable reserves, future oil and natural gas prices, operating costs, potential environmental and other liabilities and similar factors. Ordinarily, our review efforts are focused on the higher-valued properties. We have conducted a preliminary "Phase I" environmental assessment, which consists of visual inspections of properties, a review of applicable records and discussions with relevant personnel, for active producing properties that constitute approximately 53% of our producing reserve base. However, even a detailed review of these properties and records may not reveal existing or potential problems, nor will it permit us to become sufficiently familiar with the properties to assess fully their deficiencies and capabilities. We do not inspect every well that we acquire. Potential problems, such as deficiencies in the mechanical integrity of equipment or environmental conditions that may require significant remedial expenditures, are not necessarily observable even when we do inspect a well. Even if we identify problems with an acquisition, the seller may be unwilling or unable to provide effective contractual protection against all or part of these problems. Even if a seller agrees to provide indemnity, the indemnity may not be fully enforceable. Our newly acquired oil and natural gas properties may not be successfully integrated into our operations or achieve desired profitability.
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|Our Secondary Recovery Projects Require Significant Capital Expenditures and May Not Be 
          Commercially Successful                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
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|We face the risk that we will spend a significant amount of money on secondary recovery operations, such as waterflooding projects, without any increase in production. Although waterflooding requires significant capital expenditures, the total amount of reserves that can be recovered though waterflooding is uncertain. In addition, there is generally a delay between the initiation of water injection into a formation containing hydrocarbons and any increase in production that may result from the injection. The degree of success, if any, of any secondary recovery program depends on a large number of factors, including the porosity, permeability, and heterogeneity of the formation, the technique used and the location of injection wells. If our secondary recovery projects are unsuccessful, or if there is substantial delay in the success of our secondary recovery projects, our cash flows and future earnings may be significantly reduced and we may suffer losses due to the high costs of these secondary recovery efforts.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
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|We May Be Required to Write Down the Carrying Value of Our Proved Properties Under
          Accounting Rules and These Write-Downs Could Adversely Affect Our Balance Sheet                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
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|There is a risk that we will be required to write-down the carrying value of our oil and natural gas properties when oil and natural gas prices are low. In addition, write-downs may occur if we have:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
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|* | downward adjustments to our estimated proved reserves;    
|- | ----------------------------------------------------------
|* | increases in our estimates of development costs; or       
|* | deterioration in our exploration and exploitation results.
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|We periodically review the carrying value of our oil and natural gas properties under the full cost accounting rules of the SEC. Under these rules, the net capitalized costs of oil and natural gas properties may not exceed a ceiling limit that is based on the present value, based on flat prices at a single point in time, of estimated future net revenues from proved reserves, discounted at 10%. If net capitalized costs of oil and natural gas properties exceed the ceiling limit, we must charge the amount of this excess to earnings in the quarter in which the excess occurs. We may not reverse write-downs even if prices increase in subsequent periods. A write-down reduces the book value of our net tangible assets and stockholders' equity.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
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|Risks Related to Ownership of Our Common Stock                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
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|There is a Limited Market for Our Common Stock                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
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|Our common stock trades on the over-the-counter market and is quoted on the over-the-counter bulletin board ("OTCBB") maintained by the National Association of Securities Dealers. Prior to October 2, 2001, our common stock was quoted in "pink sheets" published by the National Quotation Bureau. Additionally, although prices for our common stock are quoted on the OTCBB, the market for our common stock is very small. According to information supplied by our transfer agent, Colonial Stock Transfer on November 11, 2004, there are ten institutions that act as "market makers" and buy and sell shares of our common stock as orders are placed. Specifically, these market makers are William V. Frankel & Co., Jersey City, New Jersey, Hill Thompson Magid & Co., Jersey City, New Jersey, Crown Financial Group, formerly M.H. Meyerson & Co., Inc., Jersey City, New Jersey, First Southwest, Dallas, Texas, Sterne Agee Capital Markets, Boca Raton, Florida, Brokerage America, Boston, Massachusetts, Knight Securities, Inc., Jersey City, New Jersey, Pershing, Jersey City, New Jersey, Hudson Securities, Inc., Jersey City, New Jersey, and Schwab Capital Markets, L.P., Jersey City, New Jersey. These or other market makers may not continue to actively deal in our common stock. If we are unable to locate a market maker, the liquidity of shares of our common stock will be severely limited. On many trading days, there is no trading in our common stock at all. Our investors may not be able to sell shares of our common stock at prices and times that are desirable.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
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|Our Stock Price May Be Volatile Due to Small Public Float                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
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|The number of shares of our common stock held by the public is relatively small. Therefore, the market price for our common stock varies significantly and may be volatile depending on news announcements, industry conditions, and general market trends. The sale of a substantial number of shares of the common stock in a short period of time may adversely affect the market price of the common stock.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
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|Transactions in Our Common Stock May Be Subject to Penny Stock Trading Rules                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
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|Rules 15g-1 through 15g-100 promulgated by the SEC under the Securities Exchange Act of 1934 provide various limitations on transactions involving "penny stocks." Penny stocks are defined as equity securities that do not meet specific requirements listed in Rule 3a51-1, also promulgated by the SEC under the Exchange Act. Currently, we are exempt from the penny stock rules by virtue of Rule 3a51-1(g), which excludes the equity securities of issuers that have been in continuous operations for three years and have over $2,000,000 of net tangible assets. Net tangible assets are defined as total assets less intangible assets and liabilities. Our net tangible assets were $5,483,000 as of September 30, 2004. However, reductions in the estimates of our proved reserves, increased borrowings under our credit facility in connection with acquisitions or other factors reducing our net tangible assets may subject us to the penny stock rules. If we are no longer exempt from these rules, brokers and dealers that effectuate a trade in our common stock must comply with the penny stock rules unless the transaction is of a type that is exempted from these rules, such as transactions with established customers or "accredited investors," as defined in Regulation D promulgated under the Securities Act of 1933. Specifically, penny stock rules require brokers and dealers to furnish their customers with the information set forth in Schedule 15G published by the SEC. Schedule 15G contains information concerning the general risks associated with penny stocks, including a description of the broker or dealer's compensation in the transaction, a discussion of the difference between bid and ask prices and the general liquidity of the security being sold. Brokers and dealers must obtain a manually signed acknowledgment of the receipt of this information from their customers. These additional sale requirements may result in a reduced trading volume and trading price for our common stock, which could restrict the ability of our stockholders to sell shares of our common stock.
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|Our Certificate of Incorporation Contains Provisions That Could Discourage an Acquisition          or Change of Control of Our Company                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
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|Our certificate of incorporation authorizes our board of directors to issue preferred stock without stockholder approval. Provisions of our certificate of incorporation, such as the provision allowing our board of directors to issue preferred stock with rights more favorable than our common stock, could make it more difficult for a third party to acquire control of us, even if that change of control might benefit our stockholders.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
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|We intend to foster our growth as an independent oil and natural gas company by implementing the following business strategies:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
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|* | Financial Growth. We plan to achieve asset, revenue, and cash flow growth, and increase the value of our stock, as a result of the acquisition and further development of producing oil and natural gas properties.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
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|* | Acquire and Enhance Producing Oil and Natural Gas Properties. We plan to take advantage of opportunities that currently exist in the United States to acquire producing oil and natural gas properties. We continue to focus our acquisition activities onshore in Texas and Oklahoma in order to complement our existing properties and operations; however, we plan to review potential acquisitions in other regions of the United States if they represent a significant concentration of energy-related assets. We prefer to acquire properties with production from shallow to medium depths, which offer lower geologic and mechanical risk of operations. We believe that numerous opportunities exist to acquire additional energy assets and to enhance the value of these assets through improved operating practices and by aggressively developing reserve potential. For a discussion of the financing alternatives for these activities, please see "Part II - Item 6 - Management's Discussion and Analysis or Plan of Operation - Our Liquidity and Capital Resources."
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|* | Emphasize Exploitation and Development Activities. We plan to exploit existing oil and natural gas properties and to conduct development evaluation and drilling on our existing and future oil and natural gas properties. We intend to concentrate on enhancement opportunities such as infill drilling, recompletions, secondary recovery projects, repairs, and equipment changes. We may participate, from time to time, in a limited number of exploratory wells.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
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|* | Technology. We plan to increase exploitation efforts, focusing on established geological trends where we can employ geological, geophysical, and engineering expertise. We are considering the application of 3-D seismic technologies to evaluate potential areas of development. Further, we may implement horizontal drilling technologies, which generally involve the continuation of traditional vertical wellbores in horizontal directions in an effort to increase the amount of oil and natural gas that is ultimately recovered.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
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|Developments During Fiscal 2004                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
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|We Participated in the Drilling of Seven Wells                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
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|In the first quarter of fiscal 2004 we drilled an infield development well known as the Beggs #2 on the same lease as our currently producing Beggs #1 well in Eastland County, Texas. Our share of the costs was approximately $140,000, reflecting our 96% working interest in this well. The well was successful and is currently producing approximately 3 Bbls of oil per day.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
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|During January 2004, we acquired an interest in a property in Louisiana at a cost of approximately $25,000. This interest was acquired from Live Oak Energy, an unrelated third party. Live Oak Energy retained a 25% working interest in the property. We drilled the Maddox #1 on this property during the second quarter of fiscal 2004. The total cost of this well was approximately $500,000. Since we had an 18.75% share in the drilling and completion costs of the well, our share of the drilling cost was approximately $95,000. This well was determined to be a dry hole. We recently sold our interest in this well back to Live Oak Energy for salvage value in an arms' length transaction.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
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|In the second quarter of fiscal 2004, we began drilling two new wells in Cottle County, Texas in partnership with P. C. Burns Oil Producers, Inc. ("Burns"). We entered into similar drilling arrangements with Burns in fiscal 2002 and 2003 which resulted in the drilling of four wells in this same area. The total cost associated with these two new wells drilled in fiscal 2004 was approximately $1,000,000. We paid 52% of these drilling and completion costs ($520,000) and Burns paid the remaining 48%, representing our respective working interests in the wells. Although these two wells were marginally producing after completion, we are currently in the process of evaluating further stimulation work during fiscal 2005.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
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|In the third and fourth quarters of 2004, three non-operated wells, in each of which we have an approximately one percent interest, were drilled in Oklahoma. Two were drilled by the operator Apache Corporation and one by Chesapeake Operating, Inc. All three wells were completed and are producing an aggregate of approximately 450 Mcf per month. We paid a total of $69,000 of the drilling and completion costs, representing our approximately 1% working interest in each of these wells.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
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|We Purchased Two Producing Gas Wells                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
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|In the quarter ended June 30, 2004, we purchased two producing natural gas wells located in Cottle County, Texas for $345,000 from EXCO Resources, Inc., an unrelated third party. This acquisition, effective March 1, 2004, was reflected in the capital additions for the second quarter. We took over the operations of these two wells on April 1, 2004, and they are currently producing a total of approximately 3,500 Mcf per month.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
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|We Effected a Decrease in Our Authorized Shares of Capital Stock                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
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|At our annual meeting of stockholders on February 25, 2004, our stockholders approved an amendment to our certificate of incorporation to effect a decrease in the number of authorized shares of both common and preferred stock. The number of authorized shares of common was lowered from 50,000,000 shares to 15,000,000 shares. The number of authorized shares of preferred stock was lowered from 20,000,000 shares to 400,000 shares. The reason for this change was to reduce the Company's franchise tax liability. As a result of the Company's reverse stock split in February 2003, the revised calculation for the Company's 2003 Delaware franchise tax resulted in a significant increase in taxes.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
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|Developments During Fiscal 2003                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
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|We Issued Shares of Series A Preferred Stock                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
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|On December 2, 2002, we entered into a stock purchase agreement with Michael E. Montgomery and Faye C. Briggs for the purchase of 100,000 shares of our Series A convertible preferred stock for a total purchase price of $1,000,000, or $10.00 per share. We sold 50,000 shares of Series A preferred stock to Mr. Montgomery and 50,000 shares of Series A preferred stock to Ms. Briggs in accordance with the terms of the stock purchase agreement. Mr. Montgomery is our President, Chief Executive Officer, Chief Financial Officer, and Chairman of the Board, and also serves as a member of our board of directors. Ms. Briggs is Mr. Montgomery's mother. We used the proceeds from this sale to reduce the outstanding balance of our prior credit facility with Compass Bank.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
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|Each share of Series A preferred stock may be converted into the number of shares of our common stock equal to the stated value of the Series A preferred stock ($10.00) divided by an applicable conversion rate, which is presently $.70 per share. This conversion right may be exercised at the option of the holder. Additionally, holders of our Series A preferred stock are entitled to receive a preferential dividend payment equal to 7% per annum of the $10.00 per share stated value of the Series A preferred stock before we may pay dividends to holders of our common stock. We may choose to pay this dividend in cash or by issuing additional shares of our common stock. Holders of our Series A preferred stock are entitled to a liquidation preference of $10.00 per share and participate in voting on all matters submitted to our holders of common stock. The number of votes entitled to be cast by each share of Series A preferred stock on any matter is equal to the number of shares of common stock into which the share of Series A preferred stock could be converted as of the record date for the stockholders' meeting.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
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|We Conducted a Reverse Split of Our Common Stock                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
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|At our 2003 annual meeting of stockholders,our stockholders approved an amendment to our certificate of incorporation which effected a ten-for-one reverse stock split of our outstanding shares of common stock. We filed this amendment with the Delaware Secretary of State effective as of February 24, 2003, at which time every ten shares of outstanding common stock was automatically reverse split into one share of common stock. As a result, the par value of our common stock was increased from $0.01 to $0.10 per share. However, the number of shares common stock authorized to be issued by our certificate of incorporation remained at 50,000,000. Accordingly, this amendment had the effect of increasing the number of shares of our common stock available to be issued. We conducted the reverse split primarily in an attempt to increase the liquidity and trading in our common stock. After the reverse split, the ticker symbol for our common stock on the OTCBB changed from "TKRD" to "TREK."                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
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|Prior to May 28, 2003, we had a credit facility in place with Compass Bank which provided for borrowings up to $25 million. On September 30, 2002, we had an outstanding balance of $10,700,000 and no borrowing capacity under the Compass Bank facility. The terms of our Compass Bank credit facility included provisions that automatically reduced the amount of our borrowing capacity every month. During fiscal 2002, these borrowing base reductions typically resulted in our need to make a repayment of principal, as we did not have sufficient borrowing capacity at the time of each reduction. As a result, we entered into a forbearance agreement with Compass Bank on October 10, 2002 that was amended on December 2, 2002. In accordance with the amended forbearance agreement, we made a principal repayment of $1,000,000 on December 2, 2002. This principal repayment was funded by the sale and issuance of $1,000,000 of Series A convertible preferred stock on December 2, 2002 to Michael E. Montgomery, our chairman of the board, president, chief executive officer and chief financial officer. Additionally, we agreed to make monthly principal repayments of $60,000 per month beginning on January 1, 2003 through the maturity of the credit facility on June 1, 2003. We were also required to make monthly interest payments on our borrowings under the credit facility at a rate equal to, at our option, the London Inter-Bank Offer Rate ("LIBOR") plus 4% per annum or at Compass Bank's prime rate of interest plus 1.5%. However, if we did not make the monthly principal repayments required by the forbearance agreement, the rate of interest would increase to the bank's prime rate plus 5%.
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|Under the terms of the Compass Bank credit facility, we were required to comply with the following financial covenants:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
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|- | our ratio of current assets to current liabilities (excluding the bank debt) could not be less than 1.25 to 1.0 at any time;                                                                                                                                                                              
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|- | our tangible net worth was required to be at least equal to the sum of (a) $1,100,000, (b) 50% of any net income for fiscal years ending after September 30, 2002 and (c) 100% of any proceeds that we receive from equity issuances or other types of capital contributions after September 30, 2002; and
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|- | our quarterly ratio of earnings (before interest, taxes, depreciation, depletion, amortization and other non-cash items) to interest expense could not be less than 3.0 to 1.0.                                                                                                                           
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|For more information regarding our prior credit facility with Compass Bank, see Item 2 of our quarterly report on Form 10-QSB for the quarter ended December 31, 2002 filed on February 14, 2003.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
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|On May 28, 2003, we entered into a new loan agreement with Wells Fargo Bank Texas, National Association, for a secured credit facility that permits us to borrow up to $25 million from Wells Fargo on a revolving basis, subject to borrowing base limitations. This new credit facility was entered into to repay the amounts previously advanced to us under our prior credit facility with Compass Bank. The Compass Bank facility was paid off in full on May 28, 2003 upon the funding of this new loan.                                                                                                                                                                               
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|Our initial funding of the new Wells Fargo credit facility was $9,351,600. The outstanding amount at September 30, 2003 was $8,800,000. Giving effect to principal repayments totaling $900,000 that were made in fiscal 2004, the outstanding amount of our borrowings under the credit facility was $7,900,000 as of September 30, 2004. For a further description of our credit facility with Wells Fargo, please see Part II - Item 6 - Management's Discussion and Analysis or Plan of Operation - Liquidity and Capital Resources.                                                                                                                                                     
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|We Participated in the Drilling of One Well                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|In the fourth quarter of fiscal 2003, we drilled one well with a partner, P. C. Burns Oil Producers, Inc. ("Burns"). The well was drilled on our property in Cottle County, Texas during August and September 2003. The well, known as the Gibson # 10A, was successful, and was completed during September 2003. Production for this well during the month of October 2003 averaged approximately 835 Mcf of natural gas per day, as well as 2 Bbls of oil per day. The drilling and completion costs of the well were paid 52% by us and 48% by Burns reflecting our respective working interests. Our portion of the drilling and completion costs of the well was approximately $165,000.
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|Our Exploitation and Development Activities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|We made exploitation and development expenditures of $616,000 and $2,050,000 during the fiscal years ended September 30, 2003 and 2004, respectively. We made net acquisition expenditures of $15,000, and $400,000 during the fiscal years ended September 30, 2003 and 2004, respectively. Our ability to continue to fund our exploitation and development activities depends upon cash flow and our ability to secure the necessary financing for these activities.                                                                                                                                                                                                                      
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|Exploration Activities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
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|We did not drill any exploratory wells during the fiscal year 2004.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|Our Operating Activities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
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|As of September 30, 2004, we were the operator of 298 gross (237 net) wells, which represented approximately 80% of the gross wells and 99% of the net wells in which we had an interest on that date. This number does not include the 19 wells that we operate on a contract basis in which have no ownership interest. The remainder of the wells in which we had an interest on September 30, 2004 are operated by third party operators. The wells that we currently operate are located in Texas and Oklahoma. Although we elect to operate and manage most of our properties and drilling activities, our wells are drilled by independent drilling contractors.                      
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|Our Oil and Natural Gas Properties                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
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|The following table sets forth the fields in which we have significant oil and natural gas properties, and information as of September 30, 2004, with respect to each of the fields.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
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|                                                               | Wells | Proved Reserves | Percentage of
PV-10 | Fiscal Year Ended
September 30, 2004
Net Production
|-------------------------------------------------------------- | ----- | --------------- | ------------------- | ---------------------------------------------------
|                                                               | Gross | Net             | Oil(MBbls)          | Gas(MMcf)                                          
|AWP Field
McMullen County, Texas                               | 39    | 29              | 605                 | 1,358                                              
|                                                               |       |                 |                     |                                                    
|Farnsworth Unit Area
Ochiltree County, Texas                   | 92    | 74              | 378                 | 2,299                                              
|                                                               |       |                 |                     |                                                    
|North Pioneer Unit Area
Eastland County, Texas                 | 118   | 99              | 409                 | 334                                                
|                                                               |       |                 |                     |                                                    
|Providence and Prudence Fields
King and Cottle Counties, Texas | 22    | 16              | 13                  | 2,261                                              
|                                                               |       |                 |                     |                                                    
|Other                                                          | 99    | 23              | 31                  | 3,742                                              
|                                                               |       |                 |                     |                                                    
|Total                                                          | 370   | 241             | 1,436               | 9,994                                              
|                                                               |       |                 |                     |                                                    



