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

                                  FORM 10-KSB/A

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

For the fiscal year ended September 30, 2006

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

For the transition period from _________________ to __________________.

                           Commission File No. 0-32335

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

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

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

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

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

                                      None

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

                                  Common Stock
                                (Title of class)

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

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

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [ ]

The Registrant's did not have revenues for the fiscal year ended September 30,
2006.

Indicate by check mark whether the registered is a shell company (as defined in
Rule 12b-2 of the Exchange Act).
Yes [ ]  No [x]

The aggregate market value of the Common Stock held by non-affiliates, based on
the average closing bid and asked price of the Common Stock on March 20, 2007
was $7,122,880

<PAGE>


There are approximately 13,966,431 shares of common voting stock of the
Registrant held by non-affiliates. On March 20, 2007 the average bid and asked
price was $ 0.51

As of March 20, 2007, there were 27,002,558 shares of common stock outstanding.

Forward-Looking Statements and Cautionary Words

This  annual  report on Form  10-KSB  ("Annual  Report")  for the period  ending
September 30, 2006 ("fiscal year 2006"), contains forward-looking  statements as
that term is defined in the Private Securities Litigation Reform Act of 1995 and
as such may involve  known and unknown  risks,  uncertainties  and other factors
which may cause the actual  results,  performance or achievements of the Company
to be materially different from any future results, performance, or achievements
expressed or implied by such  forward-looking  statements.  Such forward-looking
statements  speak  only as of the  date of this  Form  10-KSB  or the  amendment
thereto  in  which  they  appear,  as the  case may be.  The  Company  expressly
disclaims  any  obligation  or  undertaking  to release  publicly any updates or
revisions  to any  forward-looking  statements  contained  herein to reflect any
change in the  Company's  expectations  with  regard  thereto  or any  change in
events,  conditions or  circumstances  on which any such statement is based.  In
addition,  particular  attention  is called to  cautionary  words such as "may,"
"will,"  "expect,"  "anticipate,"  "estimate"  and  "intend"  where they  appear
herein.  These  statements  are only  predictions  and involve known and unknown
risks,  uncertainties  and other  factors,  including  the risks in the  section
entitled  "Risk Factors" that may cause our or our  industry's  actual  results,
levels of activity,  performance or achievements to be materially different from
any future results, levels of activity, performance or achievements expressed or
implied by these forward-looking statements.

Disclosure Regarding Forward-Looking Statements

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

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

                                       2
<PAGE>

Glossary of Terms

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

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

"Bcf" means  billion  cubic feet,  used in this annual  report in  reference  to
gaseous hydrocarbons.

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

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

"Gross"  oil or gas  well or  "gross"  acre is a well or acre in which we have a
working interest.

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

"Mcf" means thousand cubic feet,  used in this annual report to refer to gaseous
hydrocarbons.

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

"MMcf" means million cubic feet,  used in this annual report to refer to gaseous
hydrocarbons.

"Net" oil and gas wells or "net" acres are determined by multiplying.

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

"Prospect"  means a location where both  geological  and  economical  conditions
favor drilling a well.

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

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

                                       3
<PAGE>

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

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

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

                                       4
<PAGE>

                                   FORM 10-KSB
                  FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2006

                                      INDEX
PART I_______________________________________________________________________  6

  Item 1 Description of Business_____________________________________________  6

  Item 2 Description of Property_____________________________________________ 19

  Item 3 Legal Proceedings___________________________________________________ 21

  Item 4 Submission of Matters to a Vote of Security Holders_________________ 21

PART II______________________________________________________________________ 21

  Item 5 Market for Common Equity and Related Stockholder Matters____________ 21

  Item 6 Management's Discussion and Analysis or Plan of Operations__________ 25

  Item 7 Financial Statements________________________________________________ 27

  Item 8 Changes In and Disagreements with Accountants on Accounting
         and Financial Disclosure____________________________________________ 45

  Item 8A Controls and Procedures____________________________________________ 46

  Item 8B Other Information__________________________________________________ 46

PART III_____________________________________________________________________ 47

  Item 9 Directors, Executive Officers, Promoters and Control Persons;
         Compliance with Section 16(a) of the Exchange Act___________________ 47

  Item 10 Executive Compensation_____________________________________________ 49

  Item 11 Security Ownership of Certain Beneficial Owners and Management_____ 52

  Item 12 Certain Relationships and Related Transactions_____________________ 53

  Item 13 Exhibits and Reports on Form 8-K___________________________________ 54

  Item 14 Principal Accountants Fees and Service_____________________________ 56


                                       5
<PAGE>

                                     PART I

Item 1 Description of Business

Overview of Business

TX Holdings,  Inc. ("TX Holdings" or the "Company"),  formerly named R Wireless,
Inc.  ("RWLS") and, prior to that, named HOM Corporation  ("HOM"),  is a Georgia
corporation  incorporated  on May 4, 2000. On December 5, 2004 the Company began
to structure itself into an oil and gas production and exploration  company. The
Company  acquired oil and gas leases and began  development of oil and gas field
operations  as of April 11,  2006.  (For a  discussion  of  current  oil and gas
activities  see  sections  "Recent  Developments";  "Background  for Oil and Gas
Business Activities" and "Current Oil and Gas Activities")

History and Corporate Structure

Previously  TX  Holdings  acted  as a  holding  company  whose  operations  were
conducted through two wholly-owned operating  subsidiaries,  Direct Lending Inc.
("Direct"),  a Georgia  corporation,  and Homes By  Owners,  Inc.  ("Homes"),  a
Georgia corporation.  Direct was a licensed mortgage broker working with various
financial  institutions  and  underwriters.  Homes  published and  distributed a
monthly  magazine,  HOMES  BY  OWNERS,  listing  residential  properties  in the
Augusta,  Georgia/Aiken,  South  Carolina  metropolitan  area  for sale by their
owners and containing other  advertising  material.  Homes also listed homes for
sale on its website, www.homesbyowners.net.

Direct,  incorporated  January 9,  1997,  was  acquired  by Apple  Homes,  Inc.,
("Apple") a publicly traded company, on October 1, 1998. The stock of Direct was
distributed pro rata to the stockholders of Apple who were of record on March 1,
1999.  Homes was  incorporated  December  6,  1999 as a  subsidiary  of  Direct.
Effective  July 5, 2000,  the  Company,  which had been  created  with a minimal
initial  investment,  effected a  reorganization  with Direct and Homes.  Direct
shareholders  became  shareholders  of the Company  and Direct and Homes  became
wholly owned subsidiaries of the Company.

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

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

On December 5, 2004, the Company  announced plans to change  business  direction
based on recent global  political  and economic  developments  that  drastically
increased the price of energy.  The  restricted  supply of oil and gas from OPEC
member  countries  and other  exporters led to a surge in energy  prices.  These
trends opened new  opportunities  for local companies in the oil and gas sector,
and the Company  decided to pursue this  opportunity.  In  connection  with this
decision,  the  Company  effected  its name  change  to "TX  Holdings,  Inc." on
September 1, 2005.


                                       6
<PAGE>

Management  believes the new name  reflects  the new  business  direction of the
Company,  specifically  the  acquisition  of producing  oil and gas  properties.
Furthermore, the following changes were implemented: CUSIP number changed to 873
11R 101 as of September 6, 2005,  and the trading  symbol  changed to TXHG as of
September 19, 2005.

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

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

Recent Developments

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

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

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

                                       7
<PAGE>

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

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

Background for Oil and Gas Business Activities

Since August 2005 oil prices have exceeded $50.00 per barrel.  On March 19, 2007
the closing  price for a barrel of oil was $56.59.  At these  prices,  secondary
recovery,  or  the  recovery  accomplished  by  injecting  gas or  water  into a
reservoir to replace produced fluids and thus maintain or increase the reservoir
pressure,  becomes  financially  viable.  The current corporate  direction is to
acquire  through  purchase,  merger and option,  fields with proven reserves and
excellent development prospects.  Concurrently, the Company is exploring options
for the acquisition of operational expertise and equipment.

This strategy is  contingent  upon the  Company's  ability to obtain  sufficient
capital to fund the high start up costs of testing, analyzing, acquiring capital
equipment and lease  acquisition.  On May 11, 2006 the Company announced that it
had entered  into a private  placement  agreement  with Brill  Securities,  Inc.
Pursuant to the private  placement  agreement the Company  completed the sale of
4,133,324 units during the 3rd quarter of 2006 at a price of $0.30 per unit, for
a total of  $1,240,000,  which after  commission  and  expenses  resulted in net
proceeds of  approximately  $1,180,000.  Each unit  includes one share of common
stock and a warrant  to  purchase  an  additional  share at a price of $0.50 per
share.  This  infusion of capital  allowed the Company to pursue its strategy of
acquiring oil and gas producing properties.

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

In December 2006 Von Gonten requested additional well data on the wells owned by
TX  Holdings  in order to  evaluate  the wells.  Until this  information  can be
provided and evaluated Von Gonten is unable to evaluate any proven reserves.

Current Oil and Gas Activities

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

a. Contract Area # 1, 60% Working Interest;
b. Park's Lease, 75% Working Interest;
c. Williams Lease, 89% Working Interest.

Currently Tx Holdings is not producing any of its wells. The Company is applying
for its Operator's  License in Texas. The company is currently  refurbishing the
William's  Lease by repairing  electrical  lines,  flow lines,  and testing well
integrity. Upon the completion of the well integrity testing and approval by the
Texas  Railroad  Commission,  the company will receive its permit to produce the
wells. Upon obtaining the Operator's License, TX Holdings will begin production.
Once the wells are in production with sufficient production data the information
required  by Von Gonten to  complete  its  evaluation  of the  reserves  will be
provided and a reserve report produced.

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

                                       8
<PAGE>

Principal Products or Services and Markets

The  principal  markets  for our  crude  oil and  natural  gas will be  refining
companies, pipeline companies, utility companies and private industry end users.
The point of delivery of our crude oil is at tank  batteries  located at or near
well sites on the leases.  We believe  that our  customers  will be based in the
State of Texas and in the industries discussed above.  Currently,  the Wells the
Company owns are only capable of producing oil. Sufficient quantities of natural
gas are not produced at this time to warrant the cost of installing a collection
system.

Although we  anticipate  that any crude oil and natural gas that we produce will
be sold to customers in the State of Texas,  no assurance can be given that such
sales  will  occur,  or that if they do,  that we will  receive a price  that is
sufficient to make our operations profitable.

Distribution Methods of Products or Services

Crude oil will be stored in tanks at well site located on our leases,  until the
purchaser  takes delivery of the crude oil by tanker truck.  TX Holdings has not
entered into any contracts for the sale of its crude as of March 20, 2007.

