**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**







**FORM
      10-QSB**




(Mark
                One)R
            **QUARTERLY
                REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES**
              **EXCHANGE
                ACT OF 1934****For
                the quarterly period ended June 30, 2006****Or**£
            **TRANSITION
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                SECURITIES**
              **EXCHANGE
                ACT OF 1934****For
                the transition period
                from           
                to**










**TXP
      CORPORATION**


**(F/K/A
      YTXP Corporation)**


(Exact
      name of small business issuer as specified in its charter)




**Nevada**
            **88-0443110**(State
                or other jurisdiction of
              incorporation
                or organization)
            (I.R.S.
                Employer
              Identification
                No.)**1299
                Commerce Drive**
              **Richardson,
                Texas**
            **75081**(Address
                of principal
              executive
                offices)
            (Zip
                Code)





Check
      whether the issuer 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 issuer was required to file such reports), and (2) has been subject
      to
      the filing requirements for the past 90 days. Yes x No o




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




**APPLICABLE
      ONLY TO CORPORATE ISSUERS**




The
      number of shares issued and outstanding of the registrant’s common stock, par
      value $.001 per share, as of August
      2,
      2006 was
      96,919,372 shares.




Transitional
      Small Business Disclosure Format (Check one): Yes o No x












**TXP
      CORPORATION**




**June
      30, 2006 FORM 10-QSB QUARTERLY REPORT**




**INDEX**




PagePART
                I
            F-1Item
                1.**-**Financial
                Statements
            F-1Item
                2 - Management’s Discussion and Analysis or Plan of
                Operation
            1Item
                3 - Controls and Procedures
            14PART
                II
            15Item
                1 - Legal Proceedings.
            15Item
                2 - Unregistered Sales of Equity Securities and Use of
                Proceeds
            15Item
                3 - Default Upon Senior Securities
            15Item
                4 - Submission of Matters to a Vote of Security Holders
            15Item
                5 - Other Information
            15Item
                6 - Exhibits.
            16










**PART
      I**




**Item
      1.**  **Financial Information**





TXP
      CORPORATION


CONSOLIDATED
      BALANCE SHEETS


June
      30,
      2006 and December 31, 2005




**2006(unaudited)**
              
              **2005**ASSETSCurrent
                  assetsCash
              
              $
              205,000
              
              $
              342,000Accounts
                  receivable, net of allowance of $7,400
              
              
              1,248,000
              
              
              695,000Inventory
              
              
              217,000
              
              
              118,000Other
                  assets
              
              
              111,000
              
              
              79,000Total
                  current assets
              
              
              1,781,000
              
              
              1,234,000Property
                  and equipment, net
              
              
              967,000
              
              
              914,000Deferred
                  offering costs
              
              
              697,000
              
              
              688,000Other
                  assets
              
              
              26,000
              
              
              25,000TOTAL
                  ASSETS
              
              $
              3,471,000
              
              $
              2,861,000LIABILITIES
                  AND STOCKHOLDERS' DEFICITCurrent
                  liabilitiesCurrent
                  maturities of notes payable
              
              $
              237,000
              
              $
              143,000Current
                  capital lease obligation
              
              
              43,000
              
              
              19,000Line
                  of credit
              
              
              400,000
              
              
              250,000Accounts
                  payable
              
              
              506,000
              
              
              477,000Accrued
                  expenses
              
              
              323,000
              
              
              174,000Total
                  current liabilities
              
              
              1,509,000
              
              
              1,063,000Notes
                  payable, net of current maturities
              
              
              —
              
              
              15,000Capital
                  lease obligation, net of current obligation
              
              
              56,000
              
              
              33,000Convertible
                    debentures, net unamortized discount of $2,106,000 and $163,000 as of
                    June 30,2006 andDecember 31, 2005,
                    respectively.
              
              
              276,000
              
              
              2,187,000Derivative
                  financial instruments
              
              
              6,238,000
              
              
              —Deferred
                  tax liability
              
              
              48,000
              
              
              48,000TOTAL
                  LIABILITIES
              
              
              8,127,000
              
              
              3,346,000STOCKHOLDERS'
                  DEFICIT:Common
                  stock, $.001 par value, 300,000,000 shares authorized, 96,919,372
                  and
                  94,295,715 shares issued and outstanding as of June 30, 2006 and
                  December
                  31, 2005, respectively.
              
              
              97,000
              
              
              94,000Additional
                  paid in capital
              
              
              136,000
              
              
              12,000Retained
                  earnings
              
              
              (4,896,000
              )
              
              (598,000
              )Accumulated
                  other comprehensive income
              
              
              7,000
              
              
              7,000TOTAL
                  STOCKHOLDERS' DEFICIT
              
              
              (4,656,000
              )
              
              (485,000
              )TOTAL
                  LIABILITIES AND STOCKHOLDERS' DEFICIT
              
              $
              3,471,000
              
              $
              2,861,000




The
      accompanying notes are an integral part of the consolidated
      financial


statements.


F-1


TXP
      CORPORATION


CONSOLIDATED
      STATEMENTS OF OPERATIONS


Three
      Months and Six Months Ended June 30, 2006 and 2005 (unaudited)





**Three
                  Months Ended June 30**
              
              **Six
                  Months Ended June 30******
              
              **2006**
                **(unaudited)**
              
              **2005**
                **(unaudited)**
              
              **2006**
                **(unaudited)**
              
              **2005**
                **(unaudited)**RevenuesPrototyping
                  and assembly
              
              $
              1,383,000
              
              $
              790,000
              
              $
              2,255,000
              
              $
              1,309,000Material
                  management services
              
              
              557,000
              
              
              656,000
              
              
              1,187,000
              
              
              1,248,000Total
                  Revenues
              
              
              1,940,000
              
              
              1,446,000
              
              
              3,442,000
              
              
              2,557,000Cost
                  of sales
              
              
              1,172,000
              
              
              934,000
              
              
              2,215,000
              
              
              1,707,000Gross
                  profit
              
              
              768,000
              
              
              512,000
              
              
              1,227,000
              
              
              850,000Costs
                  and expensesSelling,
                  general & administrative
              
              
              725,000
              
              
              540,000
              
              
              1,317,000
              
              
              1,169,000Depreciation
              
              
              22,000
              
              
              15,000
              
              
              42,000
              
              
              26,000Total
                  costs and expenses
              
              
              747,000
              
              
              555,000
              
              
              1,359,000
              
              
              1,195,000Operating
                  income (loss)
              
              
              21,000
              
              
              (43,000
              )
              
              (132,000
              )
              
              (345,000
              )Interest
                  expense, net
              
              
              (271,000
              )
              
              (45,000
              )
              
              (326,000
              )
              
              (82,000
              )Change
                  in fair value of derivativefinancial
                  instruments
              
              
              (4,323,000
              )
              
              —
              
              
              (4,323,000
              )
              
              —Gain on
                  early extinguishment of debt
              
              
              465,000
              
              
              —
              
              
              465,000
              
              
              —Gain
                  on sale of fixed assets
              
              
              —
              
              
              —
              
              
              18,000
              
              
              —Loss
                  before income taxes
              
              
              (4,108,000
              )
              
              (88,000
              )
              
              (4,298,000
              )
              
              (427,000
              )Deferred
                  tax expense
              
              
              —
              
              
              —
              
              
              —
              
              
              —Net
                  loss
              
              
              (4,108,000
              )
              
              (88,000
              )
              
              (4,298,000
              )
              
              (427,000
              )Foreign
                  currency translationadjustment
              
              
              —
              
              
              —
              
              
              —
              
              
              1,000Comprehensive
                  loss
              
              $
              (4,108,000
              )
              $
              (88,000
              )
              $
              (4,298,000
              )
              $
              (426,000
              )Earnings
                  per share basic and diluted
              
              
              (.04
              )
              
              (—
              )
              
              (.05
              )
              
              (—
              )Weighted
                  average shares outstanding:basic
                  and diluted
              
              
              94,933,680
              
              
              94,295,715
              
              
              94,616,460
              
              
              94,295,715




The
      accompanying notes are an integral part of the consolidated
      financial


statements.