|1 Estimated PV-10 proved reserves cashflows include oil, natural gas, and NGLs.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
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|AWP Field
          McMullen County, Texas                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|The AWP Field produces oil and natural gas from the Olmos sand at a depth of approximately 9,500 feet. There are over 500 active producing wells in the AWP Field. We assumed operation of 39 wells in the AWP Field on July 1, 2000. Only 35 of our 39 wells in the AWP Field are currently active and producing. The wells were originally completed as flowing wells and most have now been equipped with pumping units for artificial lift. The natural gas produced is compressed to a sales line at 1,000 psi. Our interest in the AWP Field includes approximately 2,621 gross (2,621 net) developed acres and no undeveloped acres. According to the reserve report prepared by LaRoche Petroleum Consultants, Ltd., as of September 30, 2004, these properties were estimated to have net reserves of 605 MBbls of oil, and 1,358 MMcf of natural gas. The PV-10 of these properties was $10.8 million as of September 30, 2004. We own a 100% working interest in all but two of our 39 wells in the AWP Field.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
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|During fiscal 2004, we continued our exploitation program by re-completing the Walker # 1 well in the AWP area to develop the proved developed non-producing reserves in this area. There were four other major capital workovers of AWP wells during fiscal 2004 to increase reserve recovery, modify the artificial lift systems, and perform critical repairs.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
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|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|Farnsworth Unit Area                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|Ochiltree County, Texas                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|The Farnsworth Unit is a waterflood unit producing primarily oil in the Morrow sand at a depth of approximately 7,800 feet. A discovery well was drilled in the 1950s, and the area was organized as a unit in 1961. Water injection began in 1962, and the Farnsworth Unit currently consists of 64 producing wells and 28 water injection wells. Of these wells, 47 producing wells and 9 injection wells remain active. Only a small portion of the original unit remains productive. On August 2, 2000, we became the operator of this unit. These properties include approximately 13,314 gross (12,430 net) developed acres and no undeveloped acres. According to the reserve report prepared by LaRoche Petroleum Consultants, Ltd., as of September 30, 2004, the Farnsworth Unit and associated non-unit producing wells were estimated to have net reserves of 378 MBbls of oil and 2,299 MMcf of natural gas. The PV-10 for these reserves was $11.1 million at September 30, 2004. We own a 96% working interest and 83% net revenue position in the Farnsworth Unit.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
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|North Pioneer Unit Area                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|Eastland County, Texas                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|The North Pioneer Unit is a mature waterflood unit formed in the early 1980s that primarily produces oil from the Caddo at a depth of approximately 2,500 feet. We have a 100% working interest and 84% net revenue interest in the unit. Further, we own and operate several wells in the area that are outside the unit boundaries. As of September 30, 2004, the North Pioneer Unit and adjacent producing properties were estimated to have net reserves of 409 MBbls of oil and 334 MMcf of gas. The PV-10 for these reserves was $5.2 million as of September 30, 2004.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
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|In the first quarter of fiscal 2004 we drilled an infield development well known as the Beggs #2 on the same lease as our currently producing Beggs #1 well in Eastland County, Texas. Our share of the costs was approximately $140,000, reflecting our 96% working interesting this well. The well was successful and is currently producing approximately 3 Bbls of oil per day.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|In the fourth quarter of fiscal 2004 we began a program to reduce the plugging liability in the North Pioneer Unit. Of the 18 wells we identified to plug, 13 were plugged by September 30, 2004. The remaining 5 were plugged in the first quarter of fiscal 2005.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|Providence and Prudence Field Area                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|King and Cottle Counties, Texas                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
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|The Providence and Prudence Field area, which is located in King and Cottle Counties, Texas, produces natural gas and condensate oil from the Atoka sand at a depth of approximately 6,100 feet. In fiscal 2001, we acquired 6,139 gross and 5,852 net developed acres and no undeveloped acres in 16 operated wells. Since that time we have drilled and completed 4 additional wells in this area that are now producing. We own a 100% working interest in 11 of these wells.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
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|In the quarter ended June 30, 2004, we purchased two producing natural gas wells located in Cottle County, Texas for $345,000. This acquisition, effective March 1, 2004, was reflected in the capital additions for the second quarter. We took over the operations of these two wells on April 1, 2004, and they are currently producing a total of approximately 3,500 Mcf per month.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
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|In fiscal 2004, we drilled two development wells in the Providence and Prudence Field area, the Gibson #2A and Gibson #9A. The total costs associated with these new wells was $1,000,000. We paid 52% of the drilling and completion costs ($520,000), and our partner Burns paid the remaining 48%, representing our respective working interests in the wells. These wells were completed and producing, however they have subsequently been shut in pending further stimulation treatments. At September 30, 2004, plans were set to drill another development well, Masterson #8A in King County, Texas, again with Burns as a drilling partner. The well costs are to be carried with the same split of 52% for us and 48% for Burns.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
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|According to the reserve report prepared by LaRoche Petroleum Consultants Ltd., as of September 30, 2004, our estimated net reserves in the Providence and Prudence Fields were 13 MBbls of oil and 2,261 MMcf of natural gas. The PV-10 of these properties was estimated to be $5.5 million as of September 30, 2004. See also "Part I - Item 1 - Description of Business - Developments During Fiscal 2004"                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
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|Title to Our Properties                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
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|We have acquired interests in producing and non-producing acreage in the form of working interests, royalty interests, overriding royalty interests and net profits interests. Substantially all of our property interests, and the assignors' interests in the working or other interests in the underlying properties, are held pursuant to leases from third parties. The leases grant the lessee the right to explore for and extract oil and natural gas from specified areas. Consideration for these leases may consist of a lump sum payment, such as a bonus, and a fixed annual charge, such as a delay rental, prior to production unless the lease is paid up and, once production has been established, a royalty based generally upon either the proceeds from the sale of oil and natural gas or the market value of oil and natural gas produced. All the leases we have in effect at this time are paid up leases and therefore do not require delay rental payments. Once wells are drilled, a lease generally continues so long as production of oil and natural gas continues. In some cases, leases may be acquired in exchange for a commitment to drill or finance the drilling of a specified number of wells to predetermined depths. Some of our non-producing acreage is held under leases from mineral owners or governmental entities which expire at varying dates. We are not currently obligated to pay annual delay rentals to the lessors of some properties in order to prevent the leases from terminating. Title to leasehold properties is subject to royalty, overriding royalty, carried, net profits and other similar interests and contractual arrangements customary in the oil and natural gas industry, and to liens incident to operating agreements, liens relating to amounts owed to the operator, liens for current taxes not yet due and other encumbrances.
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|When we acquire developed properties we conduct a title investigation. When acquiring undeveloped properties, as is common industry practice, we conduct little or no investigation of title other than a preliminary review of local mineral records. We do conduct title investigations and, in most cases, obtain a title opinion of local counsel before we begin drilling operations. We believe that the methods we utilize for investigating title prior to acquiring any property are consistent with practices customary in the oil and natural gas industry and that our practices are adequately designed to enable us to acquire good title to properties. However, some title risks cannot be avoided, despite the use of customary industry practices.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
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|Our properties are generally subject to:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
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|* | customary royalty and overriding royalty interests;                                          
|- | ---------------------------------------------------------------------------------------------
|* | liens incident to operating agreements; and                                                  
|* | liens for current taxes and other burdens and minor encumbrances, easements and restrictions.
|  |                                                                                              



|We believe that none of these burdens either materially detract from the value of our properties or materially interfere with their use in the operation of our business. All of our properties are pledged as collateral under our credit facility.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
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|Our Oil and Natural Gas Reserves                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|On September 30, 2004, our oil and natural gas reserves included direct interests in 370 wells in the states of Texas and Oklahoma, including 298 wells that we operate. In addition, we operate 19 wells on a contract basis in which we have no interest.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
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|The following tables summarize information regarding our estimated proved oil and natural gas reserves as of September 30, 2003 and 2004. All of these reserves are located in the United States. The estimates relating to our proved oil and natural gas reserves and future net revenues of oil and natural gas reserves included in this annual report are based upon reports prepared by LaRoche Petroleum Consultants, Ltd. In accordance with guidelines of the SEC, the estimates of future net cash flows from proved reserves and their PV-10 are made using oil and natural gas sales prices in effect as of the dates of the estimates and are held constant throughout the life of the properties. Our estimates of proved reserves, future net cash flows and PV-10 were estimated using the following weighted average prices, before deduction of production taxes:
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| |                       | September 30,
| | --------------------- | -------------
| |                       | 2003         
| | Natural Gas (per Mcf) | $ 4.83       
| |                       | $29.20       
| |                       |              



|Reserve estimates are imprecise and may be expected to change, as additional information becomes available. Furthermore, estimates of oil and natural gas reserves, of necessity, are projections based on engineering data, and there are uncertainties inherent in the interpretation of this data as well as the projection of future rates of production and the timing of development expenditures. Reservoir engineering is a subjective process of estimating underground accumulations of oil and natural gas that cannot be measured in an exact way and the accuracy of any reserve estimate is a function of the quality of available data and of engineering and geological interpretation and judgment. Reserve reports of other engineers might differ from the reports contained herein. Results of drilling, testing, and production subsequent to the date of the estimate may justify revision of this estimate. Future prices received for the sale of oil and natural gas may be different from those used in preparing these reports. The amounts and timing of future operating and development costs may also differ from those used. The discounted future net cash inflows should not be construed as representative of the fair market value of the proved oil and natural gas properties, since discounted future net cash inflows are based upon projected cash inflows which do not provide for changes in oil and natural gas prices or for escalation of expenses and capital costs. The meaningfulness of these estimates is highly dependent upon the accuracy of the assumptions upon which they were based.
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|All reserves are evaluated at constant temperature and pressure, which can affect the measurement of natural gas reserves. Operating costs, development costs and some production-related and ad valorem taxes were deducted in arriving at the estimated future net cash flows. No provision was made for income taxes, operating methods and existing conditions at the prices and operating costs prevailing at the dates indicated above. The estimates of the PV-10 from future net cash flows differ from the standardized measure set forth in the notes to our consolidated financial statements, which is calculated after provision for future income taxes. These estimates may not be accurate predictions of future net cash flows from oil and natural gas reserves or their present value.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
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|The following tables set forth our proved reserves of oil and natural gas and the PV-10 thereof for the fiscal years ended September 30, 2003 and 2004.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
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|Proved Oil and Natural Gas Reserves
|-----------------------------------
|                                   



| |                                      | September 30,
| | ------------------------------------ | -------------
| |                                      | 2003         
| | Natural gas reserves (MMcf):         |              
| | Proved Developed Reserves            | 9,788        
| | Proved Undeveloped Reserves          | 1,606        
| | Total Proved Reserves of natural gas | 11,394       
| | Oil reserves (MBbl):                 |              
| | Proved Developed Reserves            | 1,227        
| | Proved Undeveloped Reserves          | 169          
| | Total Proved Reserves of oil         | 1,396        
| | Total Proved Reserves (MBoe)         | 3,295        
| |                                      |              



|PV-10 of Proved Reserves
|------------------------
|(In Thousands)          
|                        



| |                             | September 30,
| | --------------------------- | -------------
| |                             | 2003         
| | PV-10                       |              
| | Proved Developed Reserves   | $25,014      
| | Proved Undeveloped Reserves | 3,949        
| | Total PV-10                 | 28,963       
| | Total standardized measure  | 22,554       
| |                             |              



|Except for the effect of changes in oil and natural gas prices, no major discovery or other favorable or adverse event is believed to have caused a significant change in these estimates of our reserves since September 30, 2004.                                  
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                     
|For additional information concerning our oil and natural gas reserves and estimates of future net revenues attributable thereto, see note 13 of the notes to financial statements included in Appendix A to this annual report on Form 10-KSB.                      
|                                                                                                                                                                                                                                                                     
|We Have Not Reported Reserves to Other Agencies                                                                                                                                                                                                                      
|                                                                                                                                                                                                                                                                     
|As of September 30, 2004, our estimates of oil and natural gas reserves have not been filed with or included in reports to any federal authority or agency other than the SEC.                                                                                       
|                                                                                                                                                                                                                                                                     
|Our Production                                                                                                                                                                                                                                                       
|                                                                                                                                                                                                                                                                     
|The following table summarizes for the periods indicated, our revenues, net production of oil and natural gas sold, the average sales price per unit of oil (Bbl) and natural gas (Mcf) and costs and expenses associated with the production of oil and natural gas:
|                                                                                                                                                                                                                                                                     





|                                                              | Fiscal Year Ended September 30,
|------------------------------------------------------------- | -------------------------------
|                                                              |                                
|Sales:                                                        |                                
|Oil:                                                          |                                
|Revenue                                                       |                                
|Production sold (Bbls)                                        |                                
|Average sales price per Bbl                                   |                                
|                                                              |                                
|Natural Gas:                                                  |                                
|Revenue                                                       |                                
|Production sold (Mcf)                                         |                                
|Average sales price per Mcf                                   |                                
|                                                              |                                
|Costs and Expenses:                                           |                                
|Production costs per Boe                                      |                                
|Depreciation, depletion and
             amortization per Boe |                                
|                                                              |                                



|Oil and natural gas revenues for the fiscal year ended September 30, 2004 increased 10% over the prior fiscal year. This was mainly the result of higher oil and natural gas prices, offset by lower oil and natural gas volumes. Our average sales price per Bbl increased to $36.11, or 22%, and our average sales price per Mcf of natural gas increased to $5.30, or 9%, from our prices for the fiscal year ended September 30, 2003.                                                                                                            
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|The production information we reported in the preceding table only includes our share of the oil and natural gas produced after payment of royalties, if any. Oil production for the fiscal year 2004 totaled 137 MBbls, a decrease from the prior year at 139 MBbls. Natural gas production was 70 MMcf lower in 2004 reflecting principally the decline in our natural gas wells in Cottle County. On a Boe basis our total production for the fiscal year ended September 30, 2004 decreased 13 MBoe from the same period ended September 30, 2003.
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|Production costs per Boe of $11.90 for the year ended September 30, 2004 excludes approximately $880,000 for non-recurring major repairs and workover expenditures. Production costs per Boe for the year ended September 30, 2003 of $10.56 excludes approximately $960,000 for repairs and workover expenditures.                                                                                                                                                                                                                                   
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|Depletion on oil and gas properties for the year ended September 30, 2004 was $170,000 greater than the amount incurred during the year ended September 30, 2003. This was due to the addition of capitalized costs related to the drilling and completions in fiscal 2004 and the increase in future investment costs estimated in the reserve report resulting in a higher depletable base.                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|Our Interest in Productive Wells                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|The following table sets forth our interest in productive wells (producing wells and temporarily shut-in wells) on September 30, 2004. The number of total gross oil and natural gas wells excludes any multiple completions.                                                                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      



|         | Gross Wells |     | Net Wells
|-------- | ----------- | --- | ---------
|         | Oil         | Gas | Total    
|Oklahoma | 3           | 78  | 81       
|Texas    | 148         | 39  | 187      
|Total    | 151         | 117 | 268      
|         |             |     |          





|Our Drilling Activities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|We concentrate on lower risk, development-type properties by drilling to reservoirs from which production is, or was, being obtained. The number and type of wells we drill will vary depending on the amount of funds we have available for drilling, the cost of each well, the size of the fractional working interests we acquire in each well and the estimated recoverable reserves attributable to each well. Expenditures for drilling and completion of wells are entirely at our discretion. The following table summarizes our approximate net and gross interest in the development wells drilled during the years indicated and refers to the number of wells (holes) completed at any time during the year, regardless of when drilling was initiated:
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

|                          | Development Wells
|------------------------- | -----------------
|                          | Gross            
|                          | Productive       
|                          |                  
|Year ended September 2003 | 1                
|Year ended September 2004 | 6                
|                          |                  

|The development drilling activities referenced in the above table were conducted in Texas, Oklahoma and Louisiana.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|In the first quarter of fiscal 2004 we drilled an infield development well, the Beggs #2 on the same lease as our currently producing Beggs #1 well in Eastland County, Texas. Our share of the costs was approximately $140,000, reflecting our 96% working interesting this well. The other 4% working interest is owned by the Cruce Test Trust, an unrelated third party. The well was successful and is currently producing approximately 3 Bbls of oil per day.                                                                                                                                                                                                                                                                            
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|During January 2004, we acquired an interest in a property in Louisiana from Live Oak Energy, an unrelated third party, at a cost of approximately $25,000. Live Oak Energy retained a 25% working interest in the property. We drilled the Maddox #1 on this property during the second quarter of fiscal 2004. The total cost of this well was approximately $500,000. Since we had an 18.75% share in the drilling and completion costs of the well, our share of the drilling cost was approximately $95,000. This well was determined to be a dry hole. We recently sold our interest in this well back to Live Oak Energy at salvage value in an arms' length transaction.                                                                 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|In the second quarter of fiscal 2004, we began drilling two new wells in Cottle County, Texas in partnership with P. C. Burns Oil Producers, Inc. ("Burns"). We entered into similar drilling arrangements with Burns in fiscal 2002 and 2003 which resulted in the drilling of four wells in this same area. The total cost associated with these two new wells drilled in fiscal 2004 was approximately $1,000,000. We paid 52% of these drilling and completion costs ($520,000) and Burns paid the remaining 48%, representing our respective working interests in the wells. Although these two wells were marginally producing after completion, we are currently in the process of evaluating further stimulation work during fiscal 2005.
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|In the third and fourth quarters of 2004, three non-operated wells in which we have an interest were drilled in Oklahoma. Two were drilled by the operator Apache Corporation and one by Chesapeake Operating, Inc. All three wells were completed and are producing natural gas.                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|During fiscal 2004, we continued our exploitation program by re-completing the Walker # 1 well in the AWP field in order to develop proved reserves. Thus, it is not included on the above chart of completed development wells.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|During the first quarter of fiscal year 2005, we drilled and completed the Masterson 8A well in King County, Texas. It was a success and is currently a producing gas well. The costs were shared with our partner Burns in accordance with the respective working interests of 52% for us and 48% for Burns.                                                                                                                                                                                                                                                                                                                                                                                                                                    
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|Our Interest in Developed and Undeveloped Acreage                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|The following table sets forth our interest in developed and undeveloped acreage as of September 30, 2004.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 



|         | Developed Acreage |        | Undeveloped Acreage
|-------- | ----------------- | ------ | -------------------
|         | Gross             | Net    |                    
|Oklahoma | 29,809            | 8,028  |                    
|Texas    | 26,964            | 22,541 |                    
|Other    | 0                 | 0      |                    
|Total    | 56,773            | 30,569 |                    
|         |                   |        |                    



|The primary terms of the leases covering the majority of our undeveloped acreage in these counties expire at various dates, generally ranging from one to five years. We can retain our interest in undeveloped acreage by drilling activity that establishes commercial reserves sufficient to maintain these leases.                                                                                                                                                                                                                                                                                    
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|Our Past Sales of Producing Properties and Undeveloped Acreage                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|We evaluate properties on an ongoing basis to determine the economic viability of the properties and whether these properties enhance our objectives. During the course of normal business, we may dispose of producing properties and undeveloped acreage if we believe the dispositions to be in our best interest.                                                                                                                                                                                                                                                                                     
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|In fiscal years ended September 30, 2004 and September 30, 2003 we had no material sales of producing properties.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|Our Products, Markets, and Revenues                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|We produce oil and natural gas. We do not refine or process the oil and the natural gas that we produce. We generally sell the oil we produce under short-term contracts at market prices in the areas in which the producing properties are located, generally at F.O.B. field prices posted by the principal purchaser of oil in these areas. We sell almost all of our natural gas production on the spot market. The market for oil and natural gas and the prices of oil and natural gas is influenced by a number of factors that are beyond our control. These factors include, among other things:
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          



|* | the level of domestic production and economic activity generally;                                                                                                                                                                  
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|* | the availability of imported oil and natural gas;                                                                                                                                                                                  
|* | actions taken by foreign oil producing nations;                                                                                                                                                                                    
|* | the availability of natural gas pipelines with adequate capacity and other transportation facilities;                                                                                                                              
|* | the availability and marketing of other competitive fuels, fluctuating and seasonal demand for oil, natural gas and refined products; and                                                                                          
|* | the extent of governmental regulation and taxation (under both present and future legislation) of the production, refining, transportation, pricing, use and allocation of oil, natural gas, refined products and substitute fuels.
|  |                                                                                                                                                                                                                                    