Competitive Business Conditions

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

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

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

Dependence on One or a Few Major Customers

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

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

Royalty agreements relating to oil and gas production are fairly standardized in
the industry. However, the percentage and amount of royalties paid by producers,
vary from lease to lease.  (See Description of Business - "Current  Business" in
this Annual Report.)

Governmental Approval and Regulation

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

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

                                       9
<PAGE>

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

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

Research and Development

During 2005 and 2006 we did not incur any research and development expenditures.

Intellectual Property

None.

Environmental Compliance

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

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

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

     o    impose  substantial  liabilities  for  pollution  resulting  from  our
          operations.

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

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

                                       10
<PAGE>

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

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

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

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

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

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

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

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

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

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

                                       11
<PAGE>

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

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

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

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

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

Insurance

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

Former Business of TX Holdings.

Business of Freedom Homes, Inc. ("New Freedom")

The principal  business of New Freedom is the retailing of  manufactured  homes,
which has been its  principal  business  since the  merger of Old  Freedom  into
Homes,  which was renamed  "Freedom Homes Inc.",  the name of Old Freedom,  when
merger  became  effective  on May 26,  2005  ("Freedom  Merger").  Prior  to the
effective dates of the Freedom  Merger,  publishing the periodic  magazine,  FOR
SALE BY  OWNER,  and  maintaining  the  residential  sales web site was the only
business of Homes.  Subsequent to the Freedom Merger,  the periodic magazine was
discontinued  and the web site no longer  maintained,  although  New Freedom has
intermittently issued a magazine in support of a local real estate broker.

                                       12
<PAGE>

Since May 26, 2005,  the  operations  of New Freedom have not been  consolidated
with the financial  statements of the Company.  In 2005 the company sold a 67.7%
interest in New Freedom and New Freedom is no longer a subsidiary  because it is
now controlled by of Jim Evans. Old Freedom began to sell pre-owned manufactured
homes in the Augusta,  Georgia market in February 2002. In June, 2004, it became
a retailer of new homes  manufactured by Horton Homes and  subsequently has also
sold new homes  manufactured  by Southern  Energy Homes and Precision  Homes. TX
Holdings now owns a 32.3%  interest in New Freedom and TX  Holdings'  management
has determined that the investment in New Freedom is worthless.

Business of Direct Lending, Inc.

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

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

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

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

Company Employees and Other Workers

As of March 20, 2007 we had four  employees.  Mark S. Neuhaus is Chairman of the
Board of Directors  and  President of TX Holdings.  On March 28, 2006 Michael A.
Cederstrom was appointed the interim Chief Financial Officer of TX Holdings. Mr.
Cederstrom  works on a part time  basis  with the  understanding  that once full
scale oil and gas  production is achieved a permanent  chief  financial  officer
will be named. Mr. Cederstrom also provides legal services through his law firm,
Dexter and Dexter. On August 2, 2006 TX Holdings appointed W.A. "Bill" Alexander
as the Chief  Operating  Officer.  On February 2, 2007 Jose Fuentes was hired as
the Vice President of Finance for the Company.  Other specialized  functions are
provided  as  necessary   through  the  engagement  of  independent   consulting
contractors.

Risk Factors Relating to the Company's Business

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

                                       13
<PAGE>

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

General Risks Related To Our Business

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

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

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

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

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

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

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

                                       14
<PAGE>

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

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

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

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

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

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

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

     o    levels of global oil and natural gas inventories;

     o    weather conditions affecting energy consumption;

     o    technological advances affecting energy consumption; and

     o    prices and availability of alternative fuels.

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

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

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

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

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

     o    pressure or irregularities in geological formations;

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

                                       15
<PAGE>

     o    equipment failures or accidents;

     o    adverse weather conditions;

     o    reductions in oil and natural gas prices;

     o    land title problems; and

     o    limitations in the market for oil and natural gas.

Oil and gas operations involve many physical hazards.

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

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

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

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

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

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

Risks Related To Our Common Stock

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

                                       16
<PAGE>

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

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

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

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

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

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

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

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

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

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

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

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

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

                                       17
<PAGE>

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

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

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

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

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

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

Brief Operating History - No Assurance of Profitability

The Company has a brief operating history.  Although we commenced  operations in
1997, original management has been replaced as previous operations have not been
profitable.  The Wi-Fi business contemplated  subsequent to the acquisition of a
controlling interest in the Company by MA&N did not materialize. The Company has
recently  completed the acquisition of its initial oil and gas leases.  However,
as of March 20, 2007 the Company has not sold any of its oil and gas production.
The Company has encountered unforeseen costs, expenses,  problems,  difficulties
and delays  frequently  associated  with new  ventures,  and these may continue.
There is no assurance that the Company's business ventures will be successful or
that the Company will be able to produce and acquire sufficient productive wells
to meet its goals.  The Company  anticipates  that its  operating  expenses will
increase if and as its business  expands,  and it will need to generate revenues
sufficient to meet all of its expenses to achieve profitability.

Competition Could Negatively Affect Revenues

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

Concentration of Share Ownership Gives Insiders Control

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

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

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

                                       18
<PAGE>

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

Limited Access to Qualified Personnel

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

Legal and Regulatory Risk

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

Shareholders Voting Control Risk

On May 11, 2006 the  Company  issued  1,000  shares of  preferred  stock to Mark
Neuhaus.  The preferred shares provide super-voting rights to Mark Neuhaus equal
to 50% of the common stock voting rights. These super-voting rights provide Mark
Neuhaus with control of the Company;  This may allow Mr.  Neuhaus the ability to
act in a  manner  contrary  to the vote of  other  shareholders  and that may be
detrimental to other shareholders.

Item 2 Description of Property

The Company has its principal leases in Abilene, Texas. The Company is currently
utilizing  space of Masada Oil, a company  that Bobby  Fellers has a  beneficial
interest  in and that  currently  performs  some of our  field  operations.  All
research  and  activities  as  related  to the oil and gas  business  are  being
conducted from this office. The company's headquarters are located at 1701 North
Judge Ely Blvd., Suite 6420, Abilene, Texas 79601. Our telephone number is 682 -
286 - 3116. In addition we maintain an office in Miami,  Florida.  The office in
Miami is provided by Mark Neuhaus.  Management  believes  that these  properties
will be sufficient for its current and  immediately  foreseeable  administrative
needs.  The Company  does not hold any  investments  or interests in real estate
other  than the Oil and Gas  Leases  it holds  for its  operational  needs.  The
company currently seeks additional oil and gas leases for operational  purposes,
which is an essential part of operations of any oil and gas production company.

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

                                       19
<PAGE>

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

Lease and Royalty Terms

Contract Area # 1

Located in the counties of Callahan and Eastland, Texas, this lease includes the
development  of the field.  The Purchase and Sale Contract  provides for a total
investment of up to  $7,200,000.  To reach this purchase  price Masada Oil & Gas
will need to procure an additional 1186 acres in Callahan County, Texas which is
contiguous to the Company's  currently owned 247 acres. In addition the Purchase
and Sale agreement  contemplates that Masada Oil and Gas will perform all of the
work on the  field to put into  production  a  minimum  of 121  wells  within 21
months.  This production  schedule is conditioned upon the Company providing the
funds  necessary  to complete the work on a timely basis and Masada Oil and Gas'
ability to acquire the  additional  acreage.  If Masada Oil and Gas is unable to
deliver the additional  acreage the Purchase and Sale Agreement will be adjusted
to reduce the price of the  purchase.  The Purchase  and Sale  Contract for this
field was not  completed  until  November 2006 and the payments  wemade  towards
purchase of the field are  presented in the  financial  statements  as a deposit
towards the Purchase and Sale Agreement. The ultimate total price is conditioned
upon  performance  and future  acquisitions.  TX  Holdings  currently  own a 60%
working  interest  in the  field  and  Masada  Oil  and Gas  owns a 40%  working
interest.  The ORRI on each lease  varies,  thus the net  revenue  interest  the
Company will receive from the wells of the respective leases will also vary. The
table below sets forth the  royalty  interest  for each  lease,  the net working
interest and the gross acreage of each lease within Contract Area # 1:

------------------------------------------

Description                                   ORRI        Working Interest
-----------                                   ----        ----------------

Roy Adams Lease RRC #01470                    17.97%      60%

W. Isenhower Lease RRC# 20398                 20.00%      60%

Isenhower Lease RRC# 21474                    26.25%      60%

Isenhower Estate Lease RRC # 30700            20.00%      60%

------------------------------------------

As of November 25, 2006,  there were  eighteen oil wells capable of producing on
the  leases.  As of March 20,  2007  these  wells are not  producing  due to the
Company waiting to obtain its Operator's License in Texas. The production of the
wells is minimal,  from 1 to 2 bbls per day. The Company has not  completed  the
development of the water flood  program.  The water flood will inject water into
the field  through  injection  wells.  The water will force the oil  towards the
production wells so that it can be recovered.  The Company's wells on this field
are considered shallow wells and only produce to a depth of 1000 feet.

Parks Lease

This lease includes 320 acres in which we have a 75% working  interest and a 63%
net revenue  interest  in the oil and gas  produced  from this  field.  The land
owners of this lease own a 12.5% royalty interest in the production.  Masada Oil
and Gas owns a 25 % working  interest in the lease.  The Company  purchased this
lease from Masada Oil and Gas as part of the  purchase  of Contract  Area 1. The
Company's  obligation  is to pay  for the  refurbishment  of the  wells  and the
infrastructure of the lease. There are currently 30 wells on this lease and none
of the wells are  currently  producing.  The lease  provides that TX Holdings is
limited to production from 1,000 feet and above. The wells on this lease are not
currently producing.

                                       20
<PAGE>

Williams Lease

This  lease  contains  843  acres  with a working  interest  of 89% owned by the
Company. The lease was acquired through a foreclosure sale on August 1, 2006 for
the sum of $68,221.  There are no contingencies or other commitments.  The lease
carries an ORRI to the land owners of 25%. The Company's net Revenue interest on
the wells  contained in this lease is 75%.  This lease is limited to  production
from 1,000 feet and above."

Oil and Gas Reserve Analyses

Currently the leases that have been  acquired  have not been  developed in a way
that allows our Petroleum  Engineers to assign  estimated net proved oil and gas
reserves and the present value of estimated cash flows from those reserves.  The
Company is  currently  performing  work on each lease to  provide  the  required
information  of logging each well to provide the  information  to the  Petroleum
Engineers.  The Company  currently  has no proved  reserves  on the leases.  The
leases were acquired during the third and fourth quarter of 2006.  However,  the
Company  hopes to establish  reserves and commence  operations  on the leases in
2007.