F-2





TXP
      COPORATION


CONSOLIDATED
      STATEMENTS OF CASH FLOWS


Six
      Months Ended June 30, 2006 and 2005(unaudited)





**2006**
                **(unaudited)**
              ****
              **2005**
                **(unaudited)**CASH
                  FLOWS FROM OPERATING ACTIVITIESNet
                  loss
              
              $
              (4,298,000
              )
              $
              (427,000
              )Adjustments
                  to reconcile net loss to cash used in operating
                  activities:Depreciation
              
              
              123,000
              
              
              102,000Gain
                  on sale of fixed assets
              
              
              (18,000
              )
              
              —Amortization
                  of discount on convertible notes
              
              
              248,000
              
              
              35,000Gain on
                  extinguishment of debt
              
              
              (465,000
              )
              
              —Stock
                  compensation
              
              
              —
              
              
              45,000Changes
                  in assets and liabilities:Accounts
                  receivable
              
              
              (553,000
              )
              
              (831,000
              )Inventory
              
              
              (99,000
              )
              
              (3,557,000
              )Other
                  current assets
              
              
              (32,000
              )
              
              (86,000
              )Deferred
                  offering costs
              
              
              (9,000
              )
              
              (60,000
              )Other
                  assets
              
              
              (1,000
              )
              
              124,000Accounts
                  payable
              
              
              29,000
              
              
              2,656,000Accrued
                  expenses
              
              
              17,000
              
              
              86,000Change
                  in fair value of derivative financial instruments
              
              
              4,323,000
              
              
              —Deferred
                  revenue
              
              
              —
              
              
              1,501,000CASH
                  FLOWS USED IN OPERATING ACTIVITIES
              
              
              (735,000
              )
              
              (412,000
              )CASH
                  FLOWS USED INVESTING ACTIVITIESCapital
                  expenditures
              
              
              (155,000
              )
              
              (340,000
              )Proceeds
                  from sale of fixed assets
              
              
              60,000
              
              
              —CASH
                  FLOWS USED IN INVESTING ACTIVITIES
              
              
              (95,000
              )
              
              (340,000
              )CASH
                  FLOWS FROM FINANCING ACTIVITIESProceeds
                  from convertible debenture
              
              
              480,000
              
              
              485,000Line
                  of credit, net
              
              
              150,000
              
              
              —Proceeds
                  from notes payable
              
              
              150,000
              
              
              34,000Repayment
                  of notes payable and capital lease obligation
              
              
              (87,000
              )
              
              (74,000
              )CASH
                  FLOWS FROM FINANCING ACTIVITIES
              
              
              693,000
              
              
              445,000Effect
                  of currency translation on cash balances
              
              
              —
              
              
              1,000NET
                  DECREASE IN CASH
              
              
              (137,000
              )
              
              (306,000
              )Cash,
                  beginning of period
              
              
              342,000
              
              
              649,000Cash,
                  end of period
              
              $
              205,000
              
              $
              343,000




The
      accompanying notes are an integral part of the consolidated
      financial


statements.


F-3





TXP
      COPORATION


CONSOLIDATED
      STATEMENTS OF CASH FLOWS -continued


Six
      Months Ended June 30, 2006 and 2005 (unaudited)





**SUPPLEMENTAL
      DISCLOSURE OF CASH AND NONCASH INVESTING AND FINANCING ACTIVITIES
      (unaudited):**





**2006**
                **(unaudited)**
              
              **2005**
                **(unaudited)****Cash**Interest
                  paid
              
              $
              21,000
              
              $
              16,000**NONCASH
                  INVESTING AND FINANCING ACTIVITIES**1,700,000
                  shares issued to extinguish debt
              
              $
              684,000
              
              $
              —Liabilities
                  assumed upon merger
              
              $
              744,000
              
              $
              —923,657
                  shares issued on conversion of debt
              
              $
              145,000
              
              $
              —Property
                  acquired under capital lease obligations
              
              $
              63,000
              
              $
              62,000Modification
                  of debt treated as extinguishment and new debt
              
              $
              619,000
              
              $
              —




The
      accompanying notes are an integral part of the consolidated
      financial


statements.


F-4


TXP
      CORPORATION


STATEMENTS
      OF STOCKHOLDERS' DEFICIT


Six
      Months Ending June 30, 2006 (unaudited)




**Common
                  Stock**
              
              **Additional**
                **paid
                  in**
                **capital**
              
              **Retained**
                **earnings**
                **(deficit)**
              
              **Accumulated**
                **other**
                **comprehensive**
                **income**
              
              **Total****Shares**
              
              **Amount**Balance,
                  December 31, 2005
              
              
              221,054,400
              
              $
              221,000
              
              $
              (115,000
              )
              $
              (598,000
              )
              $
              7,000
              
              $
              (485,000
              )**Retroactive
                  restatement due to recapitalization **(See
                  Note 3):****Exchange
                  and cancellation of Texas Prototypes, Inc, shares
              
              
              (221,054,400
              )
              
              (221,000
              )
              
              221,000
              
              
              —
              
              
              —
              
              
              —Issuance
                  of YTXP shares to Texas Prototypes shareholders
              
              
              89,298,042
              
              
              89,000
              
              
              (89,000
              )
              
              —
              
              
              —
              
              
              —Addition
                  of YTXP shares
              
              
              4,997,673
              
              
              5,000
              
              
              (5,000
              )
              
              —
              
              
              —
              
              
              —**Balance,
                  December 31, 2005 retroactively restated**
              
              
              94,295,715
              
              $
              94,000
              
              $
              12,000
              
              $
              (598,000
              )
              $
              7,000
              
              $
              (485,000
              )Liabilities
                  assumed upon merger
              
              
              —
              
              
              —
              
              
              (744,000
              )
              
              —
              
              
              —
              
              
              (744,000
              )Net
                  Loss
              
              
              —
              
              
              —
              
              
              —
              
              
              (4,298,000
              )
              
              —
              
              
              (4,298,000
              )Issuance
                  of shares to extinguish debt
              
              
              1,700,000
              
              
              2,000
              
              
              848,000
              
              
              —
              
              
              —
              
              
              850,000Shares
                  issued in conversion of debentures
              
              
              923,657
              
              
              1,000
              
              
              144,000
              
              
              —
              
              
              —
              
              
              145,000Unamortized
                  debt discount charged to APIC on conversion of debentures
              
              
              —
              
              
              —
              
              
              (124,000
              )
              
              —
              
              
              —
              
              
              (124,000
              )Balance,
                  June 30, 2006
              
              
              96,919,372
              
              $
              97,000
              
              $
              136,000
              
              $
              (4,896,000
              )
              $
              7,000
              
              $
              (4,656,000
              )




The
      accompanying notes are an integral part of the consolidated
      financial


statements.


F-5





TXP
      CORPORATION


NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS




**NOTE
      1 - BASIS OF PRESENTATION**





The
      accompanying unaudited interim financial statements of TXP Corporation ("TXP")
      have been prepared in accordance with accounting principles generally accepted
      in the United States of America and the rules of the Securities and Exchange
      Commission ("SEC"), and should be read in conjunction with the audited financial
      statements and notes included in the 8-K/A filed May 4, 2006. In the opinion
      of
      management, all adjustments, consisting of normal recurring adjustments,
      necessary for a fair presentation of financial position and the results of
      operations for the interim periods presented have been reflected herein. The
      results of operations for interim periods are not necessarily indicative of
      the
      results to be expected for the full year. Notes to the financial statements,
      which would substantially duplicate the disclosure contained in the audited
      financial statements for the most recent fiscal year 2005 as reported in the
      8-K/A filed May 4, 2006, have been omitted.





**NOTE
      2 - ORGANIZATION**





TXP
      specializes in quick-turn complex circuit card assemblies and optoelectronic
      prototyping, new product introduction, and pilot production of electronic
      assemblies for Technology Innovators and Original Equipment Manufacturers (OEM)
      and Contract Manufacturers (CM) in the United States of America. The company
      is
      located in a 31,000 square-foot high-tech facility, located in Richardson,
      Texas.





The
      Company was originally formed in Nevada in June of 1994 under the name Cyber
      Synergy, Inc. to develop stock market related software applications. The
      Corporate name has changed several times to date including in November 1999
      to
“Jesse Livemore.com” and in December 2001 to “Stock Market Solutions, Inc.” and
      in April of 2006 to “YTXP Corporation”. On April 28, 2006, the merger between
      YTXP and its wholly owned subsidiary was consummated with Texas Prototypes,
      Inc
      - a private company. The transaction was treated as a recapitalization of Texas
      Prototypes, Inc with Texas Prototypes, Inc treated as the accounting acquirer
      and continuing reporting entity. A change of control was deemed to have occurred
      as a result of the transaction. In June of 2006, the articles of incorporation
      were amended and the Company’s name was changed to TXP Corporation (See NOTE 3
      Merger and Recapitalization).





**NOTE
      3 - ACCOUNTING POLICIES**





***Merger
      and Recapitalization***





On
      June
      14, 2005 Stock Market Solutions, Inc. and its wholly owned subsidiary entered
      into a definitive Agreement and Plan of Merger “Agreement” with Texas
      Prototypes, Inc.





On
      April
      28, 2006, YTXP Corporation (f/k/a Stock Market Solutions, Inc.) issued
      89,248,902 shares or 94.7% of the issued and outstanding shares to the
      shareholders of Texas Prototypes, Inc. and acquired all of the outstanding
      shares of Texas Prototypes, Inc. As contemplated with the agreement and
      concurrent with closing of the transaction, all directors and officers of YTXP
      resigned and were replaced by appointees of the current shareholders of YTXP.
      A
      change of control was deemed to have occurred as a result of the merger. For
      accounting purposes, the acquisition has been treated as recapitalization of
      Texas Prototypes, Inc. with Texas Prototypes, Inc. as the acquirer and as the
      continuing reporting entity. Accordingly, financial statements filed for
      post-merger periods will depict the acquisition of YTXP by the accounting
      acquirer and will include financial statements of the accounting acquirer for
      the pre-merger comparable periods. As of April 28, 2006, the Company completed
      a
      recapitalization transaction which resulted in new common shares outstanding
      of
      94,295,715, after giving effect of cancellation of shares in the transaction
      and
      reissuance per the related merger agreement. As required by accounting guidance,
      authorized shares, issued and outstanding shares and per share amounts have
      been
      retroactively restated throughout these consolidated financial statements and
      the accompanying notes.