|Accordingly, in view of the many uncertainties affecting the supply and demand for oil, natural gas and refined petroleum products, we cannot predict accurately the prices or marketability of the oil and natural gas from any producing well in which we have or may acquire an interest.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|Oil prices have been subject to significant fluctuations over the past several decades. The average price for WTI quoted on NYMEX for November 2004 was $48.60 per Bbl. Levels of production maintained by the Organization of Petroleum Exporting Countries member nations and other major oil producing countries are expected to continue to be a major determinant of oil price movements in the future. As a result, future oil price movements cannot be predicted with any certainty. Similarly, during the past several years, the U.S. market price for natural gas has been subject to significant fluctuations on a monthly basis as well as from year to year. The average NYMEX price for natural gas for November 2004 was $7.62 per Mmbtu. These frequent changes in the market price make it impossible for us to predict natural gas price movements with any certainty.
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|We may not be able to market all the oil or natural gas that we produce or, if our oil or natural gas can be marketed, that we can negotiate favorable price and contractual terms. Changes in oil and natural gas prices may significantly affect our revenues and cash flow and the value of our oil and natural gas properties. Further, significant declines in the prices of oil and natural gas may have a material adverse effect on our business and financial condition.                                                                                                                                                                                                                                                                                                                                                                                                        
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|We engage in oil and natural gas production activities in areas where from time to time the supply of oil and natural gas available for delivery exceeds the demand. In this situation, companies purchasing oil and natural gas in these areas reduce the amount of oil and natural gas that they may purchase from us. If we cannot locate other buyers for our production or any of our newly discovered oil and natural gas reserves, we may shut-in our oil and natural gas wells for periods of time.                                                                                                                                                                                                                                                                                                                                                                              
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|The following table sets forth the amount of our oil sales, natural gas sales and the percent of these sales to total oil and natural gas revenues for the periods indicated (in thousands):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         



|                              |           |                  |                                  | Percent of
Sales to Total Oil and Natural Gas Revenues
|----------------------------- | --------- | ---------------- | -------------------------------- | ------------------------------------------------------
|Period Ended                  | Oil Sales | NaturalGas Sales | Total Oil and 
Natural Gas Sales | Oil                                                   
|                              |           |                  |                                  |                                                       
|Year ended September 30, 2003 | $4,123    | $3,955           | $8,078                           | 51%                                                   
|Year ended September 30, 2004 | $4,953    | $3,929           | $8,882                           | 56%                                                   
|                              |           |                  |                                  |                                                       



|Our Current Delivery Commitments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|We are not presently obligated to provide a fixed and determinable quantity of oil or natural gas under any existing contract or agreement.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|Our Principal Customers                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|During the fiscal year ended September 30, 2004 we sold oil and natural gas to approximately 40 separate purchasers. Our largest purchasers during fiscal 2004 were Plains Marketing, L.P., Eastex Crude Company, Sonoco, Inc., Duke Energy Field Services, and Texas Energy Inc., who accounted for 27%, 15%, 14%, 13% and 12% of our respective total revenues during fiscal 2004. The same top five oil and natural gas purchasers accounted for 25%, 14%, 14% and 13% and 12% of our respective total revenues for the fiscal 2003. If we were to lose any one of our oil and natural gas purchasers, then the loss could temporarily cease or delay production and sale of our oil and natural gas in the purchaser's particular service area. We believe we would be able, under current economic circumstances, to contract with other purchasers for our oil and natural gas production if we were to lose any one of our oil and natural gas purchasers.                                                                                                                                                                                                                                                                                                                                   
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|We Encounter Strong Competition                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|The oil and natural gas industry is highly competitive. We encounter strong competition from other independent operators and from major oil companies in acquiring properties, contracting for drilling equipment and securing trained personnel. Many of these competitors have financial and technical resources and staffs substantially larger than those available to us. As a result, our competitors may be able to pay more for desirable leases and they may pay more to evaluate, bid for, and purchase a greater number of properties or prospects than our financial or personnel resources will permit.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|We are also affected by competition for drilling rigs and the availability of related equipment. The oil and natural gas industry may experience shortages of drilling rigs, equipment, pipe, and personnel. We are unable to predict how long current market conditions will continue, or its direct effect on our development and exploitation program.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|Competition for attractive oil and natural gas producing properties, undeveloped leases and drilling rights is also strong, and we may not be able to compete satisfactorily in acquiring properties. Many major oil companies have publicly indicated their decisions to concentrate on overseas activities and have been actively marketing some of their existing producing properties for sale to independent producers. We may not be successful in acquiring any of these properties.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|We Are Affected By Various Laws and Regulations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|The State of Texas and many other states require permits for drilling operations, drilling bonds and reports concerning operations and impose other requirements relating to the exploration and production of oil and natural gas. Many states also have statutes or regulations addressing conservation matters, including provisions for the unitization or pooling of oil and natural gas properties, the establishment of maximum rates of production from wells, and the regulation of spacing, plugging and abandonment of these wells. Many states restrict production to the market demand for oil and natural gas. Some states have enacted statutes prescribing ceiling prices for natural gas sold within their boundaries.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|The Federal Energy Regulatory Commission, or FERC, regulates interstate natural gas transportation rates and service conditions, which affect the revenues received by us for sales of our production. Since the mid-1980s, FERC has issued a series of orders, culminating in Order Nos. 636, 636-A and 636-B, or Order 636, that have significantly altered the marketing and transportation of natural gas. Order 636 mandates a fundamental restructuring of interstate pipeline sales and transportation service, including the unbundling by interstate pipelines of the sale, transportation, storage and other components of the city-gate sales services the pipelines previously performed. One of FERC's purposes in issuing the orders was to increase competition within all phases of the natural gas industry. Order 636 and subsequent FERC orders on rehearing have been appealed and are pending judicial review. Because these orders may be modified as a result of the appeals, it is difficult to predict the ultimate impact of the orders on us. Generally, Order 636 has eliminated or substantially reduced the traditional role of intrastate pipelines as wholesalers of natural gas, and has substantially increased competition and volatility in natural gas markets.
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|The price we receive from the sale of oil and NGLs is affected by the cost of transporting products to market. Effective January 1, 1995, FERC implemented regulations establishing an indexing system for transportation rates for oil pipelines, which, generally, would index these rates to inflation, subject to some conditions and limitations. The Railroad Commission of the State of Texas is considering adopting rules to prevent discriminatory transportation practices by intrastate natural gas gatherers and transporters by requiring the disclosure of rate information under varying conditions of service. We are not able to predict with certainty the effects, if any, of these regulations on our operations. However, the regulations may increase transportation costs or reduce wellhead prices for oil and NGLs.                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|Finally, from time to time regulatory agencies have imposed price controls and limitations on production by restricting the rate of flow of oil and natural gas wells below natural production capacity in order to conserve supplies of oil and natural gas.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|General                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|From time to time political developments and federal and state laws and regulations affect our operations in varying degrees. Changes in price controls, taxes and other laws and regulations affect our oil and natural gas production, operations, and economics.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|We review legislation affecting the oil and natural gas industry for amendments. The legislative review frequently increases our regulatory burden. The regulatory burden on the oil and natural gas industry increases our cost of doing business and affects our profitability. Because these rules and regulations are frequently amended or reinterpreted, we are unable to predict the future cost or impact of complying with these laws. We cannot predict how existing regulations may be interpreted by enforcement agencies or the courts, whether amendments or additional regulations will be adopted, or what effect interpretations and changes may have on our business or financial condition.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|Matters subject to regulation include:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    



|* | discharge permits for drilling operations;                                    
|- | ------------------------------------------------------------------------------
|* | drilling and abandonment bonds or other financial responsibility requirements;
|* | reports concerning operations;                                                
|* | the spacing of wells;                                                         
|* | unitization and pooling of properties; and                                    
|* | taxation.                                                                     
|  |                                                                               



|Natural Gas Regulation and the Effect on Marketing                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|Historically, interstate pipeline companies generally acted as wholesale merchants by purchasing natural gas from producers and reselling the natural gas to local distribution companies and large end users. Commencing in late 1985, the Federal Energy Regulatory Commission (or FERC) issued a series of orders that have substantially impacted interstate natural gas pipeline operations, services and rates, and thus have significantly altered the marketing and price of natural gas. Order No. 636, issued in April 1992, is FERC's key rule making action to date. Order No. 636 required each interstate pipeline to unbundle its traditional bundled sales services, to create and make available on an open and nondiscriminatory basis numerous constituent services (such as gathering services, storage services, firm and interruptible transportation services, and standby sales and natural gas balancing services), and to adopt a new rate making methodology to determine appropriate rates for those services. To the extent a pipeline company or its sales affiliate makes natural gas sales as a merchant in the future, it does so using private contracts in direct competition with all other sellers, such as us. The order did not require pipeline companies and their affiliates to remain merchants of natural gas, and as a result most of the interstate pipeline companies have become transporters only. In subsequent orders, the FERC largely affirmed the major features of Order 636 and denied a stay of the implementation of the new rules pending judicial review. By the end of 1994, the FERC had concluded the Order 636 restructuring proceedings, and, in general, accepted rate filings implementing Order 636 on every major interstate pipeline. However, even though the implementation of Order 636 on individual interstate pipelines is essentially complete, many of the individual pipeline restructuring proceedings, as well as Order 636 itself and the regulations promulgated thereunder, are subject to pending appellate review and could possibly be changed as a result of future court orders. We cannot predict for you whether the FERC's orders will be affirmed on appeal or what the effects will be on our business.
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|In recent years the FERC has pursued other important policy initiatives that could significantly affect the marketing of natural gas. Some of the more notable regulatory initiatives include:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
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|* | a series of orders in individual pipeline proceedings that articulate a policy of generally approving the voluntary divestiture of interstate pipeline owned gathering facilities by interstate pipelines to their affiliates (the "spindown" of previously regulated gathering facilities to the pipeline's nonregulated affiliate);
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|* | the completion of a rule involving the regulation of pipelines with marketing affiliates under Order No. 497;                                                                                                                                                                                                                        
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|* | the FERC's ongoing efforts to promulgate standards for pipeline electronic bulletin boards and electronic data exchange;                                                                                                                                                                                                             
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|* | a generic inquiry into the pricing of interstate pipeline capacity;                                                                                                                                                                                                                                                                  
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|* | efforts to refine the FERC's regulations that control operation of the secondary market for released pipeline capacity; and                                                                                                                                                                                                          
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|* | a policy statement regarding market based rates and other non-cost-based rates for interstate pipeline transmission and storage capacity.                                                                                                                                                                                            
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|Several FERC initiatives are intended to enhance competition in natural gas markets, but some may have the adverse effect. For instance, "spindowns," may actually increase the cost of doing business to some in the industry as a result of the monopolization of facilities by their new, unregulated owners. The FERC has attempted to address some of these concerns in its orders authorizing such "spindowns," but it remains uncertain what effect these activities will have on access to markets and the cost of doing business. As to all of these recent FERC initiatives, the ongoing, or in some instances, preliminary nature of these regulatory initiatives makes it impossible at this time for us to predict their ultimate impact on our business.                                                                                      
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|We directly and indirectly own natural gas facilities that we believe meet the traditional tests FERC has used to establish a company's status as a gatherer not subject to FERC jurisdiction under the Natural Gas Act of 1938. Moreover, recent FERC orders have been more liberal in their reliance upon or use of the traditional tests. In many instances, what was once classified as "transmission" may now be classified as "gathering." We transport our own natural gas through these facilities. We also transport a portion of our natural gas through gathering facilities owned by others, including interstate pipelines. Although these FERC orders have created the potential for increasing our natural gas shipping costs on third party gathering facilities, our shipping activities have not been materially affected by these orders.
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|Federal Taxation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
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|The federal government may propose tax initiatives that affect us. We are unable to determine what effect, if any, future proposals would have on product demand or our results of operations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
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|State Regulation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
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|The various states in which we conduct activities regulate our drilling, operation and production of oil and natural gas wells, including the method of developing new fields, spacing of wells, the prevention and clean-up of pollution, and maximum daily production allowables based on market demand and conservation considerations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
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|Environmental Regulation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
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|The exploration, development and production of oil and natural gas, including the operation of saltwater injection and disposal wells, is subject to various federal, state and local environmental laws and regulations. These laws and regulations can increase the costs of planning, designing, installing and operating oil and natural gas wells. Our domestic activities are subject to federal environmental laws and regulations, including, but not limited to:                                                                                                                                                                                                                                                                                                                                                                                   
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|* | the Oil Pollution Act of 1990 (OPA);                                              
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|* | the Clean Water Act (CWA);                                                        
|* | the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA);
|* | the Resource Conservation and Recovery Act (RCRA);                                
|* | the Clean Air Act (CAA); and                                                      
|* | the Safe Drinking Water Act (SDWA).                                               
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|Our domestic activities are also controlled by state regulations promulgated under comparable state statutes. We also are subject to regulations governing the handling, transportation, storage, and disposal of naturally occurring radioactive materials that are found in our oil and natural gas operations. Civil and criminal fines and penalties may be imposed for non-compliance with these environmental laws and regulations. Additionally, these laws and regulations require the acquisition of permits or other governmental authorizations before undertaking certain activities, limit or prohibit other activities because of protected areas or species, and impose substantial liabilities for the cleanup of pollution. We use an outside environmental consulting firm, Kane Environmental Consultants, to review our compliance with all environmental regulations, obtain any necessary permits such as compressor permits for oversize compressors, and prepare spill prevention plans as needed. We are currently in material compliance with all environmental requirements. We also use Miller Consulting to obtain and maintain our registration of each new well and drilling permits. We are in material compliance with our permit obligations. The costs of one-time drilling permits range from $200 to $600, and one-time fees for oversized compressors (we currently have two in use) are $750.
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|Under OPA and CWA, our release of oil and hazardous substances in harmful quantities into or upon waters of the United States, adjoining shore lines and wetlands, and offshore areas could result in our being held responsible for the (1) costs of remediating a release, (2) administrative and civil penalties or criminal fines, (3) OPA -specified damages such as loss of use, and for natural resource damages. The extent of liability could be extensive depending upon the circumstances of the release. Liability can be joint and several and without regard to fault, although there may be some limitation on liability under OPA if there is no finding of willful negligence or misconduct related to the release. The CWA also may impose permitting obligations for certain discharges of pollutants and requirements to develop Spill Prevention Control and Countermeasure Plans and Facility Response Plans to address potential discharges of oil in harmful quantities.                                                                                                                                                                                                                                                                                                                                                                                                                                    
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|CERCLA and comparable state statutes, also known as Superfund laws, can impose joint, several and retroactive liability, without regard to fault or the legality of the original conduct, on specified classes of persons for the release of a "hazardous substance" into the environment. In practice, cleanup costs are usually allocated among various responsible parties. Potentially liable parties include site owners or operators, past owners or operators under certain conditions, and entities that arrange for the disposal of, treatment of, or transport of hazardous substances found at the site. Liability can arise from conditions on properties where operations are conducted and/or from conditions at third party disposal facilities where wastes from operations were sent. Although CERCLA, as amended, currently exempts petroleum, (including oil, natural gas and NGLs) from the definition of hazardous substance, some similar state statutes do not provide such an exemption. Additionally, our operations may involve the use or handling of other materials that may be classified as hazardous substances under CERCLA and similar state statutes. We cannot assure you that the exemption will be preserved in any future amendments of the act.                                                                                                                                             
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|RCRA and comparable state and local programs impose requirements on the management, including treatment, storage, and disposal, of both hazardous and nonhazardous solid wastes. We generate hazardous and nonhazardous solid waste in our routine operations. From time to time, proposals have been made that would reclassify certain oil and natural gas wastes, including wastes generated during pipeline, drilling and production operations, as "hazardous wastes" under RCRA, which would make these solid wastes subject to much more stringent handling, transportation, storage, disposal and clean-up requirements. This development could have a significant impact on our operating costs. While state laws vary on this issue, state initiatives to further regulate oil and natural gas wastes could have a similar impact on our operations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
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|Oil and natural gas exploration and production, and possibly other activities, have been conducted at some of our properties by previous owners and operators. Materials from these operations remain on some of the properties and in some instances require remediation. In addition, we have agreed to indemnify the sellers of producing properties from whom we have acquired reserves against certain liabilities for environmental claims associated with the properties. We do not believe the costs to be incurred by us for compliance and remediating previously or currently owned or operated properties will be material, but we cannot guarantee that potential costs would not result in material expenditures.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
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|Additionally, if in the course of our routine oil and natural gas operations, surface spills and leaks, including casing leaks of oil or other materials occur, then we may incur penalties and costs for waste handling, remediation and third party actions for damages. Moreover, we are able to directly control the operations of only the wells that we operate. Notwithstanding our lack of control over wells owned by us but operated by others, the failure of the operator to comply with applicable environmental regulations may be attributable to us.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
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|We do not anticipate that we will be required in the near future to expend amounts that are material in relation to our total capital expenditures program by reason of environmental laws and regulations, but inasmuch as these laws and regulations are frequently changed and interpreted, we are unable to predict the ultimate cost of compliance. We cannot assure you that more stringent laws and regulations protecting the environment will not be adopted or that we will not incur material expenses in complying with environmental laws and regulations in the future. If substantial liabilities to third parties or governmental entities were incurred, the payment of such claims may reduce or eliminate the funds available for project investment or result in loss of our properties. Although we maintain insurance coverage we consider to be customary in the industry, we are not fully insured against all of these risks, either because insurance is not available or because of high premium costs. Accordingly, we may be subject to liability or may lose substantial portions of properties due to hazards that cannot be insured against or have not been insured against due to prohibitive premium costs or for other reasons. The imposition of any of these liabilities on us may have a material adverse effect on our financial condition and results of operations.                       
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|Our Employees                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
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|As of September 30, 2004, we employed seven full-time employees and no part-time employees. All of our employees are engaged in administrative activities. As customary in the oil and gas industry, we engage multiple independent contractors to conduct our local field operations. Additionally, as of September 30, 2004, we had arrangements with approximately two persons to provide office and administrative support on a contract basis. None of our employees are represented by unions or covered by collective bargaining agreements. We consider our relations with our employees to be excellent.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
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|Our Executive Officer                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
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|Michael E. Montgomery. Mr. Montgomery has been our President, Chief Executive Officer, and Chairman of the Board since May 15, 2000. Mr. Montgomery has served as a member of our board of directors since June 15, 2000. Mr. Montgomery was also appointed as our Chief Financial Officer during November 2001. Mr. Montgomery has over 15 years of experience in the energy industry with extensive involvement in the operations and acquisitions areas. Since its inception in 1987, Mr. Montgomery has served as the President of Montgomery Petroleum, Inc., an independent oil, and gas company that he founded, and also served from June 1998 to October 2000 as the Managing General Partner of MBOE Oil and Gas Limited Partnership, a private oil and natural gas enterprise. Additionally, Mr. Montgomery has also served as the president of Montgomery Development, Inc. since 1997. Mr. Montgomery has extensive experience in the commercial banking industry and served as a director of Bent Tree National Bank from 1994 until 1996. Mr. Montgomery holds a Bachelor of Arts degree in finance from Southern Methodist University and dedicates approximately 90% of his time during normal business hours to our business.                                                                                                                                                                                     
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|Glossary of Selected Oil and Natural Gas Terms                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
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|The following are abbreviations and definitions of certain terms commonly used in the oil and natural gas industry and this annual report on Form 10-KSB.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
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|"Bbl."One stock tank barrel, or 42 U.S. gallons liquid volume, used herein in reference to crude oil or other liquid hydrocarbons.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
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|"Bcf."One billion cubic feet of natural gas.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
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|"Boe."Barrels of oil equivalent. Calculated by converting 6 Mcf of natural gas to 1 Bbl of oil.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
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|"infill drilling."Drilling of a well between known producing wells to better exploit the reservoir.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
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|"MBoe."One thousand barrels of oil equivalent.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
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|"Mcf."One thousand cubic feet of natural gas.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
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|"MBbl."One thousand cubic barrels of oil.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
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|"Mmbtu."One million British thermal units.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
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|"MMcf."One million cubic feet of natural gas.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
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|"NGL"or"condensate."The combination of ethane, propane, butane and natural gasolines that when removed from natural gas become liquid under various levels of higher pressure and lower temperature.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
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|"NYMEX."New York Mercantile Exchange.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
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|"overriding royalty interest."An interest in an oil and/or natural gas property entitling the owner to a share of oil and natural gas production free of costs of production.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
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|"psi."pounds per square inch.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
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|"present value of estimated future net revenues"or"PV-10."The present value of estimated future net revenues is an estimate of future net revenues from a property at the time period indicated, after deducting production and ad valorem taxes, future capital costs and operating expenses, but before deducting federal income taxes. In accordance with the rules of the SEC, the future net revenues have been discounted at an annual rate of 10% to determine their "present value." The present value is shown to indicate the effect of time on the value of the net revenue stream and should not be construed as being the fair market value of the properties. Estimates have been made using constant oil and natural gas prices and operating costs at the time period indicated. We believe that the present value of estimated future net revenues before income taxes, while not in accordance with generally accepted accounting principles, is an important financial measure used by investors and independent oil and natural gas producers for evaluating the relative significance of oil and natural gas properties and acquisitions.                                                                                                                                                                                                                                                                      
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|"standardized measure."The standardized measure is an estimate of future net reserves from a property, and is calculated in the same exact same fashion as a PV-10 value, except that the projected revenue stream is adjusted to account for the estimated amount of federal income tax that must be paid.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
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|"WTI."West Texas Intermediate Crude Oil.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
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|ITEM 2.        DESCRIPTION OF PROPERTY                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
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|General                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
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|We lease approximately 2,700 square feet of office space in Dallas, Texas, for our corporate offices. The lease expires May 31, 2006, requires a monthly rental payment of approximately $4,000, and may be canceled upon 30 days notice. We consider this space adequate for our present needs.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
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|Other                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
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|We have described our oil and natural gas properties, oil and natural gas reserves, acreage, wells, production, and drilling activity in Item 1 of this annual report on Form 10-KSB. For a description of the nature of our legal interest in these properties, see "Part 1 - Item 1 - Description of Business - Title to Our Properties."                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
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|ITEM 3.       LEGAL PROCEEDINGS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
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|As of September 30, 2004, we were not involved in any legal proceedings other than ordinary routine litigation incidental to our business; the outcome of which we believe will not have a material adverse effect on our financial condition or results of operations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
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|ITEM 4.       SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|During the last three months of the fiscal year ended September 30, 2004, we did not submit any matter to a vote by our stockholders through the solicitation of proxies or otherwise.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
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|PART II                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
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|ITEM 5.       MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS 
                AND SMALL BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
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|Market Information for Our Common Stock                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|Our common stock is currently traded on the over-the-counter market under the symbol "TREK". Effective October 2, 2002, our common stock became eligible for quotation on the OTCBB. Previously, our common stock was quoted in the "pink sheets" published by the National Quotation Bureau. The trading in our common stock is extremely limited. The following table sets forth the quarterly high and low bid prices from October 1, 2002 through September 30, 2004, based upon quotations periodically published by the OTCBB. The amounts set forth below have been adjusted to reflect the ten-for-one (10:1) reverse stock split of our common stock that occurred on February 24, 2003. All price quotations represent prices between dealers, without retail mark-ups, mark-downs, or commissions and may not represent actual transactions.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             