Item 3 Legal Proceedings

Management  is  currently  aware  of one  pending,  past or  present  litigation
involving  the Company which  management  does not believe could have a material
adverse  effect  on the  Company.  Management  does not know of any  outstanding
bankruptcy  or  receivership  issues  and is not  aware  of any  securities  law
violations  other than the failure to file timely Form 10-KSB for 2005 and 2006,
and timely Forms 10-QSB for the quarterly  periods in 2005 and 2006. The Company
has  recently  filed Form 10-KSB for fiscal year end 2005.  The Forms 10-QSB for
the  quarterly  periods in 2005 have been  incorporated  in the Form 10-KSB 2005
filing as provided in an agreement between the Company and the SEC.

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

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

Item 4 Submission of Matters to a Vote of Security Holders

None.


                                     PART II

Item 5 Market for Common Equity and Related Stockholder Matters

Market Information

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

                                       21
<PAGE>

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

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

                December 31, 2006            0.87         0.45
                September 30, 2006           0.99         0.55
                June 30, 2006                1.07         0.33
                March 31, 2006               0.47         0.19

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

As of March 20,  2007  there  were  approximately  184  holders of record of our
common stock

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

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

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

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

                                       22
<PAGE>

Preferred Stock

This  Company has 1,000 shares of preferred  stock issues to Mark  Neuhaus,  the
President  and Chairman of the Board of Directors.  The  preferred  stock has no
dividend rights, no registration  rights and no conversion rights. The preferred
stock does have a super-voting right equivalent to 50% of the outstanding voting
rights held by the common stock holders.  This voting right provides Mr. Neuhaus
with control of the Company.

Dividends

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

Holders

As of September  30, 2006,  TX Holdings  has issued and  outstanding  27,002,558
shares of common stock.  During the fiscal year 2006 the following warrants were
issued:   Douglas  C.  Hewitt,   exercisable  for  300,000  shares;  Michael  A.
Cederstrom,  exercisable  for 200,000  shares;  Bobby Fellers,  exercisable  for
300,000 shares; W.A. ("Bill") Alexander,  exercisable for 250,000 shares; and as
part of the Private Placement  exercisable for a total of 4,633,324 shares, none
of which have been exercised.

Of the total 27,002,558  shares  outstanding as of December 8, 2006,  16,550,124
were deemed "restricted  securities," as defined by the Act when issued to their
registered  owner and  continues  to have their  restricted  status noted on the
books of TX Holdings' transfer agent. Certificates representing such shares bear
an  appropriate  restrictive  legend and their sale is subject to Rule 144 under
the Act.

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

Recent Sales of Unregistered Securities

As of September  30, 2006,  TX Holdings  has issued and  outstanding  27,002,558
shares of common  stock.  As of September  30, 2005,  TX Holdings had issued and
outstanding  16,705,593  shares of common  stock.  On December  12,  2002,  MA&N
acquired  control of the Company through  purchase of 4,647,626 shares of common
stock  representing 51% of the 9,112,992  outstanding  shares of common stock of
the Company.

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

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

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

                                       23
<PAGE>

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

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

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

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

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

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

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

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

                                       24
<PAGE>

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

On May 11, 2006 the  Company  entered  into an  Employment  Agreement  with Mark
Neuhaus.  As part of the  Employment  Agreement Mr.  Neuhaus was provided  1,000
preferred  shares of stock.  The preferred shares have no dividend rights and no
conversion to common stock rights.  The preferred stock does have a super-voting
right  equivalent  to  50%  of the  outstanding  shares  of  common  stock.  The
super-voting right provides Mr. Neuhaus with control of the Company.

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

During May 2006 the Company  entered  into a Private  Placement  Agreement  with
Brill  Securities,  Inc. to act as a financial advisor for the private placement
of shares of common  stock of TX  Holdings.  Pursuant to the  Private  Placement
Memorandum approximately $1,240,000 of units were placed. The units contained an
aggregate of 4,633,324 shares of the Company's common stock and 4,633,324 common
stock purchase warrants. Each common stock purchase warrant is exercisable for a
period of two years at an exercise price of $.50 per share.  In connection  with
the offering,  the Company paid a placement fee of $70,500 in cash. In addition,
the placing agent was issued warrants to purchase 235,000 shares of common stock
on the same terms and  conditions  as the  investors.  The net  proceeds  of the
offering will be used by the Company to purchase necessary equipment to upgrade,
replace,  repair equipment on site at the fields we lease; to search,  negotiate
and acquire additional oil and gas leases; and general corporate  purposes.  All
units placed were sold  pursuant to Rule 144 of the Act. All  purchasers  of the
units met the definition of an accredited investor.

Share Repurchases

None.

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

Introduction

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

The Company has never earned a profit,  and has incurred an accumulated  deficit
of $10,734,907 as of June 30, 2007. The acquisition of a controlling interest in
the Company by MA&N has given the Company  access to additional  funds  directly
from MA&N,  and the business  plan  developed by MA&N has enabled the Company to
raise additional funds from third parties. As of September 30, 2006, the Company
had raised $1,240,000 in equity. The Company has used these funds to purchase or
place deposits on three oil and gas fields to begin its operations as an oil and
gas exploration and production company. In addition the Company has entered into
negotiations  to purchase  additional  fields of operation that are scheduled to
close during the fourth  quarter of 2007.  The Company will begin oil production
upon the  completion  of well  integrity  tests  required to be performed by the
Texas Railroad  Commission on the wells located in the Williams Lease.  Upon the
successful completion of the test the Company will be in a position to start the
recompletion of the 30 wells located on the Williams  Brothers leases.  Revenues
derived  from  the  planned  production  and  sale of oil  will be  based on the
evaluation and development of fields. If our development plan is successful,  it
is estimated it will take  approximately  one year to reach production levels to
sufficiently  capitalize  the Company on an ongoing  basis.  During this initial
ramp up period,  the Company  believes it will need to raise additional funds to
fully develop its fields,  purchase  equipment  and meet general  administrative
expenses.  The  Company  may seek both debt and equity  financing.  The  Company
currently has in excess of seventy wells located on the three fields  located in
Texas.  Each of the wells will need to be reworked to establish  production at a
cost of approximately  $5,000 to $10,000 per well.  Initial production from each
well is  estimated  to be between  two to five  barrels  per day.  Once  initial
production  has been  established  the Company will begin a water flood  program
that injects water into the oil producing zone through injector wells. The water
then forces the oil towards the  producing  well and may increase  production of
each well up to an estimated  eight to twelve  barrels per day per well.  If the
Company is able to produce its wells upon the  recompletion  the Company will be
profitable  if 200 barrels of oil is produced and the price of oil remains above
$50.00 per barrel.  The Company's  success is dependent on if and how quickly it
can reach these levels of production.  The Company plans to use all revenues for
general  corporate  purposes  as well as,  future  expansion  of its current oil
producing properties and the acquisition of other oil and gas properties.  There
is no certainty that the Company can achieve  profitable levels of production or
that it will be able to raise additional capital through any means.

                                       25
<PAGE>

Results of Operations

Year Ended September 30, 2006 Compared With Year Ended September 30, 2005

Revenues  From  Operations  - The Company  had no  Revenues  for the years ended
September 30, 2006 and 2005. On December  2004, the company  announced  plans to
change  business  direction  and began to  structure  itself into an oil and gas
production  and  exploration  company.  Since  it  ceased  its  former  business
operations, the company has devoted its efforts to research, product development
and securing financing and has not earned revenues.

Expenses From Continuing Operations - The Company incurred operating expenses of
$4,998,139  for  the  fiscal  year  ended  September  30,  2006 an  increase  of
$4,762,319  compared to $235,820 for the fiscal year ended  September  30, 2005.
The  increase  in  operating  expenses  are  primarily  related  to  stock-based
compenstion  increasing to $4,542,901 for the year ended September 30, 2006 from
$40,000 for the year ended September 30, 2005 and increses in professional  fees
as it pursues its business strategy of oil and gas exploration and production.

Net Loss - For the fiscal year ended  September 30, 2006 the Company  incurred a
loss of  $5,019,715  compared  to a loss of  $340,900  for the fiscal year ended
September 30, 2005, an increase of  $4,678,815.  The major reasons for this loss
increase is having no revenue and stock-based compensation and professional fees
for the fiscal year ended September 30, 2006 as the Company shifted its focus to
oil and gas exploration and production.

Net Operating Loss Carryforward for Tax Purposes

The Company has tax net  operating  loss  carryforwards  totaling  approximately
$1,740,000,  expiring in 2018  through  2026.  Approximately  $1,200,000  of net
operating  losses was  incurred  prior to  December  12, 2002 at which date MA&N
acquired 51% of the Company and are consequently  subject to certain  limitation
described in section 382 of the Internal  Revenue  Code.  The Company  estimates
that,  due to the  limitations  and expiration  dates,  only $424,000 of the net
operating losses incurred prior to December 12, 2002 will be available to offset
future taxable income.

Net  operating  losses after  December 12, 2002 through  September 30, 2005 were
approximately  $1,316,000.  The  total net  operating  losses  available  to the
Company to offset future taxable income is approximately $1,740,000.

There can be no  assurance  that these  deferred  tax assets can ever be used. A
deferred  tax asset can be used only if there is future  taxable  income,  as to
which there can be no assurance in the case of the Company.  (SEE NOTE 5 - NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS.)

Liquidity

At September 30, 2006 we had cash or cash equivalents in the amount of $332,546.
As of September 30, 2005 we had no cash, cash equivalents and $10,000 in prepaid
current assets.

Historically  the  company  has  lacked  liquidity,  a  result  of  insufficient
financing  alternatives  available  to the  company  and the lack of a  business
strategy  that  produced  significant  revenues.  Since MA%N took a  controlling
interest in the Company in December  2002, Mr. Neuhaus has provided loans to the
Company  providing  the  Company  with  $164,385  for  operating  purposes as of
September 30, 2006.  The Company has also made an  arrangement  with its primary
creditor  concerning  an Account  Payable in the  amount of  $215,113  to accept
Warrants  totaling  1,434,088  warrants to purchase common stock of the Company.
(See Recent Sale of  Unregistered  Securities)to  forebear the collection of the
liability.  The $215,113  represents  47% of the Company's  outstanding  Account
Payable of $455,241.