After
      closing the Merger on April 28, 2006, the YTXP began operating a business model
      focused solely on the pre-manufacturing services segment of the electronics
      industry supporting original equipment manufacturers, original design
      manufacturers, contract manufacturers and new technology innovators. YTXP has
      ceased all pre-merger operations. In June of 2006, the articles of incorporation
      were amended and the name of the Company was changed to TXP
      Corporation.





***Consolidation***





As
      of
      June 30, 2006, TXP had one wholly owned subsidiary, TXP-Asia. All material
      inter-company balances and inter-company transactions have been
      eliminated.





***Basis
      of Accounting***





TXP
      maintains its accounts on the accrual method of accounting in accordance with
      accounting principles generally accepted in the United States of
      America.


F-6




***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 the reported amounts of assets and
      liabilities at the date of the balance sheet. Actual results could differ from
      those estimates.





***Foreign
      Currency Translation***





Pursuant
      to Statement of Financial Accounting Standards ("SFAS") No. 52, Foreign Currency
      Translation, TXP's investment in TXP- Asia translates all assets and liabilities
      at the respective period-end currency exchange rates and revenues and expenses
      at an average currency exchange rate for the period. The resulting translation
      adjustments are accumulated as a separate component of shareholders'
      equity.





***Cash
      and Cash Equivalents***





TXP
      considers all highly liquid debt instruments and other short- term investments
      with an initial maturity of three months or less to be cash or cash equivalents.
      TXP maintains cash and cash equivalents with a financial institution that
      periodically exceed the limit of insurability under Federal Deposit Insurance
      Corporation. At June 30, 2006 and December 31, 2005, the cash balance exceeded
      the insured limits by $105,000 and $242,000, respectively.





***Allowance
      for Doubtful Accounts***





Earnings
      are charged with a provision for doubtful accounts based on a current review
      of
      collectibility of accounts receivable. Accounts deemed uncollectible are applied
      against the allowance for doubtful accounts.





***Inventory***





Inventory
      is valued at the lower of cost or market. Cost is determined by using the
      average cost method. Inventory consists primarily of direct raw material costs
      related to customer prototyping and assembly projects. In November 2004 the
      Financial Accounting Standards Board ("FASB") issued Statement of Financial
      Accounting Standards No. 151, "Inventory Costs-an amendment of ARB No. 43,
      Chapter 4" ("SFAS 151"). SFAS 151 amends the guidance in ARB No. 43, Chapter
      4,
      "Inventory Pricing," to clarify the accounting for abnormal amounts of idle
      facility expense, freight, handling costs and wasted material (spoilage). Among
      other provisions, the new rule requires that items such as idle facility
      expense, excessive spoilage, double freight and rehandling costs be recognized
      as current-period charges regardless of whether they meet the criterion of
      "so
      abnormal" as stated in ARB No. 43. Additionally, SFAS 151 requires that the
      allocation of fixed production overheads to the costs of conversion be based
      on
      the normal capacity of the production facilities. SFAS 151 is effective for
      fiscal years beginning after June 15, 2005. As of January 1, 2006, the Company
      adopted SFAS 151. The adoption did not have a material impact on the Company's
      consolidated financial condition and results of operations.





***Deferred
      Offering Costs***





Deferred
      Offering Costs are costs incurred by TXP related to entering into the
      $15,000,000 Standby Equity Distribution Agreement (See Note 8 of Financial
      Statements). These costs consist of related legal, accounting, and commitment
      fees and will be netted ratably with the proceeds from the issuance and sale
      of
      common stock under the Standby Equity Distribution Agreement. In the event,
      TXP
      does not issue and sell the entire amount of $15,000,000 of common stock under
      the stock equity distribution by the end of the two-year term, the
      remaining


deferred
      offering cost will be expensed.





***Property
      and Equipment***





Property
      and equipment are stated at cost less accumulated depreciation. Major renewals
      and improvements are capitalized; minor replacements, maintenance and repairs
      are charged to current operations. Depreciation is computed by applying the
      straight-line method over the estimated useful lives, which are generally three
      to seven years.


F-7


***Accounting
      for Convertible Debentures, Warrants and Derivative
      Instruments***





The
      Company accounts for its embedded conversion features and freestanding warrants
      pursuant to SFAS No. 133, "Accounting for Derivative Instruments and Hedging
      Activities", and EITF 00-19, “Accounting for Derivative Financial Instruments
      Indexed to and Potentially Settled in, a Company’s Own Stock,” (“EITF 00-19”)
      which requires freestanding contracts that are settled in a company’s own stock,
      including common stock warrants, to be designated as an equity instrument,
      asset
      or a liability. Under the provisions of EITF 00-19, a contract designated as
      an
      asset or a liability must be carried at fair value on a company’s balance sheet,
      with any changes in fair value recorded in the company’s results of operations.
      In accordance with EITF 00-19, certain warrants to purchase common stock and
      embedded conversion options are accounted for as liabilities at fair value
      and
      the unrealized changes in the values of these derivatives are recorded in our
      consolidated statement of operations as “Changes in Fair Value of Derivative
      Financial Instruments”. The recognition of derivative liabilities is applied
      first to the proceeds of such issuance, at the date of issuance, and the excess
      of derivative liabilities over the proceeds is recognized in our consolidated
      statement of operations as “Changes in Fair Value of Derivative Financial
      Instruments.”





We
      use
      the Black Scholes Pricing Model to determine fair values of our derivatives.
      Valuations derived from this model are subject to ongoing internal and external
      verification and review. The model uses market-sourced inputs such as interest
      rates, exchange rates and option volatilities. Selection of these inputs
      involves management’s judgment and may impact net income. The fair value of the
      derivative liabilities are subject to the changes in the trading value of the
      Company’s common stock. As a result, the TXP’s financial statements may
      fluctuate from quarter-to-quarter based on factors, such as the price of the
      Company’s stock at the balance sheet date, the amount of shares converted by
      note holders and/or exercised by warrant holders. Consequently, our financial
      position and results of operations may vary from quarter-to-quarter based on
      conditions other than our operating revenues and expenses.





We
      have
      penalty provisions in the registration rights agreements of our debentures
      and
      warrants that require us to file the Registration Statement no later than 45
      days from the date of closing and to use its best efforts to cause the
      Registration Statement to be declared effective no later than 120 days after
      filing and to insure that the registration statement remains in effect until
      all
      of the shares of common stock issuable upon conversion of the Debentures and
      exercise of the Warrants have been sold. In the event of a default of its
      obligations under the Registration Rights Agreements, including its agreement
      to
      file the Registration Statement with the Securities and Exchange Commission
      no
      later than 45 days from the date of closing, or if the Registration Statement
      is
      not declared effective within 120 days of filing, it is required that we pay
      to
      Cornell, as liquidated damages, for each month that the registration statement
      has not been filed or declared effective, as the case may be, either a cash
      amount or shares of our common stock equal to 2% of the liquidated value of
      the
      debentures. The Company obtained a waiver from Cornell Capital extending the
      deadline for filing of the registration statement until August 31, 2006.





EITF
      05-04, which has not been adopted, “The Effect of a Liquidated Damages Clause on
      a Freestanding Financial Instrument Subject to Issue No. 00-19”, “Accounting
      for Derivative Financial Instruments Indexed to, and Potentially Settled in,
      a
      Company’s Own Stock” is pending
      the FASB reaching a conclusion as to whether a registration rights agreement
      meets the definition of a derivative instrument.  In
      March
      2006, the FASB staff reported that the EITF postponed further deliberations
      on
      Issue No. 05-04 until Q2 2006. We currently record any registration delay
      payments as expenses in the period when they are incurred. If the FASB were
      to
      adopt an alternative view, we could be required to account for the registration
      delay payments as a separate derivative. Accordingly, we would need to record
      the fair value of the estimated payments, although no authoritative methodology
      currently exists for evaluating such computation.





***Revenue
      Recognition***





Revenues
      are derived from the following sources:





—
            Prototyping
                and assembly services


—
            Prototyping
                -Photonics/Optoelectronics services


—
            Material
                supply chain management services


—
            Turn-key
                solution


—
            consists
                of material supply chain management services and one of the
                otherservices listed above.





The
      following is a description of each revenue source and our revenue recognition
      policy for each source:





Prototyping
      and assembly services typically consist of assembling and designing surface
      mount technology and other build-to-order products to the customer provided
      design specifications. These services are priced based on the complexity,
      time-to turn and unit volume of the customer project. The majority of our
      prototyping and assembly services projects are completed in less than three
      weeks. We recognize revenue when persuasive evidence of an arrangement exists,
      delivery has occurred, services have been performed, the sales price is fixed
      or
      determinable and collectibility is probable. These criteria are generally met
      after an internal quality control review of the product and at the time product
      is shipped.


F-8





Prototyping
      -Photonics/Optoelectronics services typically consists of assembling and
      designing optical and optical related products to the customer provided design
      specifications. We recognize revenue when persuasive evidence of an arrangement
      exists, delivery has occurred, services have been performed, the sales price
      is
      fixed or determinable and collectibility is probable. These criteria are
      generally met after an internal quality control review of the product and at
      the
      time product is shipped.