| |                               | High  | Low  
| | ----------------------------- | ----- | -----
| | Year ended September 30, 2003 |       |      
| | First Quarter                 | $.80  | $.50 
| | Second Quarter                | $1.00 | $.60 
| | Third Quarter                 | $1.25 | $.55 
| | Fourth Quarter                | $1.02 | $.25 
| |                               |       |      
| | Year ended September 30, 2004 |       |      
| | First Quarter                 | $.99  | $.76 
| | Second Quarter                | $1.70 | $.95 
| | Third Quarter                 | $1.70 | $1.25
| | Fourth Quarter                | $1.98 | $1.12
| |                               |       |      



|The bid price for our common stock was $1.80 on December 8, 2004.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|Our Stockholders                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|According to the records of our transfer agent, there were approximately 448 holders of record of our common stock on September 30, 2004 (including nominee holders such as banks and brokerage firms who hold shares for beneficial holders).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|Sales of Unregistered Securities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|On December 2, 2002, we sold 100,000 shares of our Series A convertible preferred stock to Michael E. Montgomery and Faye C. Briggs for an aggregate purchase price of $1,000,000, or $10.00 per share. For more information, see our Quarterly Report on Form 10-QSB for the quarter ended December 31, 2002 that was filed with the SEC on February 14, 2003.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|Our Dividend Policy                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|We have not paid any cash dividends on our common stock, and do not anticipate paying cash dividends on our common stock in the foreseeable future. Our credit facility currently prohibits us from paying dividends on our common stock. Moreover, all accrued but unpaid dividends owed to holders of our Series A Preferred stock must be paid before we can pay dividends on our common stock. We anticipate that any income generated in the foreseeable future will be retained for the development and expansion of our business. Our future dividend policy is subject to the discretion of our board of directors and will depend upon a number of factors, including future earnings, debt service, capital requirements, and restrictions in our credit facility, business conditions, our financial condition and other factors that our board of directors deems relevant.
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|Equity Compensation Plans                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|Information about our equity compensation plans as of September 30, 2004 that was either approved or not approved by our stockholders is as follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       



|Plan Category                                              | A.
Number of securities to be issued upon exercise of outstanding options, warrants and rights | B.
Weighted-average exercise price of outstanding options, warrants and rights | C.Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (A))
|---------------------------------------------------------- | ---------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------ | ---------------------------------------------------------------------------------------------------------------------------------------------
|Equity compensation plans approved by security holders     | 136,000                                                                                        | $1.39                                                                          | 3,297,000                                                                                                                                    
|Equity compensation plans not approved by security holders | 0                                                                                              | 0                                                                              | 0                                                                                                                                            
|Total                                                      | 136,000                                                                                        | $1.39                                                                          | 3,297,000                                                                                                                                    
|                                                           |                                                                                                |                                                                                |                                                                                                                                              



|Purchases of Equity Securities by Trek and its Affiliated Purchasers                                                                                                                                                                                                                                                                                                                    
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                        
|Neither we nor any of our affiliated purchasers (as defined Rule 10b-18(a)(2) under the Exchange Act) made any purchases of our equity securities during the last three months of the fiscal year ended September 30, 2004.                                                                                                                                                             
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|ITEM 6.       MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION                                                                                                                                                                                                                                                                                                                 
|                                                                                                                                                                                                                                                                                                                                                                                        
|Our Results of Operations                                                                                                                                                                                                                                                                                                                                                               
|                                                                                                                                                                                                                                                                                                                                                                                        
|Comparison of the Year Ended September 30, 2003 and 2004                                                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                                                        
|Net income for the fiscal year ended September 30, 2004 was $2,087,000, or $0.42 per diluted share, compared to net income of $1,327,000, or $0.27 per diluted share for the prior year. Our results of operations for fiscal 2004 were favorably impacted by higher oil and natural gas prices, lower interest expense and an absence of hedging losses. Offsetting those effects were:



|* | Lower oil and natural gas volumes      
|- | ---------------------------------------
|* | Higher lease operating expenses        
|* | Higher production taxes                
|* | Higher depletion costs                 
|* | Higher general and administrative costs
|  |                                        



|Revenues                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|Oil and natural gas sales were up $800,000 to $8.9 million in fiscal 2004, compared to $8.1 million in fiscal 2003. This difference reflects a $1.2 million increase due to higher average prices for both oil and natural gas, offset by a $400,000 decrease due to oil and natural gas volumes. Weighted average annual prices were $36.11 per Bbl of oil and $5.29 per Mcf of natural gas during fiscal 2004, compared to $29.64 per Bbl and $4.87 per Mcf in 2003.                                                                                                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|We sold 137 MBbls of oil during fiscal 2004, versus 139 MBbls in the prior fiscal year. Corresponding natural gas sales were 742 MMcf in fiscal 2004 and 812 MMcf in fiscal 2003. The decrease in oil and natural gas sales volume was substantially due to the natural production decline of our oil and natural gas reserves.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|Costs and Expenses                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|Our lease operating expenses for the year ended September 30, 2004 amounted to $3.98 million, a $180,000 increase from the $3.8 million of expenses incurred during fiscal 2003. This increase in direct lease operating expense is also primarily the result of higher production taxes as well as higher utility bills on our large production units. Operating expenses per Boe, excluding major repairs and workovers, were $11.90 during fiscal 2004, compared to $10.56 in 2003.                                                                                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|Our general and administrative expenses for the year ending September 30, 2004 were $1,080,000, a $137,000 increase from the $943,000 million of expenses incurred during fiscal 2003. This increase primarily resulted from an increase in franchise tax expense.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|Depreciation, depletion, and amortization totaled $1.3 million for the year ended September 30, 2004, an increase of $170,000 from the corresponding expense amount reported during fiscal 2003. Our increase in depreciation, depletion, and amortization resulted from higher capital additions to our depletable asset pool, as well as an increase in the estimated future development costs which support our current reserve value.                                                                                                                                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|In September 2001, the Board of Directors approved the re-pricing of the exercise price of certain stock option grants to $1.10 (as adjusted to take into account over 10:1 reverse stock split in February 2003) per option for employees and executive officers effective October 1, 2001. Our financial statements reflect a restatement of the stock option prices to reflect the reverse split. These options, until exercised or forfeited, are subject to variable accounting at each reporting period. Compensation cost of $39,000 was recorded in fiscal 2004 to reflect the market value of our common stock price at September 30, 2004 ($1.98) exceeding the exercise price of the re-priced options ($1.10). No compensation cost was recorded at September 30, 2003 since the market price per option was less than the exercise price.
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|Other Income and Expenses                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|We incurred $426,000 of interest expense during the fiscal year ended September 30, 2004, a decrease of $79,000 from the $505,000 of interest expended during fiscal 2003. The decrease stems from a lower outstanding principal balance under our credit facility. We had outstanding borrowings of $7.9 million under our credit facility as of September 30, 2004, compared to $8.8 million as of September 30, 2003.                                                                                                                                                                                                                                                                                                                                                                                                                              
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|Other income during fiscal 2004 also improved due to the absence of net derivative losses of $216,000 as well as other extraordinary expenses that appeared in fiscal 2003 related to a proposed sale of the Company at that time. In fiscal 2004, the Company had no outstanding derivatives.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        



|Our Liquidity and Capital Resources                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|General                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|Our working capital was $982,000 on September 30, 2004. For the twelve months ended September 30, 2004, capital expenditures of $2,400,000 and retirement of debt ($900,000) were funded primarily by cash flow from operations. During the same period in 2003, capital expenditures of $634,000 and the retirement of debt ($2,007,000) were funded by additional credit facility borrowings and cash flow. We believe that our capital resources from existing cash balances, cash flow from operating activities and borrowing capacity under our credit facility are adequate to meet the cash requirements of our business for the foreseeable future. The following is a list of our major capital expenditure projects in fiscal 2004.                                                                                          
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|During the three months ended December 31, 2003, we completed several well development activities on our producing properties located in McMullen and Ochiltree Counties, Texas, and Major County, Oklahoma. The total cost of these capital expenditures was approximately $340,000, and was funded from cash flow from our operations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|During fiscal 2004, we continued our exploitation program by re-completing the Walker # 1 well in the AWP area to develop the proved developed non-producing reserves in this area. There were four other capital workovers of AWP wells during fiscal 2004 to increase reserve recovery. The total capital expenditure for the AWP projects was $600,000.                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|During January 2004, we acquired an interest in a property in Louisiana at a cost of approximately $25,000. This well, the Maddox #1, was drilled on this property during the second quarter of fiscal 2004. The total cost of this well was approximately $500,000. Since we had an 18.75% share in the drilling and completion costs of the well, our share of the drilling cost was $95,000.                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|In the second quarter of fiscal 2004, we began drilling two new wells in Cottle County, Texas in partnership with P.C. Burns Oil Producers, Inc. ("Burns"). The total estimated costs associated with these new wells was $1,000,000. We paid 52% of these drilling and completion costs ($520,000) and Burns paid the remaining 48%, representing our respective working interests in the wells.                                                                                                                                                                                                                                                                                                                                                                                                                                       
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|Also in the second quarter of 2004, we began drilling one new well adjacent to our existing Beggs #1 well in Eastland County, Texas. Our share of the total cost of this project was $140,000, reflecting our 96% working interesting this well.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|Our capital expenditures during the third quarter of fiscal 2004 included the creation of a waterflood at our TXL lease in Nolan County, Texas. This project, with a total cost of $105,000, installed water injection wells into the productive zone to enhance oil recovery. In addition, re-completion work on a natural gas well in Major County, Oklahoma commenced in mid-May 2004. The cost for this project was $64,000.                                                                                                                                                                                                                                                                                                                                                                                                        
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|Also in the quarter ended June 30, 2004, we purchased two producing natural gas wells located in Cottle County, Texas for $345,000. This acquisition, effective March 1, 2004, was reflected in the capital additions for the second quarter. We took over the operations of these two wells on April 1, 2004, and they are currently producing a total of approximately 3,500 Mcf per month.                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|During the first quarter of fiscal year 2005, we drilled and completed the Masterson 8A well in King County, Texas. It was a success and is currently a producing gas well. The total drilling and completion costs of approximately $325,000 were shared with our partner Burns in accordance with the respective working interests of 52% for us and 48% for Burns. In addition, we have spent $50,000 in the first quarter for a new well in Hill County, Texas currently in the drilling stage. Any other capital expenditures during fiscal 2005 will be a function of and dependent upon the amount of any additional cash flow from operations or other available capital resources, including available borrowings under our credit facility. The fiscal 2005 operating budget earmarks $100,000 per month for capital projects.
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|We expect to continue to utilize cash from operations and available funds under our credit facility to fund our acquisitions, capital expenditures and working capital. We believe that our capital resources from existing cash balances, cash flow from operating activities and borrowing capacity under our credit facility are adequate to meet the cash requirements of our business for the foreseeable future. However, future cash flows are subject to a number of risks, trends and uncertainties, including:                                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        



|* | Oil and Natural Gas Prices. A substantial or extended decline in oil and/or natural gas prices may have a material adverse effect on our cash flows, financial position, results of operations, access to capital and on the estimated value of our natural gas and oil reserves. Our ability to maintain or increase our borrowing capacity, to repay current or future indebtedness and to obtain additional capital on attractive terms is substantially dependent upon oil and natural gas prices.
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|* | Production Volumes. If we are unable to conduct successful development activities or acquire properties containing proved reserves, our proved reserves will generally decline as reserves are produced. Also, our production will decline as our proved reserves decline. In addition, if our reserves and production decline, then the amount we are able to borrow under our credit agreement may also decline.                                                                                    
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       



|Deferred Income Taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|Deferred tax assets or liabilities are recognized for the anticipated future tax effects of temporary differences between the financial statement basis and the tax basis of the Company's assets and liabilities. These balances are measured using tax rates in effect for the year in which the differences are expected to reverse. A valuation allowance for deferred tax assets is recorded when it is more likely than not that the benefit from the deferred tax asset will not be realized.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|On May 28, 2003, we entered into a loan agreement with Wells Fargo Bank Texas, National Association ("Wells Fargo"), for a secured credit facility that permits us to borrow up to $25 million from Wells Fargo on a revolving basis, subject to borrowing base limitations. This credit facility was entered into to repay the amounts previously advanced to us under our prior credit facility with Compass Bank. The Compass Bank facility was paid off in full on May 28, 2003 upon the funding of the Wells Fargo facility.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|On September 30, 2004, our outstanding amount under the credit facility was $7,900,000. Giving effect to subsequent principal repayments totaling $300,000 that were made in October and November 2004, the outstanding amount of our borrowings under the credit facility was $7,600,000 as of December 15, 2004.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|The borrowing base under the credit facility was initially set at $11 million and is subject to semi-annual re-determination on March 1 and September 1 of each year. Our borrowing base under the credit facility was $11,000,000 as of September 30, 2004, which resulted in $3,100,000 of borrowing capacity as of that date. We will pay interest on our borrowings under the credit facility equal to the lesser of LIBOR plus 3.25% or Wells Fargo's prime rate of interest plus 0.5%. At no time may we have more than three tranches of borrowings that bear interest at LIBOR plus 3.25%. On September 30, 2004, LIBOR was 2.2% and Wells Fargo's prime rate was 4.75%. As of December 15, 2004 they had risen to 2.45% for LIBOR and 5.0% for the prime rate. Under the terms of the facility, we are required, among other things, to comply with interest coverage, tangible net worth, current ratio and other covenants that are customary for a credit facility of this type. The credit facility is secured by a lien on approximately 80% of our oil and natural gas properties and matures on April 30, 2006.
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|Under the present terms of the credit facility, we are required to comply with the following financial covenants:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               



|* | our ratio of current assets to current liabilities may not be less than 1.0 to 1.0 at any time;                                                                                                                                                                                
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                                
|* | our tangible net worth must be at least equal to the sum of (a) $1,875,000, (b) 50% of any quarterly net income for fiscal quarters ending after March 31, 2003, and (c) 75% of any proceeds that we receive from equity issuances or other types of capital contributions; and
|  |                                                                                                                                                                                                                                                                                
|* | our quarterly ratio of earnings (before interest, taxes, depreciation, depletion, amortization and other non-cash items) to interest expense may not be less than 2.5 to 1.0.                                                                                                  
|  |                                                                                                                                                                                                                                                                                



|As of the end of the fourth quarter of fiscal 2004, we were in compliance with the above covenants.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|Need to Raise Additional Capital                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|Our business will require substantial capital on a continuing basis. We may pursue, from time to time, opportunities to acquire oil and natural gas properties and businesses that may utilize the capital we currently expect to be available for our present operations. The amount and timing of our future capital requirements, if any, will depend upon various factors which we may not be able to control.                                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|In the past, we have relied substantially on the borrowing capacity under our credit facility as a source of capital for our capital expenditure and other liquidity needs. We plan to finance any capital expenditures during fiscal 2005 by cash flow from operations. To the extent that we have available cash flow, we may continue to reduce the principal of our credit facility. We also plan to continue to consider joint drilling and recompletion arrangements in order to reduce our risk while increasing our reserve base.                                                                                                                                                                  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|Effect of Inflation and Changing Prices on Our Business                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
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|It is difficult for us to assess the impact of inflation on our business. We cannot anticipate whether inflation will remain at its present level. However, a sudden increase in inflation and/or an increase in our operating costs or drilling costs coupled with a reduction in oil or natural gas prices could have an adverse effect on our operations.                                                                                                                                                                                                                                                                                                                                               
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|Other Contingencies                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|Terrorist Attacks                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|On September 11, 2001, the United States was the target of terrorist attacks of unprecedented scope. In response, the United States commenced military action in Afghanistan during October 2001. Further, the United States has taken military action in Iraq. These developments have caused instability in the world's financial and insurance market and have lead to increased volatility in prices for crude oil and natural gas. Insurance premiums charged for some or all of the coverages we have historically maintained could increase materially, or the coverages could be unavailable in the future. These developments could have an adverse effect on our business and on our share price.
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|Contractual Commitments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|The following table sets forth our contractual and commercial commitments as of September 30, 2004 and the timing of the payments that are required by us in connection with these commitments.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
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|                                   | Payments Due Within
|---------------------------------- | -------------------
|Contractual
Obligations            | Total              
|Long-Term Debt                     | $ 7,900,000        
|                                   |                    
|Capital Lease Obligations          | -                  
|                                   |                    
|Operating Leases                   | 169,000            
|                                   |                    
|Unconditional Purchase Obligations | -                  
|                                   |                    
|Other Long-Term Obligations        | -                  
|                                   |                    
|Total Contractual Cash Obligations | $  8,069,000       
|                                   |                    