                                       26
<PAGE>

During the Fourth  quarter of 2006 the  Company  was able to  complete a Private
Placement of $1,240,000 of units of common stock and warrants to purchase common
stock to accredited investors.  This placement has provided the Company with the
liquidity  to enter into the oil and gas  business to acquire oil and gas leases
(See Oil and Gas Business). However, based on current expectations,  the Company
will need to find additional  sources of financing to meet our general corporate
needs as well as the large capital requirements  necessary for the production of
the oil and gas in the wells we currently own and lease,  and the acquisition of
additional oil and gas producing properties.

The Company currently  requires  operating capital of approximately  $75,000 per
month to meet its current  obligations.  At this time the Company has no revenue
and is unable to meet its current obligations.  In the past the Company has been
able  to  raise  capital  from  its  shareholders/officers  through  stock-based
compensation and advances.  The Company will require the officers of the company
to continue to receive  stock-based  compensation  and the company  will need to
borrow  or  raise  sufficient   equity   capitalization   to  meet  its  current
obligations.  In addition the Company will need to raise approximately  $500,000
in working capital to complete the  refurbishment  and development of the leases
it  currently  owns.  If the  Company is unable to raise  sufficient  capital to
refurbish and develop its fields, it will need to find working interest partners
to assist in the  development of its oil and gas leases.  The Company's  primary
challenge is to begin to generate  revenue  from its oil and gas leases.  If the
revenue is not generated, then the Company will need to seek merger partners."

Item 7 Financial Statements

The Company's consolidated balance sheets as of September 30, 2006 and 2005, and
the related  consolidated  statements  of  operations,  changes in  stockholders
deficit  and cash  flows for the years  then  ended  have been  audited  by Ham,
Langston  & Brezina,  LLP,  independent  registered  public  accountants.  These
financial statements have been prepared in accordance with accounting principles
generally  accepted in the United  States of America and pursuant to  Regulation
S-B as promulgated  by the  Securities and Exchange  Commission and are included
herein in response to Part F/S of this Form  10-KSB.  The  financial  statements
have been prepared assuming the Company will continue as a going concern.

                                       27
<PAGE>

TX HOLDINGS, INC.
A CORPORATION IN THE DEVELOPMENT STAGE
FINANCIAL STATEMENTS - TABLE OF CONTENTS
FOR THE YEARS ENDED SEPTEMBER 30, 2006 AND 2005
--------------------------------------------------------------------------------


                                                                         Page(s)
                                                                        --------

Report Of Independent Registered Public Accounting Firm                     28

Audited Financial Statements:

  Balance Sheets at September 30, 2006 and 2005                             30

  Statements Of Operations for the years ended September 30, 2006 and
   2005, and for the period from inception of the development stage,
   October 1, 2004, to September 30, 2006                                   31

  Statements Of Changes In Stockholders' Deficit for the years ended
   September 30, 2005 and 2006                                            32,33

  Statements Of Cash Flows for the years ended September 30, 2006 and
   2005, and for the period from inception of the development stage,
   October 1, 2004, to September 30, 2006                                   34

Notes to Financial Statements                                               35

                                       28
<PAGE>

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To the Stockholders and Directors of TX Holdings, Inc.:

We have  audited the  accompanying  balance  sheets of TX  Holdings,  Inc. as of
September  30,  2007  and  2006  and  the  related   statements  of  operations,
stockholders' deficit and cash flows for the years then ended and for the period
from inception of the development stage, October 1, 2004, to September 30, 2007.
These financial  statements are the responsibility of the Company's  management.
Our responsibility is to express an opinion on these financial  statements based
upon 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  audits 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 TX  Holdings,  Inc. as of
September  30,  2007 and 2006,  and the results of its  operations  and its cash
flows  for the  years  then  ended  and for the  period  from  inception  of the
development  stage,  October 1, 2004, to September 30, 2007, in conformity  with
accounting principles generally accepted in the United States of America.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company will continue as a going concern.  As shown in the financial  statements
and discussed in Note 1, the Company has incurred  significant  recurring losses
from operations since inception and is dependent on outside sources of financing
for continuation of its operations.  These factors raise substantial doubt about
the Company's  ability to continue as a going concern.  Management's  plans with
regard to this matter are also discussed in Note 1. These  financial  statements
do not  include  any  adjustments  that might  result  from the  outcome of this
uncertainty.


/s/ Ham, Langston & Brezina, L.L.P.

Houston, Texas
March 20, 2007

                                       29
<PAGE>

TX HOLDINGS, INC.
A CORPORATION IN THE DEVELOPMENT STAGE
BALANCE SHEETS
September 30, 2006 and 2005

--------------------------------------------------------------------------------

                                                       2006            2005
                                                   -------------   -------------

ASSETS

Current assets:
 Cash and cash equivalents                         $    332,546    $          -
 Prepaid expenses                                        15,000          10,000
                                                   -------------   -------------

  Total current assets                                  347,546          10,000

Deposits for oil and gas property acquisition           253,000               -
Property and equipment, net                             290,318           1,080
                                                   -------------   -------------

       Total assets                                $    890,864    $     11,080
                                                   =============   =============

          LIABILITIES AND STOCKHOLDERS' DEFICIT

Current liabilities:
 Accounts payable and accrued liabilities          $    455,251    $    220,277
 Accrued stock-based compensation                       830,000               -
 Advances from stockholders/officer                     164,385         214,697
                                                   -------------   -------------

  Total current liabilitiess                          1,449,636         434,974
                                                   -------------   -------------

Commitments and contingencies

Stockholders' deficit:
 Preferred stock: no par value, 1,000,000 shares
  authorized, 1,000 shares issued or outstanding      1,018,000               -
 Common stock: no par value, 50,000,000 shares
  authorized, 25,782,558 and 16,705,593 shares
  issued and outstanding at September 30, 2006
  and 2005, respectively                              5,104,541       1,618,305
 Additional paid-in capital                             587,703         211,098
 Accumulated deficit                                 (1,803,507)     (1,803,507)
 Losses accumulated in the development stage         (5,465,509)       (449,790)
                                                   -------------   -------------

  Total stockholders' deficit                          (558,772)       (423,894)
                                                   -------------   -------------

       Total liabilities and stockholders' deficit $    890,864    $     11,080
                                                   =============   =============


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

                                       30
<PAGE>

<TABLE>
<CAPTION>
<S>     <C>                                    <C>            <C>            <C>
TX HOLDINGS, INC.
A CORPORATION IN THE DEVELOPMENT STAGE
STATEMENTS OF OPERATIONS
For the Years Ended September 30, 2006 and 2005 and for the Period from Inception
of the Development Stage, October 1, 2004, to September 30, 2006

------------------------------------------------------------------------------------------

                                                                             Inception of
                                                                              Development
                                                                                Stage to
                                                                             September 30,
                                                   2006           2005            2006
                                               -------------  -------------  -------------

Operating expenses, except items shown
 separately below                              $    202,177   $     67,250   $    269,427
 Stock-based compensation                         4,542,901         40,000      4,582,901
 Professional fees                                  211,624        120,706        332,330
 Lease expense                                       12,392          5,000         17,392
 Depreciation expense                                   780            480          1,260
 Advertising expense                                 28,265          2,384         30,649
                                               -------------  -------------  -------------

   Total operating expenses                       4,998,139        235,820      5,233,959
                                               -------------  -------------  -------------

Loss from operations                             (4,998,139)      (235,820)    (5,233,959)
                                               -------------  -------------  -------------

Other income and (expenses):
 Other income                                           710              -            710
 Forebearance agreement costs                             -       (211,098)      (211,098)
 Interest expense                                   (18,290)        (2,872)       (21,162)
                                               -------------  -------------  -------------

   Total other income and (expenses), net           (17,580)      (213,970)      (231,550)
                                               -------------  -------------  -------------

Loss from continuing operations                  (5,015,719)      (449,790)    (5,465,509)
                                               -------------  -------------  -------------

Discontinued operations:
Gain (loss) from disposal of discontinued
 business segment                                         -        108,890              -
                                               -------------  -------------  -------------

Loss from discontinued operations                         -        108,890              -
                                               -------------  -------------  -------------

Net loss                                       $ (5,015,719)  $   (340,900)  $ (5,465,509)
                                               =============  =============  =============

Net loss per common share - basic and diluted
 Continuing operations                         $      (0.25)  $      (0.03)
 Discontinued operations                                  -           0.01
                                               -------------  -------------

   Total                                       $      (0.25)  $      (0.02)
                                               =============  =============

Weighted average number of common shares
 outstanding - basic and diluted                 20,192,875     15,958,775
                                               =============  =============


    The accompanying notes are an integral part of the consolidated financial
                                   statements
</TABLE>

                                       31
<PAGE>

<TABLE>
<CAPTION>
<S>     <C>                         <C>     <C>     <C>         <C>          <C>        <C>           <C>          <C>
TX HOLDINGS, INC.
A CORPORATION IN THE DEVELOPMENT STAGE
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
For the Years Ended September 30, 2006 and 2005

------------------------------------------------------------------------------------------------------------------------------
                                                                                                         Losses
                                                                                                       Accumulated
                                     Preferred Stock      Common Stock        Additional                 in the
                                     --------------- ------------------------  Paid-In   Accumulated    Develop-
                                     Shares  Amount    Shares      Amount      Capital      Deficit    ment Stage     Total
                                     ------  ------- ----------- ------------ ---------- ------------- ----------- -----------

Balance at September 30, 2004             -  $    -  15,793,651  $ 1,532,111  $       -  $ (1,912,397) $        -  $ (380,286)

Inception of the development stage
 on October 1, 2004                       -      -            -            -          -             -           -           -

Common stock issued for
 professional services                    -      -      450,000       40,000          -             -           -      40,000

Common stock issued for prepaid
 services                                 -      -      100,000       10,000          -             -           -      10,000

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

Warrants issued under forbearence
 agreement                                -      -            -            -    211,098             -           -     211,098

Net income (loss)                         -      -            -            -          -       108,890    (449,790)   (340,900)
                                     ------  ------- ----------- ------------ ---------- ------------- ----------- -----------

Balance at September 30, 2005             -  $    -  16,705,593  $ 1,618,305  $ 211,098  $ (1,803,507) $ (449,790) $ (423,894)
                                     ====== ======== =========== ============ ========== ============= =========== ===========

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

</TABLE>

                                       32
<PAGE>


TX HOLDINGS, INC.
A CORPORATION IN THE DEVELOPMENT STAGE
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
For the Years Ended September 30, 2006 and 2005
<TABLE>
<CAPTION>
<S>                                 <C>           <C>         <C>          <C>         <C>            <C>            <C>
-----------------------------------------------------------------------------------------------------------------------------------