Material
      supply chain management services consists of locating and procuring materials
      according to customer design specifications, qualifying components and auditing
      vendors, inventorying materials, and providing dual vendor sourcing if
      necessary. Material supply chain management services are priced at the cost
      of
      the material plus 5% to 25%. The pricing is solely dependent on the complexity
      and volume of the services performed. We recognize revenue when persuasive
      evidence of an arrangement exists, delivery has occurred, services have been
      performed, the sales price is fixed or determinable and collectibility is
      probable. These criteria are generally met at the time materials have been
      received and inventoried, and the materials have shipped.





Turn-key
      solution is a combination of material supply chain management and one of the
      other service revenue sources described above. Revenue is generally recognized
      after both services have been performed and the products have
      shipped.


***Income
      Taxes***





Income
      taxes are computed using the asset and liability method. Under the asset and
      liability method, deferred income tax assets and liabilities are determined
      based on the differences between the financial reporting and tax bases of assets
      and liabilities and are measured using the currently enacted tax rates and
      laws.
      A valuation allowance is provided for the amount of deferred tax assets that,
      based on available evidence, are not expected to be realized.





***Stock-Based
      Compensation***




Effective
      January 1, 2006, the Company adopted Statement of Financial Accounting
      Standards No. 123(R),
      “Share-Based Payment,” (SFAS No. 123R) which was issued by the Financial
      Accounting Standards Board (FASB) in December 2004. SFAS No. 123R revises
      SFAS No. 123 “Accounting for Stock Based Compensation,” and supersedes APB
      No. 25, “Accounting for Stock Issued to Employees,” (APB No. 25) and
      its related interpretations. SFAS No. 123R requires recognition of the cost
      of employee services received in exchange for an award of equity instruments
      in
      the financial statements over the period the employee is required to perform
      the
      services in exchange for the award (presumptively the vesting period). SFAS
      No. 123R also requires measurement of the cost of employee services
      received in exchange for an award based on the grant-date fair value of the
      award. SFAS No. 123R also amends SFAS No. 95 “Statement of Cash
      Flows,” to require that excess tax benefits be reported as financing cash
      inflows, rather than as a reduction of taxes paid, which is included within
      operating cash flows.





In
      June
      of 2006, the majority of shareholders approved the "2006 Stock Incentive Plan."
      The plan provides for up to 10,000,000 shares of TXP's common stock to be issued
      in the form of incentive and/or non-qualified common stock for employees,
      directors and consultants to TXP. As of June 30, 2006, no stock options or
      common stock have been issued to employees, directors or consultants under
      this
      plan.





***Net
      Loss Per Share***





Basic
      net
      loss per share is computed using the weighted average number of common shares
      outstanding during the period. Contingently issuable shares are included in
      the
      computation of basic net income (loss) per share when the related conditions
      are
      satisfied. Diluted net income (loss) per share is computed using the weighted
      average number of common shares and potentially dilutive securities outstanding
      during the period. Potentially dilutive securities consist of contingently
      issuable shares, the incremental common shares issuable upon conversion of
      preferred stock or convertible
      debt (using the “if converted” method) and shares issuable upon the exercise of
      stock options and warrants
      (using the “treasury stock” method). Potentially dilutive securities are
      excluded from the computation if their effect is anti-dilutive.





As
      of
      June 30, 2006, (a) a total of 3,700,000 outstanding common stock warrants
      and (b) the unissued shares underlying our outstanding convertible
      debentures were excluded from the diluted net loss per share calculations,
      as
      their inclusion would be anti-dilutive. As of December 31, 2005, the
      unissued shares underlying our outstanding convertible debentures were excluded
      from the diluted net loss per share calculations, as their inclusion would
      be
      anti-dilutive.




***Reclassifications***





Certain
      prior periods' balances have been reclassified to conform to the current
      period's financial statement presentation. These reclassifications had no impact
      on previously reported results of operations or stockholders'
      equity.


F-9


**NOTE
      4 - RELATED PARTY TRANSACTIONS**





TXP
      leases operating equipment from the majority shareholder for $180,000 per year.
      The lease was renewed under the same payment terms in May of 2005 for a 2-year
      term through April of 2007. For the six months ending June 30, 2006 and for
      the
      twelve months ending December 2005, TXP paid the majority shareholder $105,000
      and $180,000, respectively. Included in other current assets at June 30, 2005
      is
      $15,000 which represents one month lease pre-payment made to the majority
      shareholder in June of 2006.





In
      September 2004, TXP invested in TXP-Asia, which is located in Gwangju City,
      South Korea by transferring $50,000 to a South Korean bank account. The
      investment was used to fund certain costs and expenses while TXP-Asia evaluates
      plans to co-locate within KOPTI (Korean Photonics Institute) and use its
      existing business model to penetrate the Asian Photonics market. The ownership
      of TXP-Asia is 100% owned by the majority shareholder of TXP, Inc. The majority
      shareholder will contribute his ownership of TXP-Asia when he is legally allowed
      by South Korean law. During December of 2005 TXP-Asia transferred $14,000 to
      the
      majority shareholder and effectively closed the South Korean bank account.
      Included within other currents assets as of December 31, 2005 is a receivable
      from the majority shareholder for the amount of transferred funds. In Q1 2006,
      the majority shareholder paid the receivable in full. TXP-Asia will continue
      to
      evaluate plans to co-locate within KOPTI (Korean Photonics Institute) and use
      its existing business model to penetrate the Asian Photonics
      market.





In
      Q4
      2005, the majority shareholder purchased two company owned vehicles for $48,000
      by arranging to pay-off the loans on both vehicles. The purchase price
      approximated the fair values of the vehicles in aggregate. The company realized
      an accounting loss on the sale of $14,000.





In
      Q2
      2006, the majority shareholder loaned the company $150,000. The unsecured loan
      has a one-year term and bears interest at 10%. The loan principal and interest
      are due at maturity. The balance on the note at June 30, 2006 was
      $150,000.





The
      majority shareholder has provided his personal guarantee on all of the Company’s
      notes payables, line of credit, and capital leases.





**NOTE
      5 - LINE OF CREDIT**





On
      April
      1, 2006 TXP renewed its revolving line of credit for $500,000. The line of
      credit has a one-year term with a variable interest rate of prime plus 2%.
      The
      line of credit is secured by all assets of the company. The majority shareholder
      has provided his personal guarantee on this loan (See NOTE 4). Interest payments
      are due monthly beginning April 1, 2006 and the principal is due when the
      one-year term expires. The line of credit has provisions that the maximum TXP
      may have outstanding is $500,000 or 70% of the borrowing base whichever is
      less.
      The borrowing base is defined as the value of accounts receivable less than
      90
      days past their invoice date. TXP was in compliance with these provisions as
      of
      June 30, 2006 and December 31, 2005. The revolving line credit also has
      financial and non-financial covenants. At June 30, 2006, the Company was in
      default due to failure to maintain certain covenants as provided for in the
      loan
      agreement. However, the lending institution subsequently waived non-compliance
      of the covenants. The balance outstanding on the note at June 30, 2006 and
      December 31, 2005 was $400,000 and $250,000 respectively.




**NOTE
      6 - NOTES PAYABLE**





On
      March
      15, 2004 TXP entered into a standard bank loan agreement for $45,000 to purchase
      equipment. The note has a three-year term with a variable interest rate of
      prime
      plus 2%. The note is secured by the equipment. The majority shareholder has
      provided his personal guarantee on this loan (See NOTE 4). Monthly payments
      of
      $1,400 began May 15, 2004. The balance outstanding on the note at June 30,
      2006
      was $13,000.





TXP
      entered into a financing agreement to purchase an automobile at the end of
      fiscal year 2003 for $10,000 with interest rate of 6%. The note is secured
      by
      the vehicle. The majority shareholder has provided his personal guarantee on
      this loan (See NOTE 4). The term of the financing agreement is 36 months,
      expiring in fiscal year 2006. The balance outstanding on the note at June 30,
      2006 was $1,000.





In
      December 2003 TXP entered into a standard bank loan agreement for $350,000
      to
      purchase equipment. The note has a three-year term with a 6.5% interest rate
      and
      is secured by accounts receivable and equipment. The majority shareholder has
      provided his personal guarantee on this loan (See NOTE 4). Monthly payments
      for
      this note are $11,000 and began February 18, 2004. The balance outstanding
      on
      the note at June 30, 2006 was $73,000.





In
      May of
      2006, TXP entered into a loan agreement with the majority shareholder for
      $150,000 (See Note 4). The note has a one year term with a 10% interest rate
      and
      is unsecured. Principal and interest are due at maturity. The balance
      outstanding on this note at June 30, 2006 was $150,000.


F-10


**NOTE
      7 - CAPITAL LEASE OBLIGATIONS**





In
      June
      of 2005, TXP entered into a standard lease agreement for $62,000 to lease
      certain operating and production equipment. The lease has a three-year term
      and
      is secured by the equipment. The majority shareholder has provided his personal
      guarantee on this lease (See NOTE 4). Monthly lease payments are $2,000 and
      began in June of 2005. The balance outstanding at June 30, 2006 was $43,000.
      The
      lease has been accounted for as capitalized lease in accordance with generally
      accepted accounting policies.