|Hedging Activities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|We may periodically enter into commodity derivative contracts and fixed-price physical contracts to manage our exposure to oil and natural gas price volatility. In the past, we have primarily utilized price swaps, floors, or collars, which were all placed with major financial institutions.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|Under these arrangements, monthly settlement amounts were calculated based on the difference between the agreed upon fixed prices and the average New York Mercantile Exchange closing prices for West Texas Intermediate Crude Oil and Natural Gas (Henry Hub delivery point) each business day during the monthly period. Payments to or from each financial counterparty were due 30-days following each settlement month.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
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|On April 7, 2003, we settled our last derivative contract. We do not have any derivative arrangements in place at this time. Previously, we entered into derivative contracts as required by our credit facility with Compass Bank. We are not required by our present credit facility to enter into derivative contracts.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
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|Related Party Transactions                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|We currently share or sublease office space with Montgomery Petroleum, Inc. ("MPI"), a company owned by Mr. Michael E. Montgomery, our Chairman of the Board, Chief Executive Officer, President and Chief Financial Officer. We also share office supplies, personnel, and various services with MPI and other entities owned by Mr. Montgomery. All such activities are billed to or by us at actual rates incurred. For the years ended September 30, 2004 and 2003, we were billed $141,000 and $91,400, respectively for services provided by MPI, and, for the year ended September 30, 2004, we billed MPI and other Montgomery entities $48,000 for office services that we provided. Net amounts of $97,600 and $58,300, respectively, were included as components of our general and administrative expenses in the accompanying statements of operations. At September 30, 2004, accounts payable included $51,200 payable to Montgomery related entities and accounts receivable included $34,500 due from entities owned by Mr. Montgomery for oil and natural gas joint interest billings and office services.                                                                                                                                                                                             
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|Mr. Montgomery and another board member, Mr. Smith, are partners in Rio Coil, LP which is a well service company based in Abilene, Texas. We used their coil tubing and nitrogen services on several of our wells in Texas and Oklahoma during fiscal 2004 and were billed a total of $191,000. Accounts payable at September 30, 2004 included $32,500 payable to Rio Coil LP.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
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|During the second and third quarters of fiscal 2003, we entered into a farmout agreement (an agreement whereby a lease owner allows an assignment to another operator to drill on the lease in exchange for future compensation) with MBOE Inc., an entity that is wholly owned by Mr. Montgomery. These arrangements were approved by our board of directors and were based on past similar drilling agreements with independent third parties. The farmout arrangements involved three re-entry workovers of two non-producing wells in the Farnsworth Unit in Ochiltree County, Texas and another non-producing well in Cottle County, Texas. MBOE agreed to pay 100% of the costs of these workovers to earn an eventual assignment of 50% of the working interests to these wells. We have completed the work on all three of these wells, and two of the three are now producing. The average cost for each workover, paid by MBOE, was $150,000. Until MBOE has recovered the costs of these workovers, MBOE will receive all proceeds that we would otherwise be entitled to from the sale of production from these wells. After MBOE has recovered the costs of the workovers, we will assign 50% of our working interests in these wells to MBOE. No additional farmout arrangements were added in fiscal 2004.
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|Critical Accounting Policies                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|In response to the SEC's Release No. 33-8040, "Cautionary Advice Regarding Disclosure About Critical Accounting Policies," we have identified the most critical accounting principles upon which our financial status depends. We determined the critical principles by considering accounting policies that involve the most complex or subjective decisions or assessments. We identified our most critical accounting policies to be those related to our proved reserve estimates, impairment assessments, deferred tax asset valuations, and our choice of accounting method.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
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|We prepared our consolidated financial statements for inclusion in this report in accordance with accounting principles that are generally accepted in the United States ("GAAP"). GAAP represents a comprehensive set of accounting and disclosure rules and requirements, the application of which requires management judgments and estimates including, in certain circumstances, choices between acceptable GAAP alternatives. The following is a discussion of our most critical accounting policies, judgments and uncertainties that are inherent in our response to the SEC's Release No. 33-8040, "Cautionary Advice Regarding Disclosure application of GAAP."                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
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|Proved reserve estimates                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|Estimates of our proved reserves are prepared in accordance with GAAP and SEC guidelines. The accuracy of a reserve estimate is a function of:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
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|* | the quality and quantity of available data;               
|- | ----------------------------------------------------------
|* | the interpretation of that data;                          
|* | the accuracy of various mandated economic assumptions; and
|* | the judgment of the persons preparing the estimate.       
|  |                                                           



|Our proved reserve information is based on estimates prepared by our independent petroleum engineers. Because these estimates depend on many assumptions, all of which may substantially differ from actual results, reserve estimates may be different from the quantities of oil and natural gas that are ultimately recovered. In addition, results of drilling, testing, and production after the date of an estimate may justify material revisions to the estimate.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
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|You should not assume that the present value of future net cash flows is the current market value of our estimated proved reserves. In accordance with SEC requirements, we based the estimated discounted future net cash flows from proved reserves on prices and costs on the date of the estimate. Actual future prices and costs may be materially higher or lower than the prices and costs as of the date of the estimate.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
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|Estimates of proved reserves materially impact depletion expense. If the estimates of proved reserves decline, then the rate at which we record depletion expense increases, reducing net income. A decline may result from lower market prices, which may make it uneconomic to drill or produce from higher cost fields. In addition, the decline in proved reserve estimates may impact the outcome of our assessment of our oil and gas properties for impairment.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|Impairment of unproved oil and gas properties                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
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|We periodically assess individually significant unproved oil and natural gas properties for impairment, on a project-by-project basis. Our assessment of the results of exploitation activities, commodity price outlooks, planned future sales or the expiration of all or a portion of the leases for potential projects impact the amount and timing of impairment provisions.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
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|Deferred tax asset valuations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|We periodically assess the probability of recovery of recorded deferred tax assets based on our assessment of future earnings outlooks by tax jurisdiction. These estimates are inherently imprecise since many assumptions are utilized in the assessments that may prove to be incorrect in the future.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
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|Accounting for oil and natural gas properties                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
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|The accounting for and disclosure of oil and natural gas producing activities requires that we choose between GAAP alternatives and to make judgments about estimates of future uncertainties.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
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|We use the full cost method of accounting, which involves capitalizing all acquisition, exploration, exploitation, and development costs. Once incurred, costs are recorded in the full cost pool or in unevaluated properties. Unevaluated property costs are not subject to depletion. We review our unevaluated costs on an ongoing basis, and we generally expect these costs to be evaluated in one to three years and transferred to the full cost pool during that time. We had no unevaluated costs at September 30, 2003 and 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
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|We calculate depletion using the unit-of-production method. Under this method, the sum of the full cost pool and all estimated future development costs is divided by the total amount of proved reserves. This rate is applied to our total production for the period, and the appropriate expense is recorded.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
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|To the extent that total capitalized oil and natural gas property costs (net of related deferred income taxes and accumulated depreciation, depletion and amortization) exceeds the estimated future net revenues from proved properties using current period-end prices discounted at 10%, adjusted for related income tax effects, and the lower of cost and fair value of unproved properties, excess costs are charged to operations. Once incurred, a write-down of oil and natural gas properties is not reversible at a later date even if oil or natural gas prices increase. We could be required to write-down our oil and gas properties if there is a decline in oil or natural gas prices, or downward adjustments are made to our proved reserves.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
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|Goodwill and Intangible Assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
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|SFAS No. 141, Business Combinations, and SFAS No. 142, Goodwill and Intangible Assets, became effective for the Company on July 1, 2001 and December 1, 2002, respectively. SFAS No. 141 requires all business combinations initiated after June 30, 2001 to be accounted for using the purchase method. Additionally, SFAS No. 141 requires companies to disaggregate and report separately from goodwill certain intangible assets. SFAS No. 142 establishes new guidelines for accounting for goodwill and other intangible assets. Under SFAS No. 142, goodwill and certain other intangible assets are not amortized, but rather are reviewed annually for impairment. The appropriate application of SFAS Nos. 141 and 142 to oil and gas mineral rights held under lease and other contractual arrangements representing the right to extract such reserves is unclear. Depending on how the accounting and disclosure literature is clarified, these oil and gas mineral rights held under lease and other contractual arrangements representing the right to extract such reserves for both undeveloped and developed leaseholds may be classified separately from oil and gas properties, as intangible assets on our balance sheets. Additional disclosures required by SFAS Nos. 141 and 142 would be included in the notes to financial statements. Historically, Trek, like many other oil and gas companies, has included these oil and gas mineral rights held under lease and other contractual arrangements representing the right to extract such reserves as part of the oil and gas properties, even after SFAS Nos. 141 and 142 became effective.
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|At September 30, 2004, we had net leasehold costs of approximately $16,396,000. If we applied the interpretation currently being deliberated, this classification of interests as intangible assets would require us to make the disclosures set forth under SFAS No. 142 related to these interests. We will continue to classify oil and gas leaseholds as oil and gas properties until further guidance is provided.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
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|ITEM 7.        FINANCIAL STATEMENTS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|For the financial information required by Item 7, see the financial statements included as Appendix A to this Annual Report on Form 10-KSB.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
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|ITEM 8.       CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
                      ACCOUNTING AND FINANCIAL DISCLOSURE                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
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|Not applicable.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
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|ITEM 8A.        CONTROLS AND PROCEDURES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
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|The term "disclosure controls and procedures" is defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, or the Exchange Act. This term refers to the controls and procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files under the Exchange Act is recorded, processed, summarized and reported within required time periods. Mr. Michael E. Montgomery, our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this annual report, and he has concluded that as of that date, our disclosure controls and procedures were effective at ensuring that required information will be disclosed on a timely basis in our reports filed under the Exchange Act.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
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|No change to our internal control over financial reporting occurred during our last fiscal quarter of 2004 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
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|ITEM 8B.       OTHER INFORMATION                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
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|Not applicable.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
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|PART III                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|ITEM 9.        DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL 
                       PERSONS COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
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|We have adopted a Financial Code of Ethics that applies to our Chief Executive Officer, Chief Financial Officer and any of our other officers that may function as a principal accounting officer or controller. We hereby undertake to provide to any person without charge, upon request, a copy of our Financial Code of Ethics. Requests may be directed to Trek Resources, Inc., 4925 Greenville Avenue, Suite 955, Dallas, Texas 75206, Attention: Corporate Secretary, or by calling (214) 373-0318.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
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|The following table presents information with respect to our directors and executive officers:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
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|Name                  | Age | Position                                                                             
|--------------------- | --- | -------------------------------------------------------------------------------------
|                      |     |                                                                                      
|Michael E. Montgomery | 51  | President, Chief Executive Officer, Chief Financial Officer and Chairman of the Board
|                      |     |                                                                                      
|Harold Ginsburg       | 52  | Director                                                                             
|                      |     |                                                                                      
|Kenneth R. Smith      | 52  | Director and Secretary                                                               
|                      |     |                                                                                      
|Dewain V. Hill        | 52  | Director                                                                             
|                      |     |                                                                                      



|Michael E. Montgomery. Mr. Montgomery has been our President, Chief Executive Officer and Chairman of the Board since May 15, 2000. Mr. Montgomery has also served as a member of our board of directors since June 15, 2000. Additionally, Mr. Montgomery was appointed as our Chief Financial Officer during November 2001. Mr. Montgomery has over 15 years of experience in the energy industry with extensive involvement in the operations and acquisitions areas. Since its inception in 1987, Mr. Montgomery has served as the President of Montgomery Petroleum, Inc., an independent oil and gas company that he founded, and also served from June 1998 to October 2000 as the Managing General Partner of MBOE Oil and Gas Limited Partnership, a private oil and natural gas enterprise. Additionally, Mr. Montgomery has also served as the president of Montgomery Development, Inc. since 1997. Mr. Montgomery has extensive experience in the commercial banking industry and served as a director of Bent Tree National Bank from 1994 until 1996. Mr. Montgomery holds a Bachelor of Arts degree in finance from Southern Methodist University and dedicates approximately 90% of his time during normal business hours to our business.
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|Harold H. Ginsburg. Mr. Ginsburg was elected to our board of directors on June 15, 2000. In 1991, Mr. Ginsburg was appointed and presently serves as the Managing Principal of Southern Asset Service Corporation, a commercial real estate consulting and brokerage firm, and has over 25 years of experience in the commercial real estate industry. Mr. Ginsburg also has served on the board of directors of Lone Star Bank of Dallas, Allied Bank of Dallas, Texas, American Bank of Denison, Texas, American Bank of Sherman, Texas and North American Bank Shares. He holds a Bachelor of Arts degree from the University of Texas at Austin, and also serves as a member of our audit and compensation committees.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
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|Kenneth R. Smith. Mr. Smith joined our board of directors on June 15, 2000. Mr. Smith also became our Secretary in November 2001. Since 1989, Mr. Smith has served as the President of Stanford Financial in Dallas, Texas. Since 1990, Mr. Smith has been actively involved in oil, natural gas and real estate enterprises as a private investor. Mr. Smith has over 20 years of experience in the banking industry and has held various executive and managerial positions with Bank Texas, N.A., First City Bank of Dallas and G.E. Capital. Mr. Smith holds a Bachelor of Science degree in finance from Louisiana State University, and also serves as a member of our audit and compensation committees.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
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|Dewain V. Hill. Mr. Hill joined our board of directors on June 15, 2000. Mr. Hill has over 25 years of experience in the banking industry. Since 1996, he has served as Chief Credit Officer, now Managing Executive, at Northern Trust Bank of Texas, N.A. From 1989 until 1996, he served as the President of Bent Tree National Bank of Dallas, Texas. Mr. Hill holds a Bachelor of Arts degree from Texas Christian University, and also serves as a member of our audit and compensation committees.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
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|Our directors serve one-year terms, and must stand for re-election each year at the annual meeting of our stockholders.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
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|Audit Committee Financial Expert                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
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|None of the members of our audit committee meet the definition of "audit committee financial expert" as defined in Item 401(e) of Regulation S-B promulgated by the Securities and Exchange Commission. We have not retained an audit committee financial expert to serve on our audit committee because we do not believe that we can do so without undue cost and expense. Moreover, we believe that the present members of our audit committee have sufficient knowledge and experience in financial affairs to effectively perform their duties.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
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|Section 16(a) Beneficial Ownership Reporting Compliance                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
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|Section 16(a) of the Securities Exchange Act of 1934, as amended, requires directors, executive officers and beneficial owners of more than 10% of our common stock to file with the Securities and Exchange Commission initial reports of ownership and reports of changes in ownership of our common stock and any of our other equity securities. Based solely upon our review of the copies of such forms received by us, we believe that all such reports were submitted on a timely basis during the year ended September 30, 2004.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
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|ITEM 10.        EXECUTIVE COMPENSATION                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
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|Compensation of Officers                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
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|The following table shows the compensation of the named executive officers of the company for the fiscal years ended September 30, 2004 and 2003. We did not make awards of restricted stock or stock appreciation rights or make any type of long-term incentive plan payments during any of these fiscal years.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
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|Summary Compensation Table                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
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|                                                                                                                 | Annual Compensation              | Long Term Compensation |              
|---------------------------------------------------------------------------------------------------------------- | -------------------------------- | ---------------------- | -------------
|Name and Principal Position                                                                                      | Fiscal Year 
Ended September 30, | Salary                 | Bonus        
|                                                                                                                 |                                  |                        |              
|Michael E. Montgomery(1)
President, Chief Executive 
Officer, Chief Financial 
Officer and Chairman of the
Board | 2004
2003                        | $120,000
$120,000      | $3,600
$3,600
|                                                                                                                 |                                  |                        |              



|The preceding table shows all cash compensation paid or to be paid by us, as well as certain other non-cash compensation paid or accrued, during the fiscal years indicated, to our named executive officers in all capacities in which they served.
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|We did not grant any stock options to our named executive officers during the fiscal year ended September 30, 2004. If not exercised, all outstanding stock options expire ten years from the date issued.                                          
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|Aggregated Option/SAR Exercises in Last Fiscal Year and FY-End Option/SAR Values                                                                                                                                                                    
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|Name                  | Shares Acquired on Exercise (#) | Value Realized ($) | Number of Securities 
Underlying Unexercised 
Options/SARs at 
FY-End (#) Exercisable/ Unexercisable | Value of Unexercised 
In-the-Money 
Options/SARs at 
FY-End ($) Exercisable/ Unexercisable
|--------------------- | ------------------------------- | ------------------ | ---------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------
|Michael E. Montgomery | ---                             | ---                | 40,000/0                                                                                             | $0/0                                                                                      
|                      |                                 |                    |                                                                                                      |                                                                                           



|Compensation of Directors                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
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|We have not made any standard arrangements which entitle our directors to receive cash retainers or meeting fees for their board or committee service. However, we paid each of our non-employee directors a fee of $300 for their board service during fiscal 2004. On November 1, 2000, we granted each of our non-executive directors an option to purchase up to 20,000 shares of our common stock at $1.60 per share. The terms of the option grants provide that all of the options are immediately exercisable, but the underlying shares of common stock are subject to vesting restrictions. One-fourth of the shares of common stock underlying these options vested on the date of grant, with an additional one thirty-sixth (1/36) of the remaining portion vesting in 36 equal installments beginning on December 31, 2000. All unexercised options, as well as all unvested shares of underlying common stock, are forfeited in the event that the director's service on our board of directors is terminated. Additionally, we reimburse our directors for travel, lodging and related expenses that they may occur in attending board of directors and committee meetings.
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|ITEM 11.        SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND 
                        MANAGEMENT AND RELATED STOCKHOLDER MATTERS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
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|The following table shows the beneficial ownership of our common stock as of December 15, 2004 for (1) our directors, (2) our executive officers who are listed in the Summary Compensation Table, (3) our directors and executive officers as a group and (4) beneficial owners of 5% or more of our common stock:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
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|Name and Addressof Beneficial Owner                                         | Shares of Common StockBeneficially Owned | Approximate PercentageOf Common Stock
|--------------------------------------------------------------------------- | ---------------------------------------- | -------------------------------------
|                                                                            |                                          |                                      
|Officers and Directors:                                                     |                                          |                                      
|                                                                            |                                          |                                      
|Michael E. Montgomery
4925 Greenville Avenue, Suite 955
Dallas, Texas 75206 | 3,566,544(1)                             | 71.3%                                
|                                                                            |                                          |                                      
|Harold H. Ginsburg
4925 Greenville Avenue, Suite 955
Dallas, Texas 75206    | 22,510 (2)                               | (3)                                  
|                                                                            |                                          |                                      
|Kenneth R. Smith
4925 Greenville Avenue, Suite 955
Dallas, Texas 75206      | 27,510 (2)                               | (3)                                  
|                                                                            |                                          |                                      
|Dewain V. Hill
4925 Greenville Avenue, Suite 955
Dallas, Texas 75206        | 22,510 (2)                               | (3)                                  
|                                                                            |                                          |                                      
|All executive officers and directors
as a group (5 persons)                 | 3,639,074                                | 71.8%                                
|                                                                            |                                          |                                      
|Five Percent Stockholders(4)                                                |                                          |                                      
|                                                                            |                                          |                                      
|Faye C. Briggs
12076 Tavel Circle
Dallas, Texas 75230                       | 3,566,544 (5)                            | 71.3%                                
|                                                                            |                                          |                                      



|(1) | Includes (a) 2,097,972 shares of common stock owned of record by Mr. Montgomery, (b) 40,000 shares of common stock that may be purchased by Mr. Montgomery pursuant to employee stock options within 60 days of December 31, 2004, (c) 50,000 shares of our Series A preferred stock owned by Mr. Montgomery that is convertible into 714,286 shares of common stock at the option of Mr. Montgomery and (d) 50,000 shares of Series A preferred stock owned by Faye C. Briggs, Montgomery's mother, that are convertible into 714,286 shares of common stock at the option of Ms. Briggs. The holdings of Ms. Briggs are included in the number of shares reported as Mr. Montgomery and Ms. Briggs may be deemed to constitute a "group" pursuant to Rule 13d-5(b)(1) promulgated under the Securities Exchange Act of 1934, as amended. Mr. Montgomery disclaims the beneficial ownership of the shares of Series A preferred stock and underlying shares of common stock held by Ms. Briggs.
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|(2) | Includes options to purchase 20,000 shares of common stock                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|(3) | Less than 1%.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|(4) | Does not include Mr. Montgomery, whose share ownership data is shown above under "Officers and Directors".                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|(5) | Includes (a) 50,000 shares of our Series A preferred stock owned of record by Ms. Briggs that are convertible into 714,286 shares of common stock at the option of Ms. Briggs and (b) an additional 2,852,258 shares of common stock beneficially owned by Mr. Montgomery. The holdings of Mr. Montgomery are included in the number of shares reported as Mr. Montgomery and Ms. Briggs may be deemed to constitute a "group" pursuant to Rule 13d-5(b)(1) promulgated under the Securities Exchange Act of 1934, as amended. Ms. Briggs disclaims the beneficial ownership of such shares of common stock beneficially owned by Mr. Montgomery.                                                                                                                                                                                                                                                                                                                                               
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|ITEM 12.       CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
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|Mr. Michael E. Montgomery                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
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|We currently share or sublease office space with Montgomery Petroleum, Inc. ("MPI"), a company owned by our Chairman of the Board, Chief Executive Officer, President and Chief Financial Officer, Michael E. Montgomery. We also share office supplies, personnel, and various services with MPI and other entities owned by Mr. Montgomery. All such activities are billed to or by us at actual rates incurred. For the years ended September 30, 2004 and 2003, we were billed $141,000 and $91,400, respectively for services provided by MPI, and, for the year ended September 30, 2004 we billed MPI and other Montgomery entities $48,000 for office services that we provided. Net amounts of $97,600 and $58,300, respectively, were included as components of our general and administrative expenses in the accompanying statements of operations. At September 30, 2004, accounts payable included $51,200 payable to Montgomery related entities and accounts receivable included $34,500 due from entities owned by Mr. Montgomery for oil and natural gas joint interest billings and office services.                                                           
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|During the second and third quarters of fiscal 2003, we entered into farmout arrangements with MBOE Inc., an entity that is wholly owned by Mr. Montgomery. These arrangements were approved by our board of directors and were based on past similar drilling agreements with independent third parties. The farmout arrangements involved three re-entry workovers of two non-producing wells in the Farnsworth Unit in Ochiltree County, Texas and another non-producing well in Cottle County, Texas. MBOE agreed to pay 100% of the costs of these workovers to earn an eventual assignment of 50% of the working interests to these wells. We have completed the work on all three of these wells, and two of the three are now producing. The average cost for each workover, paid by MBOE, was $150,000. Until MBOE has recovered the costs of these workovers, MBOE will receive all proceeds that we would otherwise be entitled to from the sale of production from these wells. After MBOE has recovered the costs of the workovers, we will assign 50% of our working interests in these wells to MBOE. No additional farmout arrangements were added in fiscal 2004.
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|Mr. Michael E. Montgomery and Mr. Kenneth R. Smith                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
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|Mr. Montgomery and another board member, Mr. Smith, are partners in Rio Coil, LP which is a well service company based in Abilene, Texas. We used their coil tubing and nitrogen services on several of our wells in Texas and Oklahoma during fiscal 2004 and were billed a total of $191,000. Accounts payable at September 30, 2004 included $32,500 payable to Rio Coil LP.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
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|ITEM 13.         EXHIBITS
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|                         