                                                                                                        Losses
                                                                          Additional                  Accumulated
                            Preferred Stock           Common Stock          Paid-In    Accumulated  in the Develop-
                        ----------------------- -------------------------
                          Shares      Amount       Shares       Amount      Capital      Deficit      ment Stage        Total
                        ---------- ------------ ------------------------- ----------- ------------- --------------- --------------

Balance at September 30,
 2005                            -  $         -   16,705,593  $ 1,618,305  $  211,098  $ (1,803,507)  $    (449,790) $    (423,894)

Common stock issued for
 professional services           -            -    4,649,300    2,318,296           -             -               -      2,318,296

Common stock issued for
 cash                            -            -    4,633,324    1,164,997           -             -               -      1,164,997

Common stock issued upon
 exercise
 of warrants                                         294,341        2,943                                                    2,943

Common stock surrendered         -            -     (500,000)           -           -             -               -              -

Warrants issued for
 services                        -            -            -            -     376,605             -               -        376,605

Preferred stock issued
 to the
 Company's chief
  executive
 officer/stockholder         1,000    1,018,000            -            -           -             -               -      1,018,000

Net income (loss)                -            -            -            -           -             -      (5,015,719)    (5,015,719)
                        ---------- ------------ ------------ ------------ ----------- ------------- --------------- --------------

Balance at September 30,
 2006                        1,000  $ 1,018,000   25,782,558  $ 5,104,541  $  587,703  $(1,803,507)   $  (5,465,509) $    (558,772)
                        ========== ============ ============ ============ =========== ============= =============== ==============



                       The accompanying notes are an integral part of the consolidated financial statements
</TABLE>


                                       33
<PAGE>



TX HOLDINGS, INC.
A CORPORATION IN THE DEVELOPMENT STAGE
STATEMENTS OF CASH FLOWS

For the  Years  Ended  September  30,  2006  and 2005  and for the  Period  From
Inception of the Development Stage, October 1, 2004, to September 30, 2006

<TABLE>
<CAPTION>
<S>                                         <C>           <C>            <C>
------------------------------------------------------------------------------------------

                                                                          Inception of
                                                                          Development
                                                                            Stage to
                                                                         September 30,
                                                 2006          2005          2006
                                           ------------- ------------- ------------------

Cash flows from opersating activities:
 Net
  loss                                      $ (5,015,719) $   (340,900)  $     (5,465,509)
 Adjustments to reconcile net loss to net
  cash used in
  operating activities
  Loss (gain) from discontinued operations             -      (108,890)                 -
  Warrants issued for forbearance
   agreement                                           -       211,098            211,098
  Depreciation expense                               780           480              1,260
  Common and preferred stock issued for
   services                                    3,336,296        50,000          3,386,296
  Warrants issued for services                   376,605             -            376,605
  Common stock issued to settle accounts
   payable                                             -        36,194             36,194
  Changes in operating assets and
   liabilities:                                                                         -
   Prepaid expenses and other assets              (5,000)       (9,750)           (14,750)
   Accrued interest added to stockholder
    advances                                      18,290             -             18,290
   Accounts payable and accrued
    liabilities                                1,064,974        20,705          1,085,679
                                           ------------- ------------- ------------------

        Net cash used by operating
         activities                             (223,774)     (141,063)          (364,837)
                                           ------------- ------------- ------------------

Cash flows from investing activities:
 Deposits paid for oil and gas property
  acquisition                                   (253,000)                        (253,000)
 Purchase of property and equipment             (290,018)            -           (290,018)
                                          -------------- ------------- ------------------

        Net cash provided by financing
         activities                             (543,018)            -           (543,018)
                                           ------------- ------------- ------------------

Cash flows from financing activities:
 Repayment of note payable to a bank                   -       (20,598)           (20,598)
 Proceeds from sale of common stock            1,164,997             -          1,164,997
 Proceeds from exercise of warrants                2,943             -              2,943
 Proceeds (repayments) of advances from
  stockholder/officer                            (68,602)      161,661             93,059
                                           ------------- ------------- ------------------

        Net cash provided by financing
         activities                            1,099,338       141,063          1,240,401
                                           ------------- ------------- ------------------

Increase in cash and cash equivalents            332,546             -            332,546

Cash and cash equivalents at beginning of
 year                                                  -             -                  -
                                           ------------- ------------- ------------------

Cash and cash equivalents at end of year    $    332,546  $          -   $        332,546
                                           ============= ============= ==================

Supplemental disclosure of cah flow
 information
 Cash paid for interest expense             $          -  $      2,872
 Cash paid for income taxes                            -             -


   The accompanying notes are an integral part of the consolidated financial statements
</TABLE>


                                       34
<PAGE>



TX HOLDINGS, INC.
A CORPORATION IN THE DEVELOPMENT STAGE
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

NOTE 1- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACTIVITIES

HISTORICAL BUSINESS ACTIVITIES

TX  Holdings,  Inc.  (formerly  R  Wireless,  Inc.  and  HOM  Corporation)  (the
"Company"),  incorporated May 4, 2000 in the State of Georgia,  is transitioning
from a holding  company to an oil and gas  exploration  and production  company.
This transition  began during 2005 and is discussed  below in "CURRENT  BUSINESS
ACTIVITIES."  Prior to May 26, 2005, the Company  operated as a holding  company
for its formerly two wholly owned subsidiaries,  Homes By Owners, Inc. ("Homes")
and Direct Lending,  Inc.  ("Direct").  The Company  received  approval from the
Secretary  of State of Georgia for a  certificate  of merger  between  Homes and
Freedom Homes, Inc.  ("Freedom").  The Company remains the owner of 32.3% of the
common  shares  of  Homes.  The  remaining  common  shares of Homes are owned as
follows:  63.1% by Jim Evans,  owner of Freedom,  and 4.6% by Robert S.  Wilson,
operating officer of Homes. In 2005 the company sold a 67.7% interest in Freedom
and wrote off its remaining 32.3%  investment  because  management was unable to
demonstrate  that its equity  interest  had any future  value.  Accordingly,  at
September 30, 2005 the Company recognized a gain from discontinued operations of
$108,890.

The principal  business of Freedom was the retailing of manufactured  homes, the
publishing of the periodic  magazine,  For Sale by Owner,  and  maintaining  its
residential sales web site.  Subsequent to the May 26, 2005 Freedom Merger,  the
periodic  magazine as well as web site maintenance were  discontinued,  although
Freedom  did  intermittently  issue a magazine in support of a local real estate
broker.  Since May 26, 2005,  none of the  operations of Freedom are included in
the financial  statements of the Company.  As of May 26, 2005, the operations of
Freedom are not consolidated with the financial  statements of the Company since
Freedom no longer is a subsidiary and is under the control of Jim Evans,  not TX
Holdings,  Inc. In fact, TX Holdings, Inc. has not participated in the operation
of Freedom since May 26, 2005. The Company's  management has determined that the
value of its  interest in Freedom is $0.00.  The Company  has not  received  any
revenue,  dividends,  or distributions from Freedom since prior to its merger on
May 26, 2005.  Freedom is a private  company that is not publicly  traded,  with
limited  investors,  and has no market for its stock.  The liquidation  value of
Freedom would be difficult to determine and no market is currently available for
the transfer of TX Holdings' shares.

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

CURRENT BUSINESS ACTIVITIES

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

o    Wells should be currently Producing
o    Production should be broadly distributed across lease
o    Lease should show a 24 month payback (or better)
o    Wells should show upside potential (proved undeveloped reserves of
     approximately 20%)

These criteria were developed in an effort to mitigate risk for TX Holdings,
Inc. and its investors.

Management raised  $1,240,000 in a Private Placement  offering during the months
of July through September 2006 to finance these  acquisitions.  The funds raised
in 2006 were used to purchase an interest in three oil and gas fields located in
Texas.  Development  of the  fields  began on  November  1,  2006.  The  Company
experienced  substantial costs for engineering and other  professional  services
during 2005 and 2006 in making the transition to an oil and gas  exploration and
production company.  The Company plans to continue to use a combination of debt,
and equity finance. Currently, management cannot provide any assurance regarding
the successful development of acquired oil


                                       35
<PAGE>


TX HOLDINGS, INC.
A CORPORATION IN THE DEVELOPMENT STAGE
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

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


CURRENT BUSINESS ACTIVITIES, continued

and gas fields,  the  completion  of  additional  acquisitions  or the continued
ability to raise funds,  however it is using its best efforts to complete  field
work  on  the  fields  acquired,  acquire  additional  fields  and  finance  the
operations.

DEVELOPMENT STAGE COMPANY

The Company  ceased its former  operations as of September 30, 2004.  During the
first  quarter for 2005  beginning  on October 1, 2004,  the Company  researched
different  alternatives for the future  development of the company.  In December
2004, as a result of the Company's research, the Company announced that it would
pursue operations in the oil and gas industry. October 1, 2004 was the beginning
day for the first quarter of the  determination to pursue  operations in the oil
and gas industry.  Therefore  October 1, 2004 was identified as the beginning of
the developmental stage.

Since it ceased its former  business  operations,  the  Company  has devoted its
efforts to research,  product  development,  and securing  financing and has not
earned significant revenue from its planned principal  operations.  Accordingly,
the consolidated financial statements are presented in accordance with Statement
of Financial  Accounting  Standards  (SFAS) No. 7,  Accounting  and Reporting by
Development-Stage Enterprises.

GOING CONCERN CONSIDERATIONS

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

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

USE OF ESTIMATES

The preparation of financial statements in conformity with accounting principles
generally  accepted in the United States of America requires  management to make
estimates and  assumptions  that affect certain  reported  amounts of assets and
liabilities,  disclosure of contingent assets and liabilities at the date of the
financial  statements,  and the reported amounts of revenues and expenses during
the  reporting  periods.   Significant  items  subject  to  such  estimates  and
assumptions  include  recoverability  of  long-lived  and  deferred  tax assets,
valuation  of acquired  in-process  research  and  development,  measurement  of
stock-based compensation,  and the fair value of the Company's common stock. The
Company  bases  its  estimates  on  historical   experience  and  various  other
assumptions that management  believes to be reasonable under the  circumstances.
Changes in  estimates  are  recorded in the period in which they  become  known.
Actual results could differ from those estimates.