In
      March
      of 2006, TXP entered into a standard lease agreement for $25,000 to lease
      certain computer equipment. The lease has a three-year term and is secured
      by
      the computer equipment. The majority shareholder has provided his personal
      guarantee on this lease (See NOTE 4). Monthly lease payments are $1,000 and
      began in March of 2006. The balance outstanding at June 30, 2006 was $23,000.
      The lease has been accounted for as capitalized lease in accordance with
      generally accepted accounting policies.





In
      March
      of 2006, TXP entered into a standard lease agreement for $37,000 to lease
      certain software. The lease has a thirty-month term and is secured by the
      software. The majority shareholder has provided his personal guarantee on this
      lease (See NOTE 4).Monthly lease payments are $1,000 and began in March of
      2006.
      The balance outstanding at June 30, 2006 was $33,000. The lease has been
      accounted for as capitalized lease in accordance with generally accepted
      accounting policies.





The
      following is a schedule by years of future minimum lease payments under the
      capital lease together with the present value of the net minimum lease payments
      as of June 30, 2006:





Year
            
            Amount07/01/06
                - 12/31/06
            
            $
            26,00001/01/07
                - 12/31/07
            
            
            52,00001/01/08
                - 12/31/08
            
            
            32,00001/01/10
                - 12/31/10
            
            
            3,000Total
                Minimum Lease Payments
            
            
            113,000Less
                Amounts Representing Interest
            
            
            14,000Present
                Value of Minimum Lease Payments
            
            $
            99,000




**NOTE
      8 - STANDBY EQUITY DISTRIBUTION AGREEMENT**





In
      August
      2004, TXP entered into a Standby Equity Distribution Agreement. Under this
      agreement, TXP may issue and sell Common Stock to Cornell Capital Partners
      ("Cornell") for a total purchase price of up to $15.0 million. Subject to
      certain conditions, TXP will be entitled to commence drawing down on the Standby
      Equity Distribution Agreement when the sale of Common Stock under the Standby
      Equity Distribution Agreement is registered with the SEC and the authorization
      for quotation on the National Association of Securities Dealers OTC Bulletin
      Board is obtained and TXP is within the commitment period as defined under
      the
      terms of the agreement. The commitment period shall mean the period commencing
      on the earlier to occur of the effective date, or such earlier date as TXP
      and
      the Investor may mutually agree in writing, and expiring on the earliest to
      occur of the date on which the Investor shall have made payment of Advances
      pursuant to this agreement in the aggregate amount of Fifteen Million Dollars
      ($15,000,000), or the date occurring twenty-four (24) months after the Effective
      Date.





The
      purchase price for the shares will be equal to 100% of the market price, which
      is defined as the lowest closing bid price of the Common Stock during the five
      trading days following the notice date. A cash fee equal to five percent (5%)
      of
      the cash proceeds of the draw down is also payable at the time of funding.
      To
      date, TXP has not drawn down on the Standby Equity Distribution
      Agreement.





The
      Securities and Exchange Commission will not allow registration of its shares
      as
      required by Cornell Capital under the Standby Equity Distribution Agreement
      until such time as the convertible debentures (See Note 9) have been repaid
      or
      are revised to have a fixed conversion price rather than a floating conversion
      price based upon the market price of the TXP common stock.





In
      conjunction with the Standby Equity Distribution Agreement, TXP issued a
      $400,000 compensation debenture to Cornell Capital. In June of 2006, the company
      issued 1,700,000 shares of common stock in the exchange for full settlement
      of
      this $400,000 compensation debenture and another $240,000 convertible debenture.
      The combined carrying value of both debentures amounted to $685,000 which
      included the fair value of an embedded conversion option and accrued interest.
      The fair market value of the stock was $850,000 on the date of settlement.
      The
      company realized a $165,000 loss on early extinguishment of debt as a result
      of
      the settlement. At the time of issuance, the $400,000 debenture was recorded
      as
      a liability and as a deferred offering cost on the balance sheet of the company.
      The deferred offering cost will be netted ratably with the proceeds from the
      issuance and sale of common stock under the Standby Equity Distribution
      Agreement. In the event TXP does not issue and sell the entire amount of
      $15,000,000 of common stock under the stock equity distribution by the end
      of
      the two-year term the remaining deferred offering cost will be
      expensed.


F-11


**NOTE
      9 - CONVERTIBLE DEBENTURES**





***August
      2005 Secured Convertible Debt***





In
      August
      of 2004, Texas Prototypes, Inc entered into Securities Purchase agreements
      with
      Cornell and Mobilepro Corp. for a secured convertible debenture of $1,400,000
      ($700,000 to each) bearing interest at five percent (5%). These convertible
      debentures have a term of three years and are convertible at the holder's
      option. If the convertible debentures have not been converted on the third
      anniversary they will be automatically converted into common stock of TXP.
      At
      any time TXP may elect to redeem all or any portion of the convertible
      debentures at the price of one hundred twenty percent (120%) of the amount
      redeemed plus accrued interest. If TXP uses this option they must then issue
      the
      holder of the debenture 50,000 warrants for every $100,000 redeemed. The
      warrants will have a two-year term and will be excisable at the fixed price
      of
      $.157 per share. The convertible debenture was assumed by TXP Corporation upon
      completion of the merger in April of 2006.





There
      are
      two ways this convertible debenture can be converted to common stock of TXP.
      First, the debentures are convertible at a fixed price of $0.157 per shares
      (“Fixed Price”). Second, the debentures are convertible at an amount equal to
      eighty percent (80%) of the volume weighted average price of TXP' common stock,
      as quoted by Bloomberg, LP, for the five days immediately preceding the
      conversion date (“Variable Price”). The conversion price elected will be the
      lower of fixed or variable price at the date of election to convert by the
      holder. The conversion term expires August 25, 2007.





In
      Q2 of
      2006, upon completion of the merger and assumption of all liabilities of Texas
      Prototypes, Inc including the secured debenture, the contingencies related
      to
      the future event of TXP common stock being quoted and traded on either the
      over-the-counter bulletin board, NASDAQ small cap market or American Stock
      Exchange was resolved. Certain conversion options were then deemed to be
      financial derivatives under SFAS 133 and EITF 00-19. The derivatives were
      bifurcated and recorded at fair value and is reflected on the Company’s balance
      sheet at June 30, 2006. The derivatives are adjusted to fair value at each
      reporting period.





In
      June
      of 2006, the company issued 923,657 shares of common stock to Cornell Capital
      in
      conversion of $145,000 of this convertible debenture. The conversion price
      was
      equal to $0.157 per share in accordance with the debenture agreement.





This
      convertible debenture was originally discounted by $200,000 which were fees
      paid
      to the lenders and further discounted by $1,200,000 upon bifurcation and
      recording at fair value certain financial derivative instruments embedded within
      the note in Q2 2006. The discount is being amortized over the life of the notes
      of three years. At June 30, the convertible debenture had balance of $245,000
      net $1,010,000 of unamortized discount. As of June 30, 2006, approximately
      $128,000 of interest has been accrued.





***June
      5, 2006 Secured Convertible Debentures and
      Warrants***





On
      June
      5, 2006, the company consummated a securities purchase agreement dated June
      5,
      2006 with Cornell providing for the sale by the company to Cornell of its 10%
      secured convertible debentures in the aggregate principal amount of $1,127,000.
      The company also issued to Cornell warrants to purchase 1,850,000 and 1,850,000
      shares of common stock at a price equal to $0.60 and $0.75 per share,
      respectively. The warrants expire five years from the date of issuance.





The
      first
      debenture amounting to $550,000 matures on the third anniversary of the date
      of
      issuance and the company is not required to make any payments until the maturity
      Date. The debentures are convertible at any time into shares of common stock
      of
      the company at a conversion price per share equal to the lesser of (i) $0.50,
      or
      (ii) 95% of the lowest daily volume weighted average price of the Common Stock,
      as quoted by Bloomberg, LP, for the 30 trading days immediately preceding the
      date of conversion (“Variable Market Price”). Unless waived by the company, the
      holders may not, together with their affiliates, convert more than an aggregate
      of $150,000 in any 30-day period of principal amount of the debentures at the
      Variable Market Price. The Company has the right to redeem a portion or all
      amounts outstanding under the Debentures prior to the Maturity Date at a 20%
      redemption premium provided that the closing bid price of the Common Stock
      is
      less than $0.50. The convertible debentures are secured by substantially all
      the
      company’s assets. At June 30, the convertible debenture had balance of $15,000
      net $535,000 of unamortized discount. As of June 30, 2006, approximately $4,000
      of interest has been accrued.


F-12





In
      addition, on June 5, 2006 the Company issued to Cornell an amended and restated
      convertible debenture, on the same terms and conditions as set forth above
      which
      consolidates all outstanding amounts of the convertible debenture issued by
      Texas Prototypes, Inc. to Cornell on June 15, 2005 in the amount of $550,000,
      plus accrued and unpaid interest in the amount of $27,000 through June 5, 2006,
      for the principal sum of $577,000. The company reviewed EITF 05-07 “Accounting
      for Modifications to Conversion Options Embedded in Debt Instruments and Related
      Issues” and EIFT 96-19 “Debtor's Accounting for a Modification or Exchange of
      Debt Instruments” and deemed that the modifications and amendments were
      substantial and determined that debt extinguishment had occurred as the cash
      flow effect (including the changes in fair value of the embedded conversion
      option) on a present value basis exceeded 10%. The company recorded a gain
      on extinguishment debt of $630,000 in the consolidated statements of operations
      as a result of the modification. At June 30, the amended and restated
      convertible debenture had balance of $16,000 net $561,000 of unamortized
      discount. As of June 30, 2006, approximately $4,000 of interest has been
      accrued.