|Exhibit No. | Description                                                                                                                                                                                                                                                                                                  
|----------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|            |                                                                                                                                                                                                                                                                                                              
|3.1         | Certificate of Incorporation of Trek Resources, Inc. (previously filed as an exhibit to our registration statement on Form 10-SB filed on March 26, 2001, and incorporated herein by reference).                                                                                                             
|            |                                                                                                                                                                                                                                                                                                              
|3.2         | Certificate of Amendment to Certificate of Incorporation of Trek Resources, Inc. (previously filed as an exhibit to our Quarterly Report on Form 10-QSB filed on May 15, 2003, and incorporated herein by reference).                                                                                        
|            |                                                                                                                                                                                                                                                                                                              
|3.3         | Amended and Restated Bylaws of Trek Resources, Inc. (previously filed as an exhibit to our registration statement on Form 10-SB filed on March 26, 2001, and incorporated herein by reference).                                                                                                              
|            |                                                                                                                                                                                                                                                                                                              
|3.4         | Amendment to Amended and Restated Bylaws of Trek Resources, Inc. (previously filed as an exhibit to our Quarterly Report on Form 10-QSB filed on May 15, 2003, and incorporated herein by reference).                                                                                                        
|            |                                                                                                                                                                                                                                                                                                              
|3.5         | Certificate of Designation for Series A Convertible Preferred Stock (previously filed as an exhibit to our Current Report on Form 8-K filed on December 3, 2002, and incorporated herein by reference).                                                                                                      
|            |                                                                                                                                                                                                                                                                                                              
|3.6         | Certificate of Amendment of Certificate of Incorporation of Trek Resources, Inc. (previously filed as an exhibit to our Quarterly Report on Form 10-QSB filed on May 14, 2004, and incorporated herein by reference).                                                                                        
|            |                                                                                                                                                                                                                                                                                                              
|4.1         | Certificate of Incorporation of Trek Resources, Inc. (filed as Exhibit 3.1 above).                                                                                                                                                                                                                           
|            |                                                                                                                                                                                                                                                                                                              
|4.2         | Certificate of Amendment to Certificate of Incorporation of Trek Resources, Inc. (filed as Exhibit 3.2 above).                                                                                                                                                                                               
|            |                                                                                                                                                                                                                                                                                                              
|4.3         | Amended and Restated Bylaws of Trek Resources, Inc. (filed as Exhibit 3.3 above).                                                                                                                                                                                                                            
|4.4         | Amendment to Amended and Restated Bylaws of Trek Resources, Inc. (filed as Exhibit 3.4 above).                                                                                                                                                                                                               
|            |                                                                                                                                                                                                                                                                                                              
|4.5         | Certificate of Designation for Series A Convertible Preferred Stock (filed as Exhibit 3.5 above).                                                                                                                                                                                                            
|            |                                                                                                                                                                                                                                                                                                              
|4.6         | Certificate of Amendment of Certificate of Incorporation (filed as Exhibit 3.6 above)                                                                                                                                                                                                                        
|            |                                                                                                                                                                                                                                                                                                              
|4.7         | Registration Rights Agreement, dated as of December 2, 2002, by and among Trek Resources, Inc., Michael E. Montgomery and Faye C. Briggs (previously filed as an exhibit to our Current Report on Form 8-K filed on December 3, 2002, and incorporated herein by reference).                                 
|            |                                                                                                                                                                                                                                                                                                              
|10.1        | Loan Agreement, dated as of May 28, 2003, by and between Trek Resources, Inc. and Wells Fargo Bank Texas, National Association (previously filed as an exhibit to our Current Report on Form 8-K filed on May 29, 2003 and incorporated herein by reference).                                                
|            |                                                                                                                                                                                                                                                                                                              
|10.2*       | 2000 Trek Resources, Inc. Stock Option Plan (previously filed as an exhibit to our registration statement on Form 10-SB filed on March 26, 2001, and incorporated herein by reference).                                                                                                                      
|            |                                                                                                                                                                                                                                                                                                              
|10.3*       | Trek Resources, Inc. 401(k) Plan, dated November 8, 2000 (previously filed as an exhibit to our registration statement on Form 10-SB filed on March 26, 2001, and incorporated herein by reference).                                                                                                         
|10.4        | Letter Agreement, dated May 5, 2002, by and between Trek Resources, Inc. and Michael E. Montgomery (previously filed as an exhibit to our Quarterly Report on Form 10-QSB filed on May 15, 2002, and incorporated herein by reference).                                                                      
|            |                                                                                                                                                                                                                                                                                                              
|10.5        | Agreement by and between Trek Resources, Inc. and P. C. Burns Oil Producers, Inc., dated June 1, 2002, regarding drilling of wells in King and Cottle Counties, Texas (previously filed as an exhibit to our Quarterly Report on Form 10-QSB filed on August 14, 2002, and incorporated herein by reference).
|            |                                                                                                                                                                                                                                                                                                              
|10.6        | Stock Purchase Agreement, dated as of December 2, 2002, by and among Trek Resources, Inc., Michael E. Montgomery, and Faye C. Briggs (previously filed as an exhibit to our Current Report on Form 8-K filed on December 3, 2002, and incorporated herein by reference).                                     
|            |                                                                                                                                                                                                                                                                                                              
|10.7        | Registration Rights Agreement, dated as of December 2, 2002, by and among Trek Resources, Inc., Michael E. Montgomery and Faye C. Briggs (filed as Exhibit 4.6 above).                                                                                                                                       
|            |                                                                                                                                                                                                                                                                                                              
|23.1        | Consent of Hein + Associates, LLP, independent accountants (previously filed as Exhibit 23.1 to our Form 10-KSB filed on December 29, 2004 and incorporated herein by reference).                                                                                                                            
|            |                                                                                                                                                                                                                                                                                                              
|23.2        | Consent of LaRoche Petroleum Consultants, Ltd., independent petroleum engineers (previously filed as Exhibit 23.2 to our Form 10-KSB filed on December 29, 2004 and incorporated herein by reference).                                                                                                       
|            |                                                                                                                                                                                                                                                                                                              
|31.1        | Certification of Michael E. Montgomery, President, Chief Executive Officer, Chief Financial Officer and Chairman of the Board of Trek Resources, Inc., under Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).                                                                                 
|            |                                                                                                                                                                                                                                                                                                              
|32.1        | Certification of Michael E. Montgomery, President, Chief Executive Officer, Chief Financial Officer and Chairman of the Board of Trek Resources, Inc., under Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).                                                                                 
|            |                                                                                                                                                                                                                                                                                                              



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|* denotes management contract or compensatory plan                                                                                                                                                                                                                                                                                                                          
|                                                                                                                                                                                                                                                                                                                                                                            
|Upon reasonable advance request and payment of a $5 processing fee per exhibit, we will provide copies of any of the exhibits listed above that are not included with this annual report to any of our stockholders of record. Stockholders may request copies of these exhibits by writing to Trek Resources, Inc., 4925 Greenville Avenue, Suite 955, Dallas, Texas 75206.
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|ITEM 14.         PRINCIPAL ACCOUNTANT FEES AND SERVICES                                                                                                                     
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                            
|Audit fees                                                                                                                                                                  
|                                                                                                                                                                            
|The following table summarizes the fees paid or payable to Hein & Associates LLP for services rendered for the fiscal years ended September 30, 2003 and September 30, 2004:
|                                                                                                                                                                            

|Type of Fees       | Fiscal Year Ended September 30, 2003 | Fiscal Year Ended September 30, 2004
|------------------ | ------------------------------------ | ------------------------------------
|                   |                                      |                                     
|Audit Fees         | $    28,500                          | $    19,166                         
|                   |                                      |                                     
|Audit-Related Fees | 1,800                                | -0-                                 
|                   |                                      |                                     
|Tax Fees           | 7,500                                | 8,534                               
|                   |                                      |                                     
|All Other Fees     | 400                                  | 400                                 
|                   |                                      |                                     
|Total Fees         | $ 38,200                             | $  28,100                           
|                   |                                      |                                     

|The caption "audit fees" are fees we paid Hein & Associates for professional services for the audit of our financial statements included in our Form 10-KSB and review of financial statements included our Form 10-QSBs, or for services that are usually provided by an auditor in connection with statutory and regulatory filings and engagements. "Audit-related fees" are fees billed by Hein & Associates for assurance and related services that are reasonably related to the performance of the audit or review of our financial statements. "Tax fees" are fees for tax compliance, tax advice and tax planning. All other fees are fees billed by Hein & Associates for any services not included in the first three categories.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|Our audit committee has not adopted "pre-approval policies and procedures," as such term is used in Rule 2-01(c)(7)(i) of Regulation S-X promulgated by the Securities and Exchange Commission ("Regulation S-X"), for the provision of non-audit services to us by Hein & Associates. None of the services represented by the fees set forth in the above table were provided in accordance with the "de minimus" exception to audit committee approval that appears in Rule 2-01(c)(7)(i)(C) of Regulation S-X.                                                                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

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



|                     | TREK RESOURCES, INC.                                                                                                                                     
|-------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------
|                     |                                                                                                                                                          
|                     |                                                                                                                                                          
|Date: April 15, 2005 | By: /s/ Michael E. Montgomery                                                                                                                            
|                     | Michael E. Montgomery
President, Chief Executive Officer, Chief Financial 
Officer (Principal Financial and Accounting Officer)
and Chairman of the Board
|                     |                                                                                                                                                          







|APPENDIX "A"                                                          
|----------------------------------------------------------------------
|FINANCIAL STATEMENTS                                                  
|Trek Resources, Inc.                                                  
|                                                                      
|INDEX TO FINANCIAL STATEMENTS                                         
|                                                                      
|Contents                                                              
|                                                                      
|                                                                      
|Audited Financial Statements, Years ended September 30, 2004 and 2003:
|                                                                      



|Report of Independent Auditors - September 30, 2004 and 2003 | F-2
|------------------------------------------------------------ | ---
|Balance Sheet                                                | F-3
|Statements of Operations                                     | F-4
|Statements of Stockholders' Equity                           | F-5
|Statements of Cash Flows                                     | F-6
|Notes to Financial Statements                                | F-7



|REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|The Board of Directors and Stockholders                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|Trek Resources, Inc.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|We have audited the accompanying balance sheets of Trek Resources, Inc. as of September 30, 2004 and 2003, and the related statements of operations, stockholders' equity, and cash flows for each of the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Trek Resources, Inc. as of September 30, 2004 and 2003, and the results of its operations and its cash flows for each of the years then ended, in conformity with U.S. generally accepted accounting principles.                                                                                                                                                                                                                                                                                                                                   
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|Hein & Associates LLP                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|Dallas, Texas                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|December 15, 2004                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

|Trek Resources, Inc.                                                                                                                                                                    
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                        
|Balance Sheet                                                                                                                                                                           
|                                                                                                                                                                                        
|                                                                                                                                                                                        
|                                                                                                                                                                                        
|                                                                                                                                                                                        
|Assets                                                                                                                                                                                  
|Current assets:                                                                                                                                                                         
|Cash and cash equivalents                                                                                                                                                               
|Accounts receivable, net of allowance of 
     $10,045 at September 30, 2004 and 2003                                                                                                   
|Prepaid assets                                                                                                                                                                          
|Total current assets                                                                                                                                                                    
|                                                                                                                                                                                        
|Property and equipment at cost:                                                                                                                                                         
|Oil and gas properties, full cost method of accounting                                                                                                                                  
|Other                                                                                                                                                                                   
|                                                                                                                                                                                        
|Less accumulated depreciation and depletion                                                                                                                                             
|Net property and equipment                                                                                                                                                              
|                                                                                                                                                                                        
|Other assets                                                                                                                                                                            
|Total assets                                                                                                                                                                            
|                                                                                                                                                                                        
|Liabilities and Stockholders' Equity                                                                                                                                                    
|Current liabilities:                                                                                                                                                                    
|Accounts payable                                                                                                                                                                        
|Accrued liabilities                                                                                                                                                                     
|Drilling advances                                                                                                                                                                       
|Total current liabilities                                                                                                                                                               
|                                                                                                                                                                                        
|Long-term asset retirement obligation                                                                                                                                                   
|Long-term debt                                                                                                                                                                          
|                                                                                                                                                                                        
|Commitments and contingencies (Note 11)                                                                                                                                                 
|                                                                                                                                                                                        
|Stockholders' equity:                                                                                                                                                                   
|Preferred Stock, $0.01 par value; 400,000 shares authorized;
     Series A, 100,000 shares designated; 100,000 shares issued 
     and outstanding; liquidation preference of $1,017,500
|                                                                                                                                                                                        
|Common stock, $0.10 par value; 15,000,000 shares 
     authorized;3,536,439 shares issued                                                                                               
|Additional paid-in capital                                                                                                                                                              
|Accumulated deficit                                                                                                                                                                     
|Total stockholders' equity                                                                                                                                                              
|Total liabilities and stockholders' equity                                                                                                                                              
|                                                                                                                                                                                        

|See accompanying notes.
|-----------------------
|                       
|                       
|                       
|                       

|Trek Resources, Inc.    
|------------------------
|                        
|Statements of Operations
|                        

|                                                      | 2004            | 2003           
|----------------------------------------------------- | --------------- | ---------------
|Revenues - oil and gas sales                          | $ 8,881,898     | $ 8,078,066    
|                                                      |                 |                
|Costs and expenses:                                   |                 |                
|Lease operating expenses                              | 3,982,025       | 3,800,535      
|General and administrative                            | 1,080,334       | 943,124        
|Depreciation, depletion, and amortization             | 1,319,267       | 1,148,772      
|Total costs and expenses                              | 6,381,626       | 5,892,431      
|Income from operations                                | 2,500,272       | 2,185,635      
|                                                      |                 |                
|Other income (expense):                               |                 |                
|Interest expense                                      | (425,930)       | (504,569)      
|Gain in fair value of derivatives of $276,384,        |                 |                
|net of settlement losses of $492,583                  | -               | (216,199)      
|Other                                                 | 12,783          | (78,547)       
|Total other income (expense)                          | (413,147)       | (799,315)      
|Income before accounting change                       | 2,087,125       | 1,386,320      
|                                                      |                 |                
|Cumulative effect of accounting change                | -               | (59,610)       
|                                                      |                 |                
|Net Income                                            | $ 2,087,125     | $ 1,326,710    
|Preferred Dividends                                   | 70,000          | 58,137         
|Net Income available to common shareholders           | $2,017,125      | $1,268,573     
|                                                      |                 |                
|Weighted average common shares outstanding            |                 |                
|Basic                                                 | 3,536,469       | 3,536,469      
|Diluted                                               | 4,966,914       | 4,965,040      
|Income before accounting change per share:            |                 |                
|Basic                                                 | $           .57 | $           .38
|Diluted                                               | $           .42 | $           .28
|Cumulative effect of accounting change per share:     |                 |                
|Basic                                                 | $           -   | $         (.02)
|Diluted                                               | $           -   | $         (.01)
|Net income per share available to common shareholders |                 |                
|Basic                                                 | $          .57  | $          .36 
|Diluted                                               | $.42            | $.27           
|                                                      |                 |                

|See accompanying notes
|----------------------
|                      
|                      



|Trek Resources, Inc.              
|----------------------------------
|                                  
|Statements of Stockholders' Equity
|                                  



|                                                   | Preferred Stock | Common Stock | Additional 
Paid in | Accumulated
|-------------------------------------------------- | --------------- | ------------ | ------------------- | -----------
|                                                   | Shares          | Amount       | Shares              | Amount     
|Balance at September 30, 2002                      | -               | -            | 3,536,469           | 353,673    
|Issuance of Preferred Stock, net of issuance costs | 100,000         | 1,000        | -                   | -          
|Dividends on Preferred Stock                       | -               | -            | -                   | -          
|Net income                                         | -               | -            | -                   | -          
|Balance at September 30, 2003                      | 100,000         | 1,000        | 3,536,469           | 353,673    
|Compensation costs - Options                       | -               | -            | -                   | -          
|Dividends on Preferred Stock                       | -               | -            | -                   | -          
|Net income                                         | -               | -            | -                   | -          
|Balance at September 30, 2004                      | 100,000         | $1,000       | 3,536,469           | $353,673   
|                                                   |                 |              |                     |            

|See accompanying notes.
|-----------------------
|                       
|                       
|                       





|Trek Resources, Inc.                   
|---------------------------------------
|Statements of Cash Flows               
|Years ended September 30, 2004 and 2003
|                                       

|                                                                                    | 2004        | 2003        
|----------------------------------------------------------------------------------- | ----------- | ------------
|Operating Activities                                                                |             |             
|Net income                                                                          | $ 2,087,125 | $ 1,326,710 
|Adjustments to reconcile net income to net cash provided by   operating activities: |             |             
|Depreciation, depletion and amortization                                            | 1,319,267   | 1,148,772   
|Change in fair value of derivatives                                                 | -           | (276,387)   
|Cumulative effect of accounting change                                              | -           | 59,610      
|Accretion of asset retirement obligation                                            | 120,933     | 113,604     
|Amortization of deferred financing costs                                            | 23,178      | 17,108      
|Compensation cost of stock options                                                  | 38,720      | -           
|(Gain) loss on settlement of asset retirement obligations                           | (33,268)    | (67,899)    
|Changes in working capital:                                                         |             |             
|Accounts receivable                                                                 | (187,682)   | (281,792)   
|Accounts payable and accrued liabilities                                            | 381,769     | 236,543     
|Drilling advances                                                                   | (1,392)     | 5,776       
|Prepaids and other assets                                                           | 11,289      | (20,907)    
|Net cash provided by operating activities                                           | 3,759,939   | 2,261,138   
|Investing Activities                                                                |             |             
|Additions and purchases of oil and gas properties                                   | (2,470,561) | (633,552)   
|Settlements of ARO                                                                  | (75,115)    | -           
|Proceeds from sale of oil and gas properties                                        | 83,326      | 69,948      
|Additions to other property and equipment                                           | (14,154)    | (3,611)     
|Increase in certificates of deposit                                                 | -           | (35,000)    
|Net cash used by investing activities                                               | (2,476,504) | (602,215)   
|Financing Activities                                                                |             |             
|Proceeds from long-term borrowings, net of                                          |             |             
|deferred financing costs                                                            | -           | 9,284,726   
|Repayments of long-term debt                                                        | (900,000)   | (11,291,600)
|Preferred stock dividends                                                           | (70,000)    | (40,637)    
|Proceeds from issuance of preferred stock, net                                      | -           | 942,153     
|Net cash used by financing activities                                               | (970,000)   | (1,105,358) 
|                                                                                    |             |             
|Net change in cash and cash equivalents                                             | 313,435     | 553,565     
|Cash and cash equivalents at beginning of year                                      | 1,044,306   | 490,741     
|Cash and cash equivalents at end of year                                            | $1,357,741  | $1,044,306  
|                                                                                    |             |             

|SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
|-------------------------------------------------
|                                                 

|Cash paid for interest | $    425,920 | $    504,569
|---------------------- | ------------ | ------------
|                       |              |             
|                       |              |             

|Trek Resources, Inc.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|Notes to Financial Statements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|1. Nature of Business and Summary of Significant Accounting Policies                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|General                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|Trek Resources, Inc. ("Trek" or the "Company"), is a Dallas-based domestic oil and gas acquisition, exploration, and production company with oil and gas assets principally in Texas and Oklahoma. As of September 30, 2004 the Company operated approximately 317 oil and gas wells.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|Basis of Accounting and Revenue Recognition                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|It is the Company's policy to prepare its financial statements using the accrual method of accounting in accordance with generally accepted accounting principles. Receipts are recorded as revenue during the period in which they are earned and expenses are recognized during the period in which the related liability is incurred.                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|Revenues from oil and gas activities are generally recorded using the sales method, net of royalties and net profits interest. Under the sales method, revenues are recorded based on the Company's net revenue interest in production taken for delivery. Whenever deliveries exceed the Company's entitlement, and the cumulative overproduced amount is greater than its share of remaining estimated reserves; the Company recognizes the imbalance as a liability on its balance sheet. A receivable may also be recognized in cases where the remaining reserves of underproduced wells are insufficient to settle imbalances. The Company's proved reserves may be subject to adjustment in the case of producer imbalances. Imbalances were not significant at September 30, 2004 and 2003.
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|Reclassifications                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|The balance sheet as of September 30, 2003, reflects a reclassification of $7,804 from accounts payable and accrued liabilities to drilling advances to conform with the September 30, 2004 presentation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|Cash and Cash Equivalents                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents, which at September 30, 2004 and 2003 were comprised of various bank operating accounts. Such investments are stated at cost, which approximates market value.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|Income Per Common Share                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|Basic income applicable to common stock is based on the weighted average number of shares of common stock outstanding. Diluted income per common share assumes the conversion of all securities that are exercisable or convertible into common shares that would have a dilutive effect during the period.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|Stock-Based Compensation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|In accordance with the Statement of Financial Accounting Standards ("SFAS") No. 123, Accounting for Stock-Based Compensation, the Company has elected to apply the provisions of Accounting Principles Board Opinion ("APB") No. 25, Accounting for Stock Issued to Employees, and related interpretations, in accounting for its stock-based compensation plans. Under APB No. 25, compensation is measured as the excess, if any, of the quoted market price of the Company's common stock over its acquisition price at the date of grant.                                                                                                                                                                                                                                                      
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|On December 16, 2004, the FASB published FASB Statement No. 123 (revised 2004), Share-Based PaymentStatement 123(R) requiring that the compensation cost relating to share-based payment transactions be recognized in financial statements. Such cost will be measured based on the fair value of the equity or liability instruments issued. Public entities that file as small business issuers will be required to apply Statement 123(R) in the first interim or annual reporting period that begins after December 15, 2005.                                                                                                                                                                                                                                                                 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|Stock Option Plan                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|In October 2000, the Company approved the 2000 Trek Resources, Inc. Stock Option Plan (the "Plan"). Options to purchase common stock of the Company under the Plan may be granted to employees and directors at an exercise price equal to or greater than the market price of the Company's common stock on the date of grant. Grants generally vest 25% on the date of issuance and 1/36th per month thereafter. Grants, if not exercised, expire at the end of 10 years following the date of issue.                                                                                                                                                                                                                                                                                            
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|In September 2002, the Board of Directors approved the re-pricing of certain stock option grants to $1.10 per option for certain employees and executive officers effective October 1, 2002. These repriced options, until exercised or forfeited, are subject to variable accounting at each reporting period. Compensation cost of $39,000 was recorded in fiscal 2004 since the market price of the Company's common stock exceeded the exercise price of the options during the period since October 1, 2003. No compensation cost was recorded in fiscal 2003 since the market price of the stock was less than the exercise price of the options during the period.                                                                                                                          
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|As of September 30, 2004, a total of 136,000 stock options were outstanding, of which 136,000 shares were vested.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|Stock option transactions in the Company's plan are as follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

|                              | Numberof Options | Weighted AverageExercise Price
|----------------------------- | ---------------- | ------------------------------
|Balance at October 1, 2002    | 160,000          | $1.35                         
|Granted                       | -                | -                             
|Forfeited                     | (20,000)         | $1.10                         
|Exercised                     | -                | -                             
|Balance at September 30, 2003 | 140,000          | $1.39                         
|Granted                       | -                | -                             
|Forfeited                     | (4,000)          | $1.10                         
|Exercised                     | -                | -                             
|Balance at September 30, 2004 | 136,000          | $1.39                         
|Exercisable at end of period  | 136,000          | $1.39                         
|                              |                  |                               

|The following table summarizes the stock options outstanding as of September 30, 2004:
|--------------------------------------------------------------------------------------
|                                                                                      

|Options Outstanding | Options Exercisable
|------------------- | -------------------
|Exercise
Price      | Number
Outstanding 
|$1.60               | 80,000             
|$1.10               | 20,000             
|$1.10               | 24,000             
|$1.10               | 12,000             
|                    | 136,000            
|                    |                    



|In December 2002, the FASB issued Statement of Financial Accounting Standards No. 148, Transition and Disclosure. The statement permits three transition methods for adoption of the fair value method prescribed in SFAS 123. In addition to the prospective method, the entity can choose to either (i) restate all periods presented (retroactive restatement method) or (ii) recognize compensationcost from the beginning of the fiscal year of adoption as if the fair value method had been used to account for awards (modified prospective method). For fiscal years beginning after December 15, 2003, the prospective method will no longer be allowed. The Company currently accounts for its stock-based compensation using the intrinsic value method as proscribed by Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees and plans on continuing using this method to account for stock options, therefore, it does not intend to adopt the transition requirements as specified in SFAS 148.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|Had compensation costs for options granted to the Company's employees been determined based on the fair value at the grant dates consistent with the method proscribed by SFAS 123, net income and earnings per share would have been reduced to the pro forma amounts listed below:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              



|                                                                     | Twelve Months Ended
|-------------------------------------------------------------------- | -------------------
|                                                                     | September 30,      
|                                                                     | 2004               
|Pro forma impact of fair value method:                               |                    
|Income applicable to common shares, as reported                      | $2,017,125         
|Stock-based compensation costs included in reported                  |                    
|Net income, net of related tax                                       | 38,720             
|Pro-forma stock-based compensation costs under the                   |                    
|fair value method, net of related tax                                | (2,752)            
|Pro-forma income applicable to common shares under                   |                    
|the fair-value method                                                | $2,053,093         
|Earnings per common share                                            |                    
|Basic earnings per share reported                                    | $   0.57           
|Diluted earnings per share reported                                  | $   0.42           
|Pro-forma basic earnings per share under the 
   fair value method   | $   0.58           
|Pro-forma diluted earnings per share under the 
   fair value method | $   0.41           
|                                                                     |                    



|The fair value for these options was estimated at the date of the grant using the Black-Scholes option pricing model with the following weighted average assumptions: 60% volatility, no dividend payouts expected, expected option life of five years, and a risk-free interest rate averaging 6%. The weighted average fair value of options granted in the year ended September 30, 2002 was $0.60. No options were granted in the years ended September 30, 2003 and September 30, 2004.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Property and Equipment                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|The Company follows the full cost method of accounting for its oil and gas exploration and producing activities. Under the full cost method, all costs incurred in connection with the acquisition, exploration, and development of oil and gas properties are capitalized when incurred. Costs include lease acquisition, geological and geophysical expenditures, the cost of drilling both productive and nonproductive wells, and overhead associated directly with exploration, and land acquisition activities. All capitalized costs, plus the undiscounted estimated future development costs of proved undeveloped reserves and estimated future dismantlement and abandonment costs, are depleted using the unit-of-production method based on total proved reserves. Costs associated with unproved properties that are not subject to amortization are periodically assessed for impairment. If determined to be impaired, such costs are reflected in the full-cost pool, subject to the ceiling limitation as described below. When properties are disposed of, the proceeds from disposition are applied as a reduction of capitalized costs and no gain or loss is recognized unless such disposition significantly changes the reserve quantities.                                                                         
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|Costs capitalized under the full-cost method of accounting are subject to a ceiling limitation, whereby the net capitalized costs of oil and gas properties, less related deferred income taxes, cannot exceed the sum of the estimated future net revenues from the properties, discounted at 10%; unevaluated costs not being amortized; and the lower of cost or estimated fair value of unproved properties being depleted; less income tax effects related to differences between the financial statement basis and tax basis of oil and gas properties.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
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|Support equipment and facilities are depreciated using the unit-of-production method based on total field-level reserves. Other property and equipment, which includes office equipment and software, are depreciated using the straight-line method over estimated useful lives ranging from three to seven years.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|Recent Accounting Pronouncements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
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|On December 16, 2004, the FASB published FASB Statement No. 123 (revised 2004), Share-Based Payment. Statement 123(R) requiring that the compensation cost relating to share-based payment transactions be recognized in financial statements. That cost will be measured based on the fair value of the equity or liability instruments issued. Public entities (other than those filing as small business issuers) will be required to apply Statement 123(R) as of the first interim or annual reporting period that begins after June 15, 2005. Public entities that file as small business issuers will be required to apply Statement 123(R) in the first interim or annual reporting period that begins after December 15, 2005. Statement 123(R) replaces FASB Statement No. 123, Accounting for Stock-Based Compensation, and supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees.Statement 123, as originally issued in 1995, established as preferable a fair-value-based method of accounting for share-based payment transactions with employees. However, that Statement permitted entities the option of continuing to apply the guidance in Opinion 25, as long as the footnotes to financial statements disclosed what net income would have been had the preferable fair-value-based method been used.
|In September 2004, the SEC issued SAB 106. SAB 106 addresses the application of SFAS 143 to companies that follow the full cost method of accounting for oil and gas property acquisition, exploration and development costs. SAB 106 states that after adoption of SFAS 143, the future cash outflows associated with settling asset retirement obligations that have been accrued on the balance sheet should be excluded from the computation of the present value of estimated future net revenues for purposes of the full cost ceiling calculation and companies should estimate the amount of dismantlement and abandonment costs that will be incurred as a result of future development activities on proved reserves and include those amounts in the costs to be amortized. The Company adopted SAB 106 for purposes of the full cost ceiling and depreciation calculation at September 30, 2004. The adoption of SAB 106 did not have any impact on the Company's financial statements and did not have a material effect on the results of the ceiling test calculation.                                                                                                                                                                                                                                                       
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|Income Taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|Deferred tax assets or liabilities are recognized for the anticipated future tax effects of temporary differences between the financial statement basis and the tax basis of the Company's assets and liabilities. These balances are measured using tax rates in effect for the year in which the differences are expected to reverse. A valuation allowance for deferred tax assets is recorded when it is more likely than not that the benefit from the deferred tax asset will not be realized.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
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|Risk Management                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|The Company applies SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities,which has established accounting and reporting standards for derivative instruments and for hedging activities. It requires enterprises to recognize all derivatives as either assets or liabilities in the balance sheet and measure those instruments at fair value. The requisite accounting for changes in the fair value of a derivative will depend on the intended use of the derivative and the resulting designation by the Company.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
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|Oil and gas sales by the Company are normally priced with reference to a defined benchmark, such as light, sweet West Texas Intermediate Crude Oil ("WTI") traded on the New York Mercantile Exchange ("NYMEX"). Actual prices received vary from this benchmark depending on quality and location differentials. From time to time it is the Company's policy to use financial market hedges and other transactions with creditworthy counterparties to reduce risk associated with the pricing of a portion of the oil and gas that it sells. The Company does not enter into such transactions for trading purposes. Settlement gains or losses on financial market transactions are shown net as a component of gains (losses) in fair value of derivatives in the accompanying statements of operations for September 30, 2003. No derivatives were in place in fiscal 2004.                                                                                                                                                                                                                                                                                                                                                                                                                                                           
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|Use of Estimates and Certain Significant Estimates                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
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|The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in these financial statements and accompanying notes. Actual results could differ from those estimates. Significant assumptions are required in the valuation of proved oil and gas reserves, which as described above may affect the amount at which oil and gas properties are recorded. It is at least reasonably possible those estimates could be revised in the near term and those revisions could be material.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
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|Asset Retirement Obligation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|SFAS 143 establishes accounting requirements for retirement obligations associated with tangible long-lived assets, including (1) the timing of the liability recognition, (2) initial measurement of the liability, (3) allocation of asset retirement cost to expense, (4) subsequent measurement of the liability and (5) financial statement disclosures. SFAS 143 requires that an asset retirement cost should be capitalized as part of the cost of the related long-lived asset and subsequently allocated to expense using a systematic and rational method. The Company adopted SFAS 143 October 1, 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|As a result of adoption of this statement, the Company recorded a current asset retirement obligation ("ARO") of $80,000, a long term ARO of $1,099,000 and capitalized $962,000 to the full cost pool. The Company recorded a net decrease to accumulated depletion of $156,000 representing the net amount of depletion that would have been recognized to date on the ARO from the date of acquisition, offset by the amount of excess depletion that has been recognized since acquisition resulting from the exclusion of the salvage value of well equipment from depletion estimates. The net effect of this depletion recapture and the estimated accretion expense of $216,000 that would have been recognized from the date of acquisition through the date of adoption appear in the statement of operations as a cumulative effect of change in accounting principle of approximately $60,000 in the year ended September 30, 2003.                                                                                                                                                                                                                                                                                                                                                                                             
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|The following table shows the changes in the balance of the ARO during fiscal year 2004.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
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|                                                | Year Ended
September 30,2004 | Year Ended
September 30,2003
|----------------------------------------------- | ---------------------------- | ----------------------------
|                                                |                              |                             
|Asset retirement obligation beginning of period | $1,210,000                   | $1,179,000                  
|Asset retirement accretion expense              | 121,000                      | 114,000                     
|Gain on settlement of retirement obligation     | (33,000)                     | -                           
|Additions to retirement obligation              | 4,000                        | -                           
|Less: plugging cost                             | (75,000)                     | (83,000)                    
|                                                |                              |                             
|Asset retirement obligation end of period       | $1,227,000                   | $1,210,000                  
|                                                |                              |                             



|Based on the expected timing of payments, $21,000 and $1,206,000 are classified as current and long-term, respectively at September 30, 2004.
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|2. Other Property and Equipment                                                                                                              
|                                                                                                                                             
|At September 30, 2004 and 2003, other property and equipment consisted of the following:                                                     
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|                                 | 2004      | 2003     
|-------------------------------- | --------- | ---------
|                                 |           |          
|Automobiles & Equipment          | $  29,185 | $  29,185
|Office equipment                 | 87,407    | 73,253   
|Leasehold improvements           | 39,605    | 39,605   
|                                 | 156,197   | 142,043  
|Less accumulated depreciation    | (135,884) | (103,068)
|Net other property and equipment | $20,313   | $38,975  
|                                 |           |          



|3. Long-Term Debt                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
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|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|On May 28, 2003, the Company entered into a loan agreement with Wells Fargo Bank Texas, National Association ("Wells Fargo"), for a secured credit facility that permits the Company to borrow up to $25 million from Wells Fargo on a revolving basis, subject to borrowing base limitations. This new credit facility was entered into to repay the amounts advanced to the Company under its previous credit facility with Compass Bank. The Compass Bank facility was paid off in full on May 28, 2003 upon the funding of the new loan.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|On May 28, 2003, the initial funding of the new credit facility was $9,351,600. The outstanding balance on September 30, 2004 was $7,900,000 reflecting principal repayments of $900,000 during the fiscal year 2004, and $551,600 during last four months of the fiscal year 2003.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|The borrowing base under the new credit facility was initially set at $11,000,000 and is subject to semi-annual re-determination in March and September of each year. The Company has been notified that the borrowing base is $11,000,000 as of September 30, 2004. The Company will pay interest on its borrowings under the new credit facility equal to the lesser of LIBOR plus 3.25% or Wells Fargo's prime rate of interest plus 0.5%. At no time may the Company have more than three tranches of borrowings that bear interest at LIBOR plus 3.25%. Under the terms of the facility, the Company is required, among other things, to comply with interest coverage, tangible net worth, current ratio and other covenants that are customary for a credit facility of this type. At September 30, 2004 the Company was in compliance with these covenants. The new credit facility is secured by a lien on approximately 80% of Trek's oil and natural gas properties and matures on April 30, 2006.                                                                                                                                                                                                                                                    
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|4. Employee Benefits                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
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|Deferred Compensation Plans                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|In November 2000, the Company adopted a qualified deferred compensation plan under Section 401(k) of the Internal Revenue Code for the benefit of all employees meeting certain service requirements. Under the plan, employees may elect to defer up to 15% of compensation, subject to the Internal Revenue Service limits. The plan requires that the Company match 50% of employee deferrals up to 6% of compensation, subject to a five-year vesting period. The plan also allows discretionary employer profit sharing contributions. During the year ended September 30, 2004 and 2003, the Company contributed $11,745 and $11,990 respectively to the plan.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|5. Stockholders' Equity                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
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|Preferred Stock                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|In December 2002, the Company sold 100,000 shares of Series A convertible preferred stock to Michael E. Montgomery and Faye C. Briggs for an aggregate purchase price of $1,000,000, or $10.00 per share. Mr. Montgomery, the Company's President, Chief Executive Officer, Chief Financial Officer and Chairman of the Board, purchased 50,000 shares of these newly issued shares of Series A preferred stock. Ms. Briggs, who is the mother of Mr. Montgomery, purchased the remaining 50,000 shares.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|Each share of Series A preferred stock may be converted into the number of shares of the Company's common stock equal to the stated value of the Series A preferred stock ($10.00) divided by an applicable conversion rate, which is currently $.70. This conversion right may be exercised at the option of the holder. Additionally, holders of Trek's Series A preferred stock are entitled to receive a preferential dividend payment equal to 7% per annum of the $10.00 per share stated value of the Series A preferred stock before the Company may pay dividends to holders of its common stock. The Company may choose to pay this dividend in cash or by issuing additional shares of common stock. Holders of Series A preferred stock are entitled to a liquidation preference of $10.00 per share plus accumulated unpaid dividends (a total of $1,017,500 at September 30, 2004) and participate in voting on all matters submitted to Trek's holders of common stock. The number of votes entitled to be cast by each share of Series A preferred stock on any matter is equal to the number of shares of common stock into which the shares of Series A preferred stock could be converted as of the record date for the stockholders' meeting.
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|At the Company's annual meeting of stockholders held on February 20, 2003the Company's stockholders approved an amendment to the Company's certificate of incorporation, which effected a reverse stock split of the outstanding shares of common stock whereby every ten shares of outstanding common stock was automatically reverse split into one share of common stock outstanding. Additionally, this amendment increased the par value of the common stock from $0.01 to $0.10 per share. It maintained the number of shares of common stock authorized at 50,000,000. At that time the number of authorized shares of preferred stock remained at 20,000,000. At the Company's annual meeting of stockholders held on January 23, 2004 the authorized shares of common and preferred stock were reduced to 15,000,000 and 400,000 shares respectively, based on state tax considerations.                                                                                                                                                                                                                                                                                                                                                                
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|Earnings Per Common Share                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|The following table reconciles the numerators and denominators of the basic and diluted income loss per share computation for the years ended September 2004 and 2003. The diluted gain per share for the year ended September 2004 includes the assumed conversion of preferred shares, and includes the assumed exercise of the stock options since the inclusion would be dilutive. The diluted gain per share for the year ended September 2003 includes the assumed conversion of preferred shares, and excludes the assumed exercise of the stock options since the inclusion would be anti-dilutive                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
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|Earnings Per Common Share                               |  | Year Ended September 30,
|------------------------------------------------------- |  | ------------------------
|                                                        |  | 2004                    
|Basic earnings per share                                |  |                         
|Numerator:                                              |  |                         
|Net income (loss)                                       |  | $2,087,125              
|Less: dividends on preferred shares                     |  | (70,000)                
|Net income available to common
            shareholders |  | $2,017,125              
|                                                        |  |                         
|Denominator -                                           |  |                         
|Common shares outstanding                               |  | 3,536,469               
|                                                        |  |                         
|Basic earnings per share                                |  | $0.57                   
|                                                        |  |                         
|Diluted earnings per share                              |  |                         
|Numerator:                                              |  |                         
|Net income                                              |  | $2,087,125              
|Less: dividends on preferred shares                     |  | -                       
|Net income available to common shareholders             |  | $2,087,125              
|                                                        |  |                         
|Denominator:                                            |  |                         
|Common shares outstanding                               |  | 3,536,469               
|Common stock options and warrants                       |  | 1,874                   
|Conversion of preferred shares                          |  | 1,428,571               
|                                                        |  | 4,966,914               
|                                                        |  |                         
|Diluted earnings per share                              |  | $         0.42          
|                                                        |  |                         