PROPERTY AND EQUIPMENT

The Company uses the  successful  efforts  method of accounting  for oil and gas
producing  activities.  Under  this  method,  acquisition  costs for  proved and
unproved properties are capitalized when incurred.  Exploration costs, including
geological and geophysical  costs, the costs of carrying and retaining  unproved
properties and exploratory dry hole drilling  costs,  are expensed.  Development
costs, including the costs to drill and equip development wells,


                                       36
<PAGE>


TX HOLDINGS, INC.
A CORPORATION IN THE DEVELOPMENT STAGE
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

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

PROPERTY AND EQUIPMENT, continued

and  successful  exploratory  drilling  costs  to  locate  proved  reserves  are
capitalized.  Exploratory  drilling costs are capitalized  when incurred pending
the  determination of whether a well has found proved reserves.  A determination
of whether a well has found proved  reserves is made shortly  after  drilling is
completed.   The   determination   is  based  on  a  process   that   relies  on
interpretations  of available  geologic,  geophysic,  and engineering data. If a
well is determined to be  successful,  the  capitalized  drilling  costs will be
reclassified  as part of the cost of the  well.  If a well is  determined  to be
unsuccessful,  the capitalized  drilling costs will be charged to expense in the
period  the  determination  is made.  If an  exploratory  well  requires a major
capital  expenditure  before  production  can begin,  the cost of  drilling  the
exploratory  well will continue to be carried as an asset pending  determination
of  whether  proved  reserves  have been  found only as long as: i) the well has
found a sufficient quantity of reserves to justify its completion as a producing
well if the  required  capital  expenditure  is made  and  ii)  drilling  of the
additional exploratory wells is under way or firmly planned for the near future.
If drilling in the area is not under way or firmly  planned,  or if the well has
not found a commercially  producible quantity of reserves,  the exploratory well
is assumed to be impaired, and its costs are charged to expense.

In the  absence of a  determination  as to whether the  reserves  that have been
found can be  classified as proved,  the costs of drilling  such an  exploratory
well is not carried as an asset for more than one year  following  completion of
drilling.  If, after that year has passed, a determination  that proved reserves
exist  cannot be made,  the well is  assumed to be  impaired,  and its costs are
charged to  expense.  Its costs can,  however,  continue  to be  capitalized  if
sufficient  quantities  of reserves  are  discovered  in the well to justify its
completion as a producing well and sufficient  progress is made in assessing the
reserves and the well's economic and operating feasibility.

The impairment of unamortized  capital costs is measured at a lease level and is
reduced to fair value if it is  determined  that the sum of expected  future net
cash flows is less than the net book value. TX Holdings determines if impairment
has occurred  through either adverse changes or as a result of the annual review
of all fields.

Development  costs  of  proved  oil  and  gas  properties,  including  estimated
dismantlement,  restoration and abandonment  costs and  acquisition  costs,  are
depreciated  and  depleted  on a field basis by the  units-of-production  method
using proved developed and proved reserves,  respectively. The costs of unproved
oil and gas properties are generally combined and impaired over a period that is
based on the  average  holding  period  for such  properties  and the  Company's
experience of successful drilling.

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

REVENUE RECOGNITION

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

INCOME TAXES

Income taxes are estimated for the tax effects of  transactions  reported in the
financial  statements  and consist of taxes  currently due plus  deferred  taxes
related  primarily to  differences  between the  financial  reporting  basis and
income tax basis of assets and liabilities.  Deferred tax assets and liabilities
represent future tax consequences of those


                                       37
<PAGE>

TX HOLDINGS, INC.
A CORPORATION IN THE DEVELOPMENT STAGE
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

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

INCOME TAXES, continued

differences,  which will  either be taxable  or  deductible  when the assets and
liabilities are recovered or settled.  Deferred taxes may also be recognized for
operating  losses that are available to offset future taxable  income.  Deferred
taxes are adjusted for changes in tax laws and tax rates when those  changes are
enacted.

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

RECLASSIFICATIONS

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

BASIC NET LOSS PER COMMON SHARE

Net loss per share is computed  based on the guidance of SFAS No. 128,  Earnings
Per Share  (SFAS  128),  requiring  companies  to report both basic net loss per
common  share,  which is computed  using the weighted  average  number of common
shares  outstanding  during the period,  and diluted net loss per common  share,
which is computed using the weighted average number of common shares outstanding
and the weighted average dilutive  potential common shares outstanding using the
treasury stock method. However, for all periods presented,  diluted net loss per
share is the same as basic  net loss  per  share as the  inclusion  of  weighted
average  shares of common stock  issuable upon the exercise of stock options and
warrants and conversion of convertible preferred stock would be anti-dilutive.

The following  table  summarizes  securities  outstanding at each of the periods
presented  which were not  included in the  calculation  of diluted net loss per
share since their inclusion would be anti-dilutive.

                                                    2006              2005
                                           ----------------  ----------------

Options issued to former owner                           -           294,341
Warrants Issued for forbearance of payable       1,434,088         1,434,088
Warrants issued as compensation                  1,050,000                 -
Warrants issued in private placement             4,368,324                 -
                                           ----------------  ---------------

       Total                                     6,852,412         1,728,423
                                           ================  ===============

RECENTLY ISSUED ACCOUNTING STANDARDS

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

The  statement  applies to new  equity  awards  and to equity  awards  modified,
repurchased,  or cancelled after the effective date. Additionally,  compensation
cost for the  portion of awards  for which the  requisite  service  has not been
rendered that are  outstanding  as of the effective  date shall be recognized as
the requisite service is rendered on or



<PAGE>


TX HOLDINGS, INC.
A CORPORATION IN THE DEVELOPMENT STAGE
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

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

RECENTLY ISSUED ACCOUNTING STANDARDS, continued

after the effective  date. The  compensation  cost for that portion of awards is
based on the  grant-date  fair value of those awards as calculated  from the pro
forma  disclosures under Statement No. 123. Changes to the grant-date fair value
of equity  awards  granted  before  the  effective  date of this  statement  are
precluded. The compensation cost for those earlier awards shall be attributed to
periods  beginning on or after the effective  date of this  statement  using the
attribution method that was used under Statement No. 123, except that the method
of recognizing forfeitures only as they occur shall not be continued.

Any unearned or deferred compensation  (contra-equity accounts) related to those
earlier  awards shall be eliminated  against the  appropriate  equity  accounts.
Additionally, common stock purchased pursuant to stock options granted under our
employee stock purchase plan is expensed based upon the fair market value of the
stock option.

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

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

In July  2006,  the FASB  issued  FASB  Interpretation  No. 48,  Accounting  for
Uncertainty in Income Taxes--an  interpretation of FAS 109. This  interpretation
clarifies  the  accounting  for  uncertainty  in income  taxes  recognized  in a
company's  financial  statements  in  accordance  with FASB  Statement  No. 109,
Accounting  for Income  Taxes.  This  interpretation  prescribes  a  recognition
threshold and measurement  attribute for the financial statement recognition and
measurement of a tax position taken in a tax return.  It also provides  guidance
on derecognition,  classification, interest and penalties, accounting in interim
periods,  disclosure  and  transition.  Interpretation  No. 48 is effective  for
fiscal  years  beginning  after  December  15,  2006.  Earlier   application  is
encouraged  if the company has not yet issued  financial  statements,  including
interim financial  statements,  in the period  Interpretation No. 48 is adopted.
The  Company  is   currently   evaluating   the  impact  the  adoption  of  this
interpretation will have on its consolidated results of operations and financial
position.

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

NOTE 2 - DEPOSITS FOR OIL AND GAS PROPERTY ACQUISITION

On November 1 2006, the Company  entered into a purchase and sale agreement (the
"Agreement")  for a 60%  interest in certain oil and gas  properties  located in
Eastland County, Texas. Under the Agreement, the Company is


                                       39
<PAGE>


TX HOLDINGS, INC.
A CORPORATION IN THE DEVELOPMENT STAGE
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

NOTE 2 - DEPOSITS FOR OIL AND GAS PROPERTY ACQUISITION, continued

obligated to pay a total of $7,200,000 for equipment,  mineral leases,  drilling
and reworks,  and various  other  catagories  of costs if all  provisions of the
agreement are met. At September 30, 2006, the Company had made payments totaling
$253,000 to the seller and those  payments are presented as deposits for oil and
gas property acquisition in the accompanying balance sheet.

NOTE 3 - PROPERTY AND EQUIPMENT

Property and equipment consists of the following at September 30, 2006 and 2005:

                                            Life
                                           Years         2006          2005
                                       ------------- ------------- -------------

  Oil and gas properties and
   equipment                                          $    289,248  $          -
  Furniture and office equipment         3-5 years           3,070         2,400
                                                     ------------- -------------

  Total                                                    292,318         2,400
  Less accumulated depreciation,
   depletion and
   amortization                                            (2,000)       (1,320)
                                                     ------------- -------------

                                                           290,318         1,080
                                                     ============= =============

Depreciation  expense of $780 and $480 was  recognized  during  the years  ended
September 30, 2006 and 2005,  respectively.  At September 30, 2006,  the Company
has no proven oil and gas properties and, accordingly,  there is no amortization
of oil and gas properties during the yer ended September 30, 2006.

NOTE 4 - DISCONTINUED OPERATIONS

In 2005 the company sold a 67.7%  interest in Freedom Home Inc and wrote off its
remaining  32.3%   investment  in  Freedom  because   management  is  unable  to
demonstrate  that its equity  interest  has any future  value.  Accordingly,  at
September 30, 2005 the Company recognized a gain from discontinued operations of
$108,890.

NOTE 5 - INCOME TAXES

The tax effects of temporary differences that give rise to deferred taxes are as
follows at September 30, 2006 and 2005:

                                                      2006            2005
                                                 ------------- ----------------

  Deferred tax assets:
    Net operating losses                           $   591,580   $      413,573
    Accrued wages                                            -           17,149
    Valuation allowance                               (591,480)        (430,722)
                                                 ------------- ----------------

  Total deferred tax assets                                100                -

  Deferred tax liabilities:
    Basis of property and
     equipment                                             100                -
                                                 ------------- ----------------

  Net deferred tax asset                           $         -   $            -
                                                 ============= ================

The Company has tax net  operating  loss  carryforwards  totaling  approximately
$1,740,000,  expiring in 2018  through  2026.  Approximately  $1,200,000  of net
operating  losses was  incurred  prior to  December  12, 2002 at which date MA&N
acquired 51% of the Company and are consequently  subject to certain  limitation
described in section 382 of


                                       40
<PAGE>


TX HOLDINGS, INC.
A CORPORATION IN THE DEVELOPMENT STAGE
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

NOTE 5 - INCOME TAXES, continued

the Internal  Revenue Code. The Company  estimates  that, due to the limitations
and expiration  dates,  only $424,000 of the net operating losses incurred prior
to December 12, 2002 will be available to offset future taxable income.