The
      company accounted for the embedded conversion features within the debentures
      and
      freestanding warrants discussed above pursuant to SFAS No. 133, "Accounting
      for
      Derivative Instruments and Hedging Activities", and EITF 00-19, “Accounting for
      Derivative Financial Instruments Indexed to and Potentially Settled in, a
      Company’s Own Stock,” (“EITF 00-19”) which requires freestanding contracts that
      are settled in a company’s own stock, including common stock warrants, to be
      designated as an equity instrument, asset or a liability. Under the provisions
      of EITF 00-19, a contract designated as an asset or a liability must be carried
      at fair value on a company’s balance sheet, with any changes in fair value
      recorded in the company’s results of operations. In accordance with EITF 00-19,
      certain warrants to purchase common stock and embedded conversion options are
      accounted for as liabilities at fair value and the unrealized changes in the
      values of these derivatives are recorded in our consolidated statement of
      operations as “Changes in Fair Value of Derivative Financial Instruments”. The
      recognition of derivative liabilities is applied first to the proceeds of such
      issuance, at the date of issuance, and the excess of derivative liabilities
      over
      the proceeds is recognized in our consolidated statement of operations as
“Changes in Fair Value of Derivative Financial Instruments.”





***Registration
      Rights Agreement***





In
      connection with the all of the above secured convertible debenture and warrants,
      the Company entered into registration rights agreements providing for the filing
      of a registration statement with the Securities and Exchange Commission
      registering the Common Stock issuable upon conversion of the Debentures and
      exercise of the Warrants. The Company is obligated to file the Registration
      Statement no later than 45 days from the date of closing and to use its best
      efforts to cause the Registration Statement to be declared effective no later
      than 120 days after filing and to insure that the registration statement remains
      in effect until all of the shares of common stock issuable upon conversion
      of
      the Debentures and exercise of the Warrants have been sold. In the event of
      a
      default of its obligations under the Registration Rights Agreements, including
      its agreement to file the Registration Statement with the Securities and
      Exchange Commission no later than 45 days from the date of closing, or if the
      Registration Statement is not declared effective within 120 days of filing,
      it
      is required that we pay to Cornell, as liquidated damages, for each month that
      the registration statement has not been filed or declared effective, as the
      case
      may be, either a cash amount or shares of our common stock equal to 2% of the
      liquidated value of the Debentures. The Company obtained a waiver from Cornell
      Capital extending the deadline for filing of the registration statement until
      August 31, 2006.





**NOTE
      10 - COMMON STOCK**





On
      April
      28, 2006, the Company completed a recapitalization transaction which resulted
      in
      new common shares outstanding of 94,295,715, after giving effect of cancellation
      of shares in the transaction and reissuance per the related merger agreement.
      As
      required by accounting guidance, authorized shares, issued and outstanding
      shares and per share amounts have been retroactively restated throughout these
      consolidated financial statements and the accompanying notes.





In
      June
      of 2006, the Company issued an aggregate of 1,700,000 shares of its Common
      Stock
      to Cornell in consideration for the cancellation of the convertible debenture
      issued by the Company dated June 14, 2004 in the amount of $240,000 issued
      in
      connection with the Standby Equity Distribution Agreement dated June 14, 2004
      and the cancellation of the convertible debenture issued by TXP dated August
      25,
      2004 in the amount of $400,000 issued in connection with the Standby Equity
      Distribution Agreement dated August 25, 2004. The combined carrying value of
      the
      debentures amounted to $685,000 which included the fair value of an embedded
      conversion option and accrued interest. The fair market value the stock was
      $850,000 on the date of settlement. The company realized a $165,000 loss on
      early extinguishment of debt as a result of the settlement.





In
      June
      of 2006, the company issued 923,657 shares of common stock to Cornell Capital
      in
      conversion of $145,000 of convertible debentures. The conversion price was
      equal
      to $0.157 per share in accordance with debenture agreement.





In
      June
      of 2006, the company amended its articles of incorporation and increased the
      authorized shares from 100,000,000 to 300,000,000.


F-13


**NOTE
      11 - COMMITMENTS**





TXP
      executed a new lease with its landlord in December 2004. The new lease began
      March 15, 2005 and will last for five years. The lease required a deposit in
      the
      amount of $13,000. The annual rent payments increase each year as outlined
      below:





Year
            
            Amount07/01/06
                - 12/31/06
            
            $
            99,00001/01/07
                - 12/31/07
            
            
            202,00001/01/08
                - 12/31/08
            
            
            207,00001/01/09
                - 12/31/09
            
            
            211,00001/01/10
                - 12/31/10
            
            
            43,000Total
            
            $
            762,000





Rent
      expense for the six months ending June 30, 2006 amounted to
      $99,000.





**NOTE
      12 - MAJOR CUSTOMERS**





During
      the six months ended June 30, 2006 and 2005, TXP’s 5 largest customers accounted
      for 63% and 68% of net sales, respectively.





**NOTE
      13 - STOCK INCENTIVE PLAN**





In
      June
      of 2006, the majority of shareholders approved the "2006 Stock Incentive Plan."
      The plan provides for up to 10,000,000 shares of TXP's common stock to be issued
      in the form of incentive and/or non-qualified common stock for employees,
      directors and consultants to TXP. As of June 30, 2006, no stock options or
      common stock have been issued to employees, directors or consultants under
      this
      plan.





**NOTE
      14 - SUBSEQUENT EVENTS - ENTRY INTO MATERIAL AGREEMENTS**





On
      July
      28, 2006, TXP Corporation entered into an Agreement (the "Agreement") with
      an
      accredited investor (the "Investor") pursuant to which the Company issued to
      the
      Investor five-year warrants to purchase an aggregate of 320,000 shares of common
      stock (the "Warrants") as consideration for the Investor agreeing to pledge
      an
      aggregate of $2,000,000 in free-trading shares of common stock of Adobe Systems
      Incorporated (NASDAQ:ADBE), Fossil Incorporated (NASDAQ:FOSL) or such other
      shares of free-trading common stock having a value of $2,000,000 in the
      aggregate beneficially owned by the Investor as may be agreed upon between
      the
      parties (the “Collateral”). The Collateral is to be pledged on behalf of the
      Company in favor of First Bank of Canyon Creek, or such other lending or
      financing institution as may be agreed upon between the parties (a “Lender”), as
      Collateral for a loan to be obtained by the Company from a Lender in an amount
      up to $2,000,000 with a term of up to 2 years (the “Term”), which will be
      further guaranteed personally and through the pledge of common stock
      beneficially owned by the Company’s Chief Executive Officer. The warrants are
      exercisable into shares of the Company’s common stock at a price equal to $0.50
      per share. As additional consideration of the Investor’s agreement to pledge the
      Collateral to a Lender, the Company agreed to pay to the Investor a one-time
      commitment fee, during the Term, of $40,000 (the “Commitment Fee”) no later than
      90 days after the Collateral is deposited into the account of a Lender;
      provided, however, that the Company shall pay an additional Commitment Fee
      within 90 days after the renewal of the Loan by a Lender.





In
      addition, the Agreement provides for the filing of a registration statement
      (the
“Registration Statement”) by the Company with the Securities and Exchange
      Commission registering the common stock issuable upon exercise of the Warrants.
      The Company is obligated to file the Registration Statement no later than 45
      days from the date of closing and to use its best efforts to cause the
      Registration Statement to be declared effective no later than 120 days after
      filing and to insure that the registration statement remains in effect until
      all
      of the shares of common stock issuable upon exercise of the Warrants have been
      sold.





The
      Company claims an exemption from the registration requirements of the Act for
      the private placement of these securities pursuant to Section 4(2) of the Act
      and/or Regulation D promulgated thereunder since, among other things, the
      transaction did not involve a public offering, the Investor is an accredited
      investor, the Investor had access to information about the Company and his
      investment, the Investor took the securities for investment and not resale,
      and
      the Company took appropriate measures to restrict the transfer of the
      securities.


F-14


In
      addition, on July 28, 2006 the Company entered into an Asset Purchase Agreement
      with the former Chief Executive Officer and sole director of our predecessor
      corporation, Stock Market Solutions, Inc., pursuant to which the Company sold
      the assets (the Assets”) of the Company’s predecessor business, including the
      business and related software, as well as the book-rights to three Livermore
      related books relating to a teaching and a computer training program designed
      to
      provide educational/instructional assistance and aid to those stock market
      traders who wish to learn how to trade in the stock market using a system
      previously developed by an early 20th century stock market trader, Jesse
      Livermore. In consideration for the sale of the Assets, Mr. Smitten agreed
      to
      forgive the repayment of a certain debt that the Company owed to Mr. Smitten
      in
      the aggregate amount of $329,272, of which $179,272 was forgiven by Mr. Smitten
      pursuant to that certain Agreement and Plan of Merger dated as of June 15,
      2005
      and $150,000 was forgiven by Mr. Smitten pursuant to the
      Agreement.