|6. Fair Value of Financial Instruments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|At September 30, 2004 and 2003, the Company's financial instruments included cash equivalents, accounts receivable, certificates of deposit maturing in excess of three months, debt and financial market transactions. The fair values of the Company's financial instruments approximated carrying values at September 30, 2004 and 2003. The carrying amount associated with certificates of deposit maturing in excess of three months was $ 106,791 as of September 30, 2004 and 2003. The certificates of deposit were classified as other assets in the accompanying balance sheets at those dates.                                                                                                            
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|7. Risk Management                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|The Company may periodically enter into commodity derivative contracts and fixed-price physical contracts to manage its exposure to oil and natural gas price volatility. In the past the Company has primarily utilized price swaps, floors or collars, which were all placed with major financial institutions.                                                                                                                                                                                                                                                                                                                                                                                                     
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|Under these arrangements, monthly settlement amounts were calculated based on the difference between the agreed upon fixed prices and the average New York Mercantile Exchange ("NYMEX") closing prices for West Texas Intermediate Crude Oil ("WTI") and Natural Gas(Henry Hub delivery point) each business day during the monthly period. Payments to or from each financial counterparty were due 30-days following each settlement month.                                                                                                                                                                                                                                                                        
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|The Company applies SFAS 133, Accounting for Derivative Instruments and Hedging Activities. The Company elected not to designate its derivatives as hedges. Accordingly, all changes in the fair value of the Company's derivative contracts are recognized as income or expense in the period during which they occur.                                                                                                                                                                                                                                                                                                                                                                                               
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|For the year ended September 30, 2004, none of the Company's revenue was hedged. At September 30, 2003, Trek had no open derivative positions remaining.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|8. Concentrations of Credit Risk                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|Financial instruments that are potentially subject to concentrations of credit risk consist of cash equivalents, certificates of deposit maturing in excess of three months, accounts receivable, and financial market transactions. However, the Company places such instruments with credit-quality financial institutions and, therefore, its risk of incurring losses is considered to be remote. At September 30, 2004 and 2003, cash equivalents and certificates of deposit maturing in excess of three months amounted to $1,464,407 and $1,150,972, respectively. Of these amounts, $200,868 and $183,237, respectively, were covered by federal depository insurance. The remaining balances were uninsured.
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|The Company currently sells its oil and gas production to approximately 40 separate purchasers, of which five accounted for 27%, 15%, 14%, 13%, and 12% of fiscal 2004 sales and, in the aggregate, approximately $698,000 of outstanding accounts receivable at September 30, 2004. During 2003, sales to five purchasers accounted for 25%, 14%, 14%, 13% and 12% of total sales, and represented outstanding accounts receivable of approximately $579,080 at September 30, 2003.                                                                                                                                                                                                                                  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|The Company does not believe that the loss of any single purchaser of its crude oil and natural gas, or a joint owner in a property would have a material adverse effect on its operations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
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|9. Income Taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax provisions.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|A reconciliation of the differences between the Company's applicable statutory tax rate and its effective income tax rate and a schedule showing the significant components of the net deferred tax asset follow:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
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|                                              | 2004        | 2003       
|--------------------------------------------- | ----------- | -----------
|Tax provision at statutory tax rate           | 34%         | 34%        
|Increase (decrease) resulting from:           |             |            
|Net change in valuation allowance             | (39)        | (39)       
|State and local taxes                         | 5           | 5          
|Effective tax rate                            | -%          | -%         
|                                              |             |            
|Deferred tax asset:                           |             |            
|Difference in basis of oil and gas properties | (974,000)   | 32,000     
|Net operating loss carryforward               | 2,255,000   | 2,365,000  
|Other                                         | 9,000       | 13,000     
|Gross deferred tax asset                      | 1,290,000   | 2,410,000  
|Less valuation allowance                      | (1,290,000) | (2,410,000)
|Net deferred tax asset                        | $-          | $-         
|                                              |             |            





|Due to a lack of earnings history, it cannot be determined that the deferred tax assets will more likely than not be realized. As a result, offsetting valuation allowances of $1,290,000 and $2,410,000 have been recorded at September 30, 2004 and 2003, respectively. At September 30, 2004 and 2003, the Company had net operating loss carryforwards for tax purposes of approximately $6,094,000 and $6,100,000, respectively, that are available to offset future income tax liabilities, subject to certain limitations. If not previously utilized, these net operating losses principally expire in 2009 through 2021.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 



|10. Related Party Transactions                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|The Company currently shares or subleases office space from Montgomery Petroleum, Inc. ("MPI"), a company owned by its President. They also share office supplies, personnel, and various services with MPI and other Montgomery entities (also owned by Trek's President). All such activities are billed to or by the Company at actual rates incurred. For the years ended September 30, 2004 and 2003, the Company was billed $141,000 and $91,400, respectively for services provided by MPI, and, for the year ended September 30, 2004, the Company billed MPI and other Montgomery entities $48,000 for office services that the Company provided. Net amounts of $97,600 and $58,300, respectively, were included as components of general and administrative expenses in the accompanying statements of operations. At September 30, 2004 accounts payable included $51,200 payable to Montgomery entities and accounts receivable included $34,500 due from Montgomery entities, for oil and natural gas joint interest billings and office services.                                                                                                                  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|Mr. Montgomery and another board member, Mr. Smith, are partners in Rio Coil, LP which is a well service company based in Abilene, Texas. We used their coil tubing and nitrogen services on several of our wells in Texas and Oklahoma during fiscal 2004 and were billed a total of $191,000. Accounts payable at September 30, 2004 included $32,500 payable to Rio Coil LP.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|During the second and third quarters of fiscal 2003, we entered into farmout arrangements with MBOE Inc., an entity that is wholly owned by Mr. Montgomery. These arrangements were approved by our board of directors and were based on past similar drilling agreements with independent third parties. The farmout arrangements involved three re-entry workovers of two non-producing wells in the Farnsworth Unit in Ochiltree County, Texas and another non-producing well in Cottle County, Texas. MBOE agreed to pay 100% of the costs of these workovers to earn an eventual assignment of 50% of the working interests to these wells. We have completed the work on all three of these wells, and two of the three are now producing. The average cost for each workover, paid by MBOE, was $150,000. Until MBOE has recovered the costs of these workovers, MBOE will receive all proceeds that we would otherwise be entitled to from the sale of production from these wells. After MBOE has recovered the costs of the workovers, we will assign 50% of our working interests in these wells to MBOE. No additional farmout arrangements were added in fiscal 2004.
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|In the course of its business affairs and operations, the Company is subject to possible loss contingencies arising from federal, state, and local environmental, health, and safety laws and regulations and third-party litigation. There are no litigation matters as of September 30, 2004 that the Company believes will have a material adverse effect on the financial position or results of operations of the Company.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|The Company is committed to leases for office space at $4,100 per month through May 2006. Lease expense for the years ended September 30, 2004 and 2003, amounted to $47,000 and $56,000 respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|11. Oil and Gas Data Producing Activities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|The following tables provide additional information about the Company's oil and gas producing activities.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  



|Results of Operations                                                                                                                          
|-----------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                               
|The results of operations for oil and gas producing activities for the years ended September 30, considering direct costs only, are as follows:
|                                                                                                                                               



|                                    | 2004        | 2003       
|----------------------------------- | ----------- | -----------
|                                    |             |            
|Revenues                            | $ 8,881,898 | $ 8,078,066
|Costs and expenses:                 |             |            
|Lease operating expenses            | (3,982,025) | (3,800,535)
|General and administrative expenses | (1,080,334) | (943,124)  
|Depletion                           | (1,319,267) | (1,148,772)
|Income taxes                        | -           | -          
|Results of operations               | $2,500,272  | $2,185,635 
|                                    |             |            



|Costs Incurred and Capitalized Costs                                                                                                                                             
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                 
|Costs incurred in connection with oil and gas acquisition, exploration, and development activities and related capitalized costs for the years ended September 30 are as follows:
|                                                                                                                                                                                 



|                                              | 2004           | 2003         
|--------------------------------------------- | -------------- | -------------
|Costs incurred:                               |                |              
|Property acquisition                          | $   400,656    | $    14,827  
|Exploration                                   | -              | -            
|Development                                   | 2,050,520      | 618,725      
|Depletion per equivalent barrel of production | $         4.93 | $        4.19
|Cost of properties at year-end:               |                |              
|Unproved oil and gas properties               | 112,169        | 92,236       
|Proved oil and gas properties                 | 20,868,166     | 18,496,153   
|Accumulated depletion and depreciation        | $ 7,532,780    | $ 6,246,330  
|                                              |                |              



|Oil and Gas Reserve Data (Unaudited)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|The following tables present the Company's estimates of its proved oil and gas reserves as prepared by LaRoche Petroleum Consultants, Ltd., the Company's independent petroleum engineers, as of September 30, 2004 and 2003. The Company emphasizes that reserve estimates are approximate and are expected to change as additional information becomes available. Reservoir engineering is a subjective process of estimating underground accumulations of oil and gas that cannot be measured in an exact way, and the accuracy of any reserve estimate is a function of the quality of available data and of engineering and geological interpretation and judgment. Accordingly, there can be no assurance that the reserves set forth herein will ultimately be produced.
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               





|                                         |           | Natural    
|---------------------------------------- | --------- | -----------
|Reserve Data (Unaudited)                 | Oil       | Gas        
|                                         | (Bbls)    | (Mcf)      
|Proved reserves as of
September 30, 2002 | 1,569,250 | 10,442,080 
|Extensions and discoveries               | 148,062   | 2,152,902  
|Revisions of previous estimates          | (183,145) | (508,020)  
|Purchases of reserves in place           | 630       | 119,385    
|Production                               | (139,071) | (812,475)  
|Proved reserves as of
September 30, 2003 | 1,395,726 | 11,393,872 
|Extensions and discoveries               | 65        | 92,720     
|Revisions of previous estimates          | 177,066   | (1,063,803)
|Purchases of reserves in place           | 230       | 313,852    
|Production                               | (137,153) | (742,350)  
|Proved reserves as of
September 30, 2004 | 1,435,934 | 9,994,291  
|Proved developed reserves:               |           |            
|September 30, 2003                       | 1,226,556 | 9,787,870  
|September 30, 2004                       | 1,316,473 | 8,927,814  
|                                         |           |            



|Standardized Measure of Discounted Future Net Cash Inflows and Changes Therein (Unaudited)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|The following table presents a standardized measure of discounted future net cash inflows associated with the Company's net proved oil and gas reserves at September 30, 2004 and 2003, discounted at an annual rate of 10%. The future cash inflows were calculated in accordance with Securities and Exchange Commission guidelines. Weighted average prices used in calculating the future cash inflows were $46.25 and $29.20 per Bbl for oil and $6.24 and $4.83 per Mcf for natural gas at September 30, 2004 and 2003, respectively. These prices were applied to the Company's estimated quantities of proved reserves at each year-end.
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|Future production and development costs were computed by estimating those expenditures expected to be incurred in developing and producing the proved oil and gas reserves at the end of each year, based on year-end costs. The Company emphasizes that the future net cash inflows should not be construed as representative of the fair market value of the Company's proved reserves. The meaningfulness of these estimates is highly dependent upon the accuracy of the assumptions upon which they were based. Actual future cash inflows may vary materially.                                                                            
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|Future cash inflows                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|Future production costs                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|Future development costs                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|Future income tax expenses                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|Future net cash flows                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|10% annual discount for estimated timing                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|of cash flows                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|Standardized measure of discounted future net                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|cash flows for proved oil and gas reserves                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                



|Changes in the standardized measure of discounted future net cash inflows for the years ended September 30 are as follows:
|--------------------------------------------------------------------------------------------------------------------------
|                                                                                                                          



|                                           | 2004        | 2003        
|------------------------------------------ | ----------- | ------------
|Beginning of year                          | $22,554,000 | $ 21,174,000
|Increase (decrease) due to:                |             |             
|Sales of oil and gas produced, net of      |             |             
|production costs                           | (4,979,000) | (4,278,000) 
|Net changes in prices and production costs | 11,055,000  | 1,150,000   
|Net change in development costs            | 868,000     | (2,690,000) 
|Extensions and discoveries                 | 1,676,000   | 13,758,000  
|Net changes from purchases and sales of    |             |             
|minerals in place:                         |             |             
|Purchases                                  | 1,630,000   | 560,000     
|Sales                                      | -           | (37,000)    
|Revisions of previous quantity estimates   | 2,908,000   | (4,501,000) 
|Net change in income taxes                 | (3,795,000) | (465,000)   
|Accretion of discount                      | (2,255,000) | (2,117,000) 
|Net increase                               | 7,108,000   | 1,380,000   
|End of year                                | $29,662,000 | $22,554,000 
|                                           |             |             
|                                           |             |             
|                                           |             |             













|EXHIBIT INDEX
|-------------

|Exhibit No. | Description
|----------- | -----------
|            |            

|3.1   | Certificate of Incorporation of Trek Resources, Inc. (previously filed as an exhibit to our registration statement on Form 10-SB filed on March 26, 2001, and incorporated herein by reference).                                                                                                             
|----- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      |                                                                                                                                                                                                                                                                                                              
|3.2   | Certificate of Amendment to Certificate of Incorporation of Trek Resources, Inc. (previously filed as an exhibit to our Quarterly Report on Form 10-QSB filed on May 15, 2003, and incorporated herein by reference).                                                                                        
|      |                                                                                                                                                                                                                                                                                                              
|3.3   | Amended and Restated Bylaws of Trek Resources, Inc. (previously filed as an exhibit to our registration statement on Form 10-SB filed on March 26, 2001, and incorporated herein by reference).                                                                                                              
|      |                                                                                                                                                                                                                                                                                                              
|3.4   | Amendment to Amended and Restated Bylaws of Trek Resources, Inc. (previously filed as an exhibit to our Quarterly Report on Form 10-QSB filed on May 15, 2003, and incorporated herein by reference).                                                                                                        
|      |                                                                                                                                                                                                                                                                                                              
|3.5   | Certificate of Designation for Series A Convertible Preferred Stock (previously filed as an exhibit to our Current Report on Form 8-K filed on December 3, 2002, and incorporated herein by reference).                                                                                                      
|      |                                                                                                                                                                                                                                                                                                              
|3.6   | Certificate of Amendment of Certificate of Incorporation of Trek Resources, Inc. (previously filed as an exhibit to our Quarterly Report on Form 10-QSB filed on May 14, 2004, and incorporated herein by reference).                                                                                        
|      |                                                                                                                                                                                                                                                                                                              
|4.1   | Certificate of Incorporation of Trek Resources, Inc. (filed as Exhibit 3.1 above).                                                                                                                                                                                                                           
|      |                                                                                                                                                                                                                                                                                                              
|4.2   | Certificate of Amendment to Certificate of Incorporation of Trek Resources, Inc. (filed as Exhibit 3.2 above).                                                                                                                                                                                               
|      |                                                                                                                                                                                                                                                                                                              
|4.3   | Amended and Restated Bylaws of Trek Resources, Inc. (filed as Exhibit 3.3 above).                                                                                                                                                                                                                            
|4.4   | Amendment to Amended and Restated Bylaws of Trek Resources, Inc. (filed as Exhibit 3.4 above).                                                                                                                                                                                                               
|      |                                                                                                                                                                                                                                                                                                              
|4.5   | Certificate of Designation for Series A Convertible Preferred Stock (filed as Exhibit 3.5 above).                                                                                                                                                                                                            
|      |                                                                                                                                                                                                                                                                                                              
|4.6   | Certificate of Amendment of Certificate of Incorporation (filed as Exhibit 3.6 above)                                                                                                                                                                                                                        
|      |                                                                                                                                                                                                                                                                                                              
|4.7   | Registration Rights Agreement, dated as of December 2, 2002, by and among Trek Resources, Inc., Michael E. Montgomery and Faye C. Briggs (previously filed as an exhibit to our Current Report on Form 8-K filed on December 3, 2002, and incorporated herein by reference).                                 
|      |                                                                                                                                                                                                                                                                                                              
|10.1  | Loan Agreement, dated as of May 28, 2003, by and between Trek Resources, Inc. and Wells Fargo Bank Texas, National Association (previously filed as an exhibit to our Current Report on Form 8-K filed on May 29, 2003 and incorporated herein by reference).                                                
|      |                                                                                                                                                                                                                                                                                                              
|10.2* | 2000 Trek Resources, Inc. Stock Option Plan (previously filed as an exhibit to our registration statement on Form 10-SB filed on March 26, 2001, and incorporated herein by reference).                                                                                                                      
|      |                                                                                                                                                                                                                                                                                                              
|10.3* | Trek Resources, Inc. 401(k) Plan, dated November 8, 2000 (previously filed as an exhibit to our registration statement on Form 10-SB filed on March 26, 2001, and incorporated herein by reference).                                                                                                         
|      |                                                                                                                                                                                                                                                                                                              
|10.4  | Letter Agreement, dated May 5, 2002, by and between Trek Resources, Inc. and Michael E. Montgomery (previously filed as an exhibit to our Quarterly Report on Form 10-QSB filed on May 15, 2002, and incorporated herein by reference).                                                                      
|      |                                                                                                                                                                                                                                                                                                              
|10.5  | Agreement by and between Trek Resources, Inc. and P. C. Burns Oil Producers, Inc., dated June 1, 2002, regarding drilling of wells in King and Cottle Counties, Texas (previously filed as an exhibit to our Quarterly Report on Form 10-QSB filed on August 14, 2002, and incorporated herein by reference).
|      |                                                                                                                                                                                                                                                                                                              
|10.6  | Stock Purchase Agreement, dated as of December 2, 2002, by and among Trek Resources, Inc., Michael E. Montgomery, and Faye C. Briggs (previously filed as an exhibit to our Current Report on Form 8-K filed on December 3, 2002, and incorporated herein by reference).                                     
|      |                                                                                                                                                                                                                                                                                                              
|10.7  | Registration Rights Agreement, dated as of December 2, 2002, by and among Trek Resources, Inc., Michael E. Montgomery and Faye C. Briggs (filed as Exhibit 4.6 above).                                                                                                                                       
|      |                                                                                                                                                                                                                                                                                                              
|23.1  | Consent of Hein + Associates, LLP, independent accountants (previously filed as Exhibit 23.1 to our Form 10-KSB filed on December 29, 2004 and incorporated herein by reference).                                                                                                                            
|      |                                                                                                                                                                                                                                                                                                              
|23.2  | Consent of LaRoche Petroleum Consultants, Ltd., independent petroleum engineers (previously filed as Exhibit 23.2 to our Form 10-KSB filed on December 29, 2004 and incorporated herein by reference).                                                                                                       
|      |                                                                                                                                                                                                                                                                                                              
|31.1  | Certification of Michael E. Montgomery, President, Chief Executive Officer, Chief Financial Officer and Chairman of the Board of Trek Resources, Inc., under Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).                                                                                 
|      |                                                                                                                                                                                                                                                                                                              
|32.1  | Certification of Michael E. Montgomery, President, Chief Executive Officer, Chief Financial Officer and Chairman of the Board of Trek Resources, Inc., under Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).                                                                                 
|      |                                                                                                                                                                                                                                                                                                              

|                                                  
|--------------------------------------------------
|* denotes management contract or compensatory plan