Net  operating  losses after  December 12, 2002 through  September 30, 2005 were
approximately  $1,316,000.  The  total net  operating  losses  available  to the
Company to offset future taxable income is approximately  $1,740,000.  Following
is a  reconciliation  of the tax  benefit at the federal  statutory  rate to the
amount reported in the statement of operations:

                                       2006                     2005
                               ----------------------- -------------------------
                                  Amount     Percent      Amount       Percent
                               ------------ ---------- ------------- -----------

  Benefit for income tax at
   federal
  statutory rate                $ 1,705,344         34%  $   115,906         34%
  Change in valuation allowance    (160,758)        (3)      (67,555)       (20)
  Non-taxable gain from
   discontinued
    operations                            -          -        37,022          11
  Non-deductible stock-based
    compensation                 (1,544,586)       (31)      (85,373)       (25)
                               ------------ ---------- ------------- -----------

                                $         -          -%  $         -          -%
                               ============ ========== ============= ===========

There were no income taxes due or receivable from operations for the years ended
September 30, 2006 and 2005, and the Company's reported benefit for income taxes
differs from the amount computed by applying  statutory tax rates to loss before
income taxes due to changes in the valuation  allowance for financial  reporting
purposes.

NOTE 6 - SEGMENT INFORMATION

As of September 30, 2006 the Company's only operation were in the oil and gas
operations.

NOTE 7 - STOCKHOLDERS' EQUITY

PREFERRED STOCK

In May 2006 an  employment  agreement  was  entered  into with Mr.  Neuhaus  the
president,  CEO and  chairman  of the Board.  The  agreement  provides  that Mr.
Neuhaus shall be  compensated  at the rate of $25,000 per month plus bonus based
on oil and gas production.  In addition the employment agreement provides to Mr.
Neuhaus 1,000 shares of preferred  stock.  The preferred stock has the following
rights and privileges:

     1.   Super voting rights:  The preferred stock has the right to vote on any
          item of business  submitted to the common  shareholders for a vote the
          equivalent number of votes  representing 50% of the outstanding common
          shares then issued by company.

     2.   No other rights: The preferred shares have no other rights,  including
          but not limited to no conversion  rights;  no dividend rights;  and no
          liquidation priority rights.

During the fiscal  year 2006,  Mr.  Neuhaus  waived  his  salary;  however,  the
preferred  stock he was issued was valued at $1,018,000 due to the fact that the
shares  give Mr.  Neuhaus  complete  control  over  every  decision  made by the
Company.


                                       41
<PAGE>


TX HOLDINGS, INC.
A CORPORATION IN THE DEVELOPMENT STAGE
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

NOTE 7 - STOCKHOLDERS' EQUITY, continued

COMMON STOCK

During the years ended  September 30, 2006 and 2005,  the Company  issued Common
stock to raise capital,  compensate  employees and professionals,  and to settle
liabilities. Following is a description of stock issuances in 2006 and 2005:

On May 11,  2005,  the  Company  issued  100,000  shares of common  stock of the
Company to Frank  Shafer.  The shares  were issued as payment of $12,000 in fees
for past and future  advisory  services  provided  to the Company in relation to
financial  aspects  of the  Company's  plans for  expansion,  acquisitions,  and
business opportunities. On April 18, 2006, June 9, 2006 and July 31, 2006, Frank
Shafer received additional shares of 100,000, 20,000 and 300,000,  respectively,
for his  services.  The shares  issued to Frank  Shafer  during the years  ended
September 30, 2006 and 2005 were valued at $338,400 and $12,000, respectively.

On July 1, 2005,  the Company  authorized  the issuance of 350,000  shares of TX
Holdings  common  stock to Ned  Baramov  for  services,  valued at  $28,000,  in
relation  to the  preparation  of  SEC  filings.  Mr.  Baramov's  role  included
assisting the Company in record keeping, accounting and data management.

On August 5, 2005,  461,942  shares of TX Holdings  common  stock were issued to
David R. Baker,  361,942  representing  settlement  of $36,194 of legal fees and
expenses of Haskell  Slaughter  Young & Rediker,  LLC that were due to Mr. Baker
(the issuance being 3,000 shares less than  required,  which  additional  shares
will be issued in due course) and 100,000  shares  representing  an  accountable
retainer valued at $10,000 for future services and expenses of Haskell Slaughter
Young & Rediker,  LLC in assisting  the Company  (through Mr. Baker) in bringing
all required SEC filings up to date. Mr. Baker is an accredited  investor.  Such
services exceeding $10,000 in value have been performed.

On October 19, 2005, the Company issued  2,000,000 shares of its common stock to
Darren Bloom as his compensation in the role of, CFO, Secretary - Treasurer. The
Company has filed suit against Mr. Bloom for the return of the shares for breach
of contract. The shares were issued pursuant to a three year employment contract
which Mr. Bloom only served for 9 months.

On February 22, 2006,  the company  issued 200,000 shares of common stock to The
Research Works for consulting services, valued at $70,000.

On March 1, 2006,  the Company  entered into a contract  with Global  Investment
Holdings, LLC ("Global"). Global acts as a consultant and provides advice in the
areas of paper-based stock and internet-based  stock information  publishers who
are in compliance  with the federal  securities  laws,  etc. For their services,
Global will receive 400,000  restricted  shares of common stock each month for a
period of six months  commencing March 1, 2006. The Company used the services of
Global for seven months in 2006 and issued Global a total of 1,600,000 shares in
2006 with a value of $1,300,000.  An additional  1,220,000 shares were issued to
Global subsequent to September 30, 2006, with a value of $830,000. The liability
for the services performed for which shares were not issued in 2006 is presented
as accrued stock-based compensation in the accompanying balance sheet.

On March 14, 2006, the company issued 400,000 shares of common stock to Security
Pacific Holdings LLC for consulting services, valued at $100,000.

During May 2006,  the Company  entered into a Private  Placement  Agreement with
Brill  Securities,  Inc. to act as a financial advisor for the private placement
of shares of common  stock of TX  Holdings.  Pursuant to the  Private  Placement
Memorandum  $1,240,000 of units were placed. The units contained an aggregate of
4,133,324  shares of the  Company's  common  stock and  4,133,324  common  stock
purchase  warrants.  Each common stock  purchase  warrant is  exercisable  for a
period  of two  years  at an  exercise  price of $.50 per  share.  The  purchase
warrants contain a call provision as follows:


                                       42
<PAGE>


TX HOLDINGS, INC.
A CORPORATION IN THE DEVELOPMENT STAGE
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

NOTE 7 - STOCKHOLDERS' EQUITY, continued

COMMON STOCK, continued

     The Warrants are  exercisable  for up to twenty-four  (24) months after the
     date of their  issuance.  The  Warrant  Exercise  Price of the  Warrants is
     subject to  adjustment  for stock splits,  combinations,  dividends and the
     like. The company may call this warrant at anytime after January 1, 2007 if
     the Stock  Price of the  Company  is  trading  above  $1.50 per share for a
     period of ten (10)  trading  days as quoted on the stock  quotation  system
     where the shares are regularly  traded.  If the Company chooses to call the
     Warrants,  then the Warrant holder shall have twenty (20) trading days from
     the day on which the Company  sets as the "Call Date" in which to surrender
     the  Warrant  with the  payment  pursuant to  paragraph  1.1 above.  If the
     Warrant  holder  fails to exercise  the Warrant  within the twenty (20) day
     period then the Warrant shall expire. Warrant holder shall be sent a notice
     of the Call by the  Company to the  address  that the Company has on record
     for the  Warrant  holder.  The Notice  shall be mailed at least 10 calendar
     days prior to the Call Date.'

In connection with the offering,  the Company paid a placement fee of $70,500 in
cash.  In addition,  the placing agent was issued  warrants to purchase  235,000
shares of common stock on the same terms and  conditions as the  investors.  The
net proceeds of the offering  will be used by the Company to purchase  necessary
equipment to upgrade,  replace, repair equipment on site at the fields we lease;
to search,  negotiate  and acquire  additional  oil and gas leases;  and general
corporate purposes.

On June 9, 2006,  the company  issued  17,900  shares of common stock to Michael
Pisani for  consulting  services in assisting with investor  relations  efforts,
valued at $18,079.

On June 9, 2006,  the Company  issued  11,400  shares of common  stock to Barker
Design Inc. for website design services valued at $11,514.

STOCK OPTIONS AND WARRANTS

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

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

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


                                       43
<PAGE>


TX HOLDINGS, INC.
A CORPORATION IN THE DEVELOPMENT STAGE
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

NOTE 7 - STOCKHOLDERS' EQUITY, continued

STOCK OPTIONS AND WARRANTS, continued

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

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

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

Following is a summary of  outstanding  stock warrants at September 30, 2006 and
2005 and activity during the years then ended:

                                         Number of      Exercise      Weighted
                                         Shares          Price     Average Price
                                     --------------- ------------- -------------

  Warrants at September 30, 2004             294,341  $       0.01  $       0.01

  Issued                                   1,434,082          0.15          0.15
                                    ----------------

  Warrants at September 30, 2005           1,728,423   0.01 - 0.15          0.13

  Issued                                   5,418,324   0.30 - 0.50          0.46
  Exercised                                 (294,341)         0.01          0.01
                                    ----------------

  Warrants at September 30, 2006           6,852,406  $0.15 - 0.50  $       0.40
                                    ================

A summary of outstanding warrants at September 30, 2006, follows:

                                                                   Contractual
                                       Number of      Exercise    Remaining Life
         Expiration Date                Shares         Price         (Years)
  ------------------------------     ------------- -------------- --------------

  March 2007                               800,000   $       0.30            0.5
  October 2008                           4,368,324           0.50            2.0
  March 2010                               250,000           0.30            3.5
  December 2010                          1,434,082           0.15            4.3
                                    --------------

  Warrants at September 30, 2006         6,852,406
                                    ==============


                                       44
<PAGE>


TX HOLDINGS, INC.
A CORPORATION IN THE DEVELOPMENT STAGE
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

NOTE 8 - RELATED PARTY TRANSACTIONS

Mark Neuhas,  Chairman of the Board of Directors and Chief Executive  Officer of
the Company and entities he controls  have  provided  much of the support of the
Company in the  development  stage.  As described in Note 7, the Company  issued
preferred  stock  to Mr.  Neuhaus  in 2007  and that  preferred  stock  includes
provisions that give Mr. Neuhaus voting control over the actions of the Company.

Included in the financial statements at September 30, 2006 and 2005 are advances
from stockholders and officers of $164,385 and $214,697, respectively.  Interest
has been accrued on these  advances at rates  ranging from 8% to 10% in 2006 and
substantially  all interest expense in the accompanying  statement of operations
relates to those advances.