F-15


**Item
      2. Management’s Discussion and Analysis or Plan of
      Operation**





***Special
      Note on Forward-Looking Statements.*** *Certain statements in “Management’s Discussion and Analysis or Plan of
      Operation” below, and elsewhere in this quarterly report, are not related to
      historical results, and are forward-looking statements. Forward-looking
      statements present our expectations or forecasts of future events. You can
      identify these statements by the fact that they do not relate strictly to
      historical or current facts. These statements involve known and unknown risks,
      uncertainties and other factors that may cause our 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
      such forward-looking statements. Forward-looking statements frequently are
      accompanied by such words such as “may,” “will,” “should,” “could,” “expects,”
“plans,” “intends,” “anticipates,” “believes,” “estimates,” “predicts,”
“potential” or “continue,” or the negative of such terms or other words and
      terms of similar meaning. Although we believe that the expectations reflected
      in
      the forward-looking statements are reasonable, we cannot guarantee future
      results, levels of activity, performance, achievements, or timeliness of such
      results. Moreover, neither we nor any other person assumes responsibility for
      the accuracy and completeness of such forward-looking statements. We are under
      no duty to update any of the forward-looking statements after the date of this
      quarterly report. Subsequent written and oral forward looking statements
      attributable to us or to persons acting in our behalf are expressly qualified
      in
      their entirety by the cautionary statements and risk factors set forth below
      and
      elsewhere in this quarterly report, and in other reports filed by us with the
      SEC* .




**TXP**




**Overview**





TXP
      specializes in quick-turn complex circuit card assemblies and optoelectronic
      prototyping, new product introduction, and pilot production of electronic
      assemblies for Technology Innovators and Original Equipment Manufacturers (OEM)
      and Contract Manufacturers (CM) in the United States of America. The company
      is
      located in a 31,000 square-foot high-tech facility, located in Richardson,
      Texas.





The
      Company was originally formed in Nevada in June of 1994 under the name Cyber
      Synergy, Inc. to develop stock market related software applications. The
      corporate name has changed several times to date including in November 1999
      to
“Jesse Livemore.com” and in December 2001 to “Stock Market Solutions, Inc.” and
      in April of 2006 to “YTXP Corporation”. On April 28, 2006, the merger between
      YTXP and its wholly owned subsidiary was consummated with Texas Prototypes,
      Inc
      - a private company. The transaction was treated as a recapitalization of Texas
      Prototypes, Inc with Texas Prototypes, Inc treated as the accounting acquirer
      and continuing reporting entity. A change of control was deemed to have occurred
      as a result of the transaction. In June of 2006, the articles of incorporation
      were amended and the Company’s name was changed to TXP Corporation (See NOTE 3
      Merger and Recapitalization).




**Critical
      Accounting Policies**





TXP's
      consolidated financial statements are prepared in accordance with accounting
      principles generally accepted in the United States. The preparation of these
      consolidated financial statements requires us to make estimates and assumptions
      that affect the reported amounts of assets, liabilities, revenues, costs and
      expenses, and related disclosures. TXP evaluates its estimates and assumptions
      on an ongoing basis. TXP actual results may differ from these estimates under
      different assumptions or conditions.





TXP's
      significant accounting policies are described in Note 1 of the notes to our
      consolidated financial statements located in this 10QSB filing. The following
      accounting policies involve a greater degree of judgment and complexity.
      Accordingly, these are the policies TXP believes are the most critical to aid
      in
      fully understanding and evaluating our consolidated financial condition and
      results of operations.





***Revenue
      Recognition***





Revenues
      are derived from the following sources:





—
            Prototyping
                and assembly services


—
            Prototyping
                -Photonics/Optoelectronics services


—
            Material
                supply chain management services


—
            Turn-key
                solution


—
            consists
                of material supply chain management services and one of the other
                services
                listed above.





The
      following is a description of each revenue source and our revenue recognition
      policy for each source:





Prototyping
      and assembly services typically consist of assembling and designing surface
      mount technology and other build-to-order products to the customer provided
      design specifications. These services are priced based on the complexity,
      time-to turn and unit volume of the customer project. The majority of our
      prototyping and assembly services projects are completed in less than three
      weeks. We recognize revenue when persuasive evidence of an arrangement exists,
      delivery has occurred, services have been performed, the sales price is fixed
      or
      determinable and collectibility is probable. These criteria are generally met
      after an internal quality control review of the product and at the time product
      is shipped.


1





Prototyping
      -Photonics/Optoelectronics services typically consists of assembling and
      designing optical and optical related products to the customer provided design
      specifications. We recognize revenue when persuasive evidence of an arrangement
      exists, delivery has occurred, services have been performed, the sales price
      is
      fixed or determinable and collectibility is probable. These criteria are
      generally met after an internal quality control review of the product and at
      the
      time product is shipped.





Material
      supply chain management services consists of locating and procuring materials
      according to customer design specifications, qualifying components and auditing
      vendors, inventorying materials, and providing dual vendor sourcing if
      necessary. Material supply chain management services are priced at the cost
      of
      the material plus 5% to 25%. The pricing is solely dependent on the complexity
      and volume of the services performed. We recognize revenue when persuasive
      evidence of an arrangement exists, delivery has occurred, services have been
      performed, the sales price is fixed or determinable and collectibility is
      probable. These criteria are generally met at the time materials have been
      received and inventoried, and the materials have shipped.





Turn-key
      solution is a combination of material supply chain management and one of the
      other service revenue sources described above. Revenue is generally recognized
      after both services have been performed and the products have
      shipped.





***Allowance
      for Doubtful Accounts***





TXP's
      allowance for doubtful accounts relates to trade accounts receivable. The
      allowance for doubtful accounts is an estimate prepared by management based
      on
      identification of the collectibility of specific accounts and the overall
      condition of the receivable portfolios. The company specifically analyzes
      individual customer balances in trade receivables, historical bad debts,
      customer credits, customer concentrations, customer credit-worthiness, current
      economic trends and changes in customer payment terms when evaluating the
      adequacy of the allowance for doubtful accounts. If the financial condition
      of
      the company's customers were to deteriorate, resulting in an impairment of
      their
      ability to make payments, additional allowances may be required. Likewise,
      should the company determine that it would be able to realize more of its
      receivables in the future than previously estimated, an adjustment to the
      allowance would increase income in the period such determination was made.
      The
      allowance for doubtful accounts is reviewed on a quarterly basis and adjustments
      are recorded as deemed necessary.





***Property
      and Equipment***





Property
      and equipment are stated at cost less accumulated depreciation. Major renewals
      and improvements are capitalized; minor replacements, maintenance and repairs
      are charged to current operations. Depreciation is computed by applying the
      straight-line method over estimated useful lives, which are generally three
      to
      seven years.


2




**RESULTS
      OF OPERATIONS**




**COMPARISON
      OF THE 3 MONTHS ENDED JUNE 30, 2006 ("2006") TO THE 3 MONTHS ENDED JUNE 30,
      2005
      ("2005")**





***Revenues***





TXP
      currently derives almost all of our revenue from our prototyping and assembly
      and material supply chain management services. Prototyping and assembly services
      are priced based on the complexity, time-to turn and volume of the customer
      project. TXP's material supply chain management services are generally priced
      at
      the cost of the material plus 5% to 25%. Revenues increased 34% from $1,446,000
      in 2005 to $1,940,000 in 2006 or by $494,000. Material supply chain management
      services decreased 15% from $656,000 in 2005 to $557,000 in 2006. Prototyping
      and assembly services increased 75% from $790,000 in 2005 to $1,383,000 in
      2006.
      In 2006, TXP had sales of $520,000 to several new customers related to
      build-to-order tele-communications product assemblies. The additional increase
      in revenues is attributed to an increasing customer base and continued demand
      from existing customers. TXP expanded its customer base from 63 in 2005 to
      93 in
      2006 and had current active customers for the quarter of 28 and 33 for 2005
      and
      2006, respectively. TXP's top five customers accounted for 80% of revenue in
      2005 and 63% of revenue in 2006.




***Cost
      of Sales and Gross Profit***




Cost
      of
      sales consists of direct material, manufacturing overhead, labor costs,
      depreciation expense on machinery and equipment, equipment lease, and set-up
      and
      tooling charges associated with performing our services. Cost of sales increased
      from $934,000 in 2005 to $1,172,000 in 2006 or $238,000. Direct material costs
      related to supply chain management and assembly services increased from $686,000
      in 2005 to $790,000 in 2006 or $104,000. Manufacturing overhead and labor cost
      increased from 132,000 in 2005 to 267,000 in 2006 due to increased headcount
      and
      higher manufacturing overhead allocations due to expanded operations. Contract
      labor directly attributable to prototyping and assembly increased by $28,000
      compared to 2005.





Gross
      profit is dependent on the scope and the nature of the customer project and
      thus
      can vary significantly. Customer projects requiring a turnkey solution which
      includes both prototyping and material supply chain management services
      typically results in a lower margin than prototyping services only. Margins
      on
      prototyping services can range from 40% to 85% while margins on material supply
      chain management services can range from 5% to 25%.





Gross
      profit increased from $512,000 in 2005 to $767,000 in 2006. Revenues increased
      by $494,000 compared to 2005. During the same period the gross margin percentage
      increased from 35% in 2005 to 39% in 2006 due to a positive change in revenue
      mix.





***Selling,
      General and Administrative Expenses***





Selling
      general & administrative expense (“SG&A”) expense consists of personnel
      costs including taxes and benefits, rent and utilities, contract labor,
      insurance, professional fees, marketing, telecommunication, Internet costs,
      and
      other administrative expenses. SG&A expenses increased by $185,000 from
      $540,000 in 2005 to $725,000 in 2006. In 2006, TXP incurred approximately
      $52,000 in legal, accounting and other professional fees related to the merger
      between YTXP and its wholly owned subsidiary and Texas Prototypes, Inc.
      Personnel costs increased as costs increased from $366,000 in 2005 to $506,000
      in 2006 or by $140,000. TXP created and filled several new positions including
      three Vice Presidents, Chief Technology Officer and an administrative clerical
      position subsequent to June 2005. Certain personnel received raises from the
      prior year. Rent and utilities decreased $29,000 as result of increased
      allocations to manufacturing overhead as operations expanded. Sales and
      marketing increased $13,000 due to efforts to increase our product and service
      awareness and additional travel and expenses related sales calls to customers.





***Depreciation
      Expense***





Depreciation
      expense, net amounts included as a component of cost of sales, increased from
      $15,000 in 2005 to $22,000 in 2006. The increase was in-line with capital
      expenditures and depreciable asset base.





***Net
      Interest Expense***





Net
      interest expense increased from $45,000 in 2005 to $271,000 in 2006 or by
      $226,000. Approximately $208,000 of the increase relates to additional
      amortization of note discounts on our secured convertible debentures issued
      to
      Cornell Capital. Additionally, TXP had additional interest expense of $11,000
      in
      2006 on the $550,000 convertible debenture issued to Cornell in June of 2005
      which was subsequently amended in June of 2006. The remaining increase in
      interest expense relates to increases on the outstanding balances of our line
      credit and capital lease obligations from 2005 to 2006.





***Change
      in Fair Value of Derivative Financial Instruments***




Change
      in
      fair value of derivative financial instruments **** increased
      from $0 in 2005 to $4,323,000 in 2006. The Company accounts for all derivative
      financial instruments in accordance with SFAS No. 133. Derivative financial
      instruments are initially recorded as liabilities in the consolidated balance
      sheet, at fair
      value. Derivative instrument liabilities are re-valued at the end of each
      reporting period, with changes in the fair value of the derivative liability
      recorded in our consolidated statement of operations as “Changes in Fair Value
      of Derivative Financial Instruments” in the period in which the changes occur.
      As a result, the Company’s financial statements may fluctuate from
      quarter-to-quarter based on factors, such as the price of the Company’s stock at
      the balance sheet date, the amount of shares converted by note holders and/or
      exercised by warrant holders. Consequently, our financial position and results
      of operations may vary from quarter-to-quarter based on conditions other than
      our operating revenues and expenses.


3


***Net
      Gain on Early Extinguishment of Debt***





Net gain on
      early extinguishment of debt **** increased
      from $0 in 2005 to $465,000 in 2006. In June of 2006, the company issued
      1,700,000 shares of common stock in the exchange for full settlement of a
      $400,000 compensation debenture and another $240,000 convertible debenture.
      The
      combined carrying value of both debentures amounted to $685,000 which included
      the fair value of an embedded conversion option and accrued interest. The fair
      market value the stock was $850,000 on the date of settlement. The Company
      realized a $165,000 loss on early extinguishment of debt as a result of the
      settlement.





In
      addition, on June 5, 2006 the Company issued to Cornell an amended and restated
      convertible debenture that consolidated all outstanding amounts of the
      convertible debenture issued by Texas Prototypes, Inc. to Cornell on June 15,
      2005 in the amount of $550,000, plus accrued and unpaid interest in the amount
      of $27,000 through June 5, 2006, for the principal sum of $577,000. The company
      reviewed EITF 05-07 “Accounting for Modifications to Conversion Options Embedded
      in Debt Instruments and Related Issues” and EIFT 96-19 “Debtor's Accounting for
      a Modification or Exchange of Debt Instruments” and deemed that the
      modifications and amendments were substantial and determined that debt
      extinguishment had occurred as the cash flow effect (including the changes
      in
      fair value of the embedded conversion option) on a present value basis exceeded
      10%. The company recorded a gain on extinguishment debt of $630,000 in the
      consolidated statements of operations as a result of the
      modification.







**COMPARISON
      OF THE 6 MONTHS ENDED JUNE 30, 2006 ("2006") TO THE 6 MONTHS ENDED JUNE 30,
      2005
      ("2005")**





***Revenues***




TXP
      currently derives almost all of our revenue from our prototyping and assembly
      and material supply chain management services. Prototyping services are priced
      based on the complexity, time-to turn and volume of the customer project. TXP's
      material supply chain management services are priced at the cost of the material
      plus 5% to 25%. Total revenues increased 35% from $2,557,000 in 2005 to
      $3,442,000 in 2006 or by $885,000. Material supply chain management services
      decreased 5% from $1,248,000 in 2005 to $1,187,000 in 2006. Prototyping and
      assembly services increased 72% from $1,309,000 in 2005 to $2,255,000 in 2006
      or
      $946,000. In 2006, TXP had sales of $672,000 to several new customers related
      to
      build-to-order tele-communications product assemblies. The remaining increase
      in
      revenues is attributed to an increasing customer base and continued demand
      from
      existing customers. TXP had no Photonics Prototyping revenues in 2005 or in
      2006. The company continues to offer photonics prototyping services to
      customers. TXP expanded its customer base from 63 in 2005 to 93 in 2006 and
      had
      current active customers for the six months of 32 and 44 for 2005 and 2006,
      respectively. TXP's top five customers accounted for 68% of revenue in 2005
      and
      63% of revenue in 2006.





***Cost
      of Sales and Gross Profit***




Cost
      of
      sales consists of direct material, manufacturing overhead, labor costs,
      depreciation expense on machinery and equipment, equipment lease, and set-up
      and
      tooling charges associated with performing our services. Cost of sales increased
      from $1,707,000 in 2005 to $2,215,000 in 2006 or $508,000. Direct material
      costs
      and production supplies increased from $1,227,000 in 2005 to $1,431,000 in
      2006
      or $204,000. Manufacturing overhead and labor cost increased from $264,000
      in
      2005 to $535,000 or $271,000 in 2006 due to increased headcount and higher
      manufacturing overhead allocations due to expanded operations. Contract labor
      directly attributable to prototyping and assembly increased by $76,000 compared
      to 2005. Depreciation on equipment increased by $5,000 compared to 2005 in
      line
      with capital expenditures.





Gross
      profit is dependent on the scope and the nature of the customer project and
      thus
      can vary significantly. Customer projects requiring a turnkey solution which
      includes both prototyping and material supply chain management services
      typically results in a lower margin than prototyping services only. Margins
      on
      prototyping services can range from 40% to 85% while margins on material supply
      chain management services can range from 5% to 25%.





Gross
      profit increased from $850,000 in 2005 to $1,227,000 in 2006 or 377,000.
      Revenues increased for the same period by $885,000. During the same period
      the
      gross margin increased from 33% in 2005 to 36% in 2006 due to a positive change
      in revenue mix





***Selling,
      General and Administrative Expenses***





Selling
      general & administrative expense (“SG&A”) consists of personnel costs
      including taxes and benefits, rent and utilities, contract labor, insurance,
      professional fees, marketing, telecommunication, internet costs, and other
      administrative expenses. SG&A expenses increased by $148,000 from $1,169,000
      in 2005 to $1,317,000 in 2006. In 2006, the TXP incurred approximately $52,000
      in legal, accounting and other professional fees related to the merger between
      YTXP and its wholly owned subsidiary and Texas Prototypes, Inc. Personnel costs
      increased as costs increased from $723,000 in 2005 to $971,000 in 2006 or by
      $248,000. TXP created and filled several new positions including three Vice
      Presidents, Chief Technology Officer and an administrative clerical position
      subsequent to June 2005. Certain personnel have received raises from the prior
      year. Rent and utilities decreased $44,000 as result of increased allocations
      to
      manufacturing overhead as operations expanded. Sales and Marketing decreased
      $71,000 due to cost incurred in 2005 related to a trade show that the Company
      did not participate in 2006. TXP also incurred one-time moving fees of $11,000
      in Q1 2005 in connection with the new lease.


4


***Depreciation
      Expense***





Depreciation
      expense, net amounts included as a component of cost of sales, increased from
      $26,000 in 2005 to $42,000 in 2006. The increase was in-line with capital
      expenditures and depreciable asset base.





***Net
      Interest Expense***





Net
      interest expense increased from $82,000 in 2005 to $326,000 in 2006 or by
      $244,000. Approximately $212,000 of the increase relates to additional
      amortization of note discounts on our secured convertible debentures issued
      to
      Cornell Capital. Additionally, TXP had additional interest expense of $18,000
      in
      2006 on the $550,000 convertible debenture issued to Cornell in June of 2005
      which was subsequently amended in June of 2006. The remaining increase in
      interest expense relates to increases on the outstanding balances of our line
      credit and capital lease obligations from 2005 to 2006.





***Change
      in Fair Value of Derivative Financial Instruments***





Change
      in
      fair value of derivative financial instruments **** increased
      from $0 in 2005 to $4,323,000 in 2006. The Company accounts for all derivative
      financial instruments in accordance with SFAS No