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

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

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

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

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

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

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

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

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


                                       45
<PAGE>


TX HOLDINGS, INC.
A CORPORATION IN THE DEVELOPMENT STAGE
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

Item 8A Controls and Procedures

Evaluation of Disclosure Controls and Procedures

TX Holdings, Inc.'s Chief Executive Officer and Chief Financial Officer
performed an evaluation of the Company's disclosure controls and procedures.
Disclosure controls and procedures include, without limitation, controls and
procedures designed to ensure that information required to be disclosed by an
issuer in the reports that it files or submits under the Securities Exchange Act
of 1934 is accumulated and communicated to the issuer's management, including
its Chief Executive Officer and Chief Financial Officer, as appropriate to allow
timely decisions regarding required disclosure. Based on this evaluation, the
Chief Executive Officer and Chief Financial Officer have concluded that the
Company's disclosure controls and procedures are effective as of September 30,
2006.


Changes in Internal Control over Financial Reporting

A material weakness is a control deficiency, or combination of control
deficiencies, that results in more than a remote likelihood that a material
misstatement of the annual or interim financial statements will not be prevented
or detected.

Since the assessments of September 30, 2006, the Company has instituted
significant changes in the control over the expense accounts of the Company.
These changes include the following controls:

     1.   All  obligations  that are paid are subject to review by the President
          and the Director of Finance;
     2.   The  President  of the  Company  signs each  check or other  financial
          instrument;
     3.   Copies of each check are  maintained  and  attached to each invoice or
          funds request;
     4.   The President and the Director of Finance  review all bank  statements
          on a monthly basis;
     5.   Each bank account and the stock  accounts are  reconciled on a monthly
          basis;
     6.   All of the financial records are maintained in the Company's  business
          office;
     7.   The Company has hired as the Director of Finance, Jose Fuentes, who is
          a Certified Public Account;
     8.   The Company has hired a Company to oversee  all  accounting,  payments
          and operations for its Texas oil and gas operations;
     9.   The Chief Financial Officer reviews all accounts on a regular basis.

Item 8B Other Information

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

Mr.  Neuhaus is  alleged to have  violated  Sections  5(b) and (c) and  Sections
17(a)(1),  (2) and (3) of the  Securities  Act of 1933 and Section  10(b) of the
Securities  Exchange Act of 1934 and Rule 10b-5  thereunder.  Mr. Neuhaus denies
violation  of any  applicable  law in  connection  with his resale of  Universal
common stock.  On February 21, 2007 the United States  District  Court  Southern
District of New York granted a motion for summary  judgment  against Mr. Neuhaus
as to Section 5 liability only. The summary judgment motion was denied as to all
other issues  pending  against Mr.  Neuhaus.  The Company  believes  there is no
connection  between the Company and Universal other than Mr.  Neuhaus'  position
with the Company and the fact that Mr. Neuhaus was a consultant to Universal and
received and resold shares of its common stock.


                                       46
<PAGE>



                                    PART III


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

The following  table shows the names,  ages and positions  held by our executive
officers, directors and significant employees at February 23, 2007:

Name                    Age  Position
----------------------- ---- ----------------------------------------------
Mark Neuhaus            52   Chairman of the Board of Directors and
                             President (Chief Executive Officer)

Michael A. Cederstrom   54   Interim Chief Financial Officer

W.A. Alexander          70   Chief Operating Officer

Jose Fuentes            59   Vice President of Finance

Bobby S. Fellers        57   Director

Douglas C. Hewitt       49   Director

Business Experience of Executive Officers and Directors

Mark S. Neuhaus, Chairman of the Board of Directors and Chief Executive Officer

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

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

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

Jose Fuentes, Vice President of Finance - Mr. Fuentes has over thirty-five years
of financial related  experience in the energy sector. The majority of his early
career,  after leaving public  accounting,  was spent at Atlantic Richfield Co.,
where he held several  progressive  financial  roles  including  his most recent
position as Vice President of Finance,  Planning and Control for Arco Indonesia.
From  there,  Mr.  Fuentes  served as Vice  President  of Finance and CFO at PJM
Interconnection,  LLC.  Mr.  Fuentes  received a Bachelor  of Science  degree in
accounting  from Saint John's  University in New York and is a Certified  Public
Accountant.

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


                                       47
<PAGE>


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

Term of Office

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

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

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

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

Audit Committee

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

Compliance with Section 16(a)

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

Code of Ethics

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

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


                                       48
<PAGE>


Item 10 Executive Compensation

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

                           SUMMARY COMPENSATION TABLE
                           --------------------------
<TABLE>
<CAPTION>
                                                                                       Long Term Compensation
----------------------------  --------------------------------------------- --------------------------------------------
                                           Annual Compensation                      Awards                Payouts
----------------------------  --------------------------------------------- ----------------------- --------------------
                                                                                         Securities
                                                                  Other      Restricted    Under-
          Name And                                                Annual       Stock       Lying     LTIP    All Other
         Principal                        Salary       Bonus   Compensation Compensation  Options/  Payouts Compensation
          Position              Year        ($)         ($)        ($)          ($)       SARs (#)    ($)       ($)
---------------------------- --------- ------------- --------- ------------ ------------ ---------- ------- ------------

---------------------------- --------- ------------- --------- ------------ ------------ ---------- ------- ------------
Mark Neuhaus, Chief             2006        -0-         -0-        -0-          N/A         N/A       N/A       (1)
<S>                             <C>          <C>         <C>        <C>     <C>          <C>        <C>     <C>
 Executive Officer and          2005        -0-         -0-        -0-          N/A         N/A       N/A       N/A
 Chairman                       2004        -0-         -0-        -0-          N/A         N/A       N/A       N/A
---------------------------- --------- ------------- --------- ------------ ------------ ---------- ------- ------------
</TABLE>

(1)  During the year ended September 30, 2007, Mr. Neuhaus received 1,000 shares
     of preferred stock.  The stock is non convertible,  but provides for 50% of
     the voting rights in the Company.

The  preceding  table does not include any  amounts for  non-cash  compensation,
including  personal  benefits,  paid to any of the foregoing officers during the
periods  covered  herein.  The Company  believes that the value of such non-cash
benefits and compensation  paid during the periods  presented did not exceed the
lesser of $50,000 or 10% of the annual salary reported for them.

Equity Compensation Plan Information - Employment Agreements

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

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

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

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


                                       49
<PAGE>


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

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

Option Warrant Grants During 2006 Fiscal Year

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

<TABLE>
<CAPTION>
<S>                               <C>                             <C>             <C>
Name                 No. of Securities    % of Total Options Granted   Exercise Price
Expiration Date      Underlying Options      to Employees in Fiscal         ($/Sh)
                         Granted (#)
------------------- --------------------- ---------------------------- ----------------
W.A. Alexander
March 27, 2010                    250,000                         23.8            $0.30
Michael A.
 Cederstrom
March 27, 2010                    200,000                         19.0            $0.30
Bobby S. Fellers
March 27, 2010                    300,000                         28.6            $0.30
Douglas C. Hewitt
March 27, 2010                    300,000                         28.6            $0.30
</TABLE>

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


                                       50
<PAGE>


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

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

<TABLE>
<CAPTION>

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

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

</TABLE>


                                       51
<PAGE>



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

The  following  table  sets  forth  information,  to the  best of the  Company's
knowledge,  as of January 22, 2007 with respect beneficially  ownership (as such
term is defined in Item 403 of Regulation S-B under the Securities  Exchange Act
of 1934) of the  outstanding TX Holdings  common stock by (i) each person to own
more than 5%, (ii) each director, each executive officer and (iii) all directors
and officers as a group.

Name of Beneficial Owner (1)                    Amount and Nature of Beneficial
Percent of Class                                                       Ownership
-------------------------------------------- -----------------------------------
Mark Neuhaus
19.7%                                                              7,662,626 (3)
Darren Bloom
7.4%                                                                   2,000,000
Nicole B. Neuhaus
8.6%                                                               4,647,626 (4)
MA&N LLC
17.2%                                                                  4,647,626
David R. Baker
6.0%                                                               1,632,669 (5)
Ned Baramov
3.5%                                                                     940,000
Michael A. Cederstrom*                                               200,000 (6)
Bobby S. Fellers                                                     300,000 (6)
Douglas C. Hewitt                                                    300,000 (6)
W.A. Alexander                                                       250,000 (6)

All Directors and executive officers (5 persons)                       8,712,626

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

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

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

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

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

     (5)  Represents  915,625  shares  owned by Mr.  Baker  and  717,044  shares
          subject to warrants currently exercisable.


                                       52
<PAGE>


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

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


Item 12 Certain Relationships and Related Transactions

Particular Transactions

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

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

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

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

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

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

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

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


                                       53
<PAGE>


     (8)  On February  19,  2003,  the Company  issued  1,500,000  shares of the
          Company's  Common  Stock to Ned  Baramov,  Secretary - Treasurer  (SEE
          EXHIBIT 99.). The shares represent  $75,000 of stock  compensation for
          2003, and were registered  under an S-8  Registration  Statement under
          the Securities Act of 1933.

Controlling Persons

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

Item 13 Exhibits and Reports on Form 8-K

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


                                       54
<PAGE>


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

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

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

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

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

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

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

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

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

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

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

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

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

Reports on Form 8-K

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

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

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


                                       55
<PAGE>


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

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

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

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

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

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

Hiring of Jose Fuentes as Vice  President-Finance  of TX Holdings,  Inc.;  filed
with the Security and Exchange Commission on February 2, 2007.

Item 14 Principal Accountants Fees and Service

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

                                                2006          2005
                                     ------------------- --------

Audit Fees                            $      30,000  $      20,000
Audit-Related Fees
Total Audit and Audit-Related Fees

Tax Fees
All Other Fees
Total


                                       56
<PAGE>



                                   SIGNATURES

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

                                            TX HOLDINGS, INC.


                                            By: /s/ William "Buck" Shrewsbury
                                                    William "Buck Shrewsbury
                                                    Chief Executive Officer

Dated: March 19, 2008


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

      /s/ William "Buck" Shewsbury      Chairman of the Board of Directors and
      -------------------------         Chief Executive Officer
      William "Buck" Shrewsbury
      March 19, 2008

      /s/ Rob Hutchings                 President
      -------------------------
      Rob Hutchings
      March 19, 2008

      /s/ Michael A. Cederstrom         Chief Financial Officer
      -------------------------
      Michael A. Cederstrom
      March 19, 2008

      /s/ Bobby S. Fellers              Director
      -------------------------
      Bobby S. Fellers
      March 19, 2008

      /s/ Martin Lipper                 Director
      -------------------------
      Martin Lipper
      March 19, 2008


                                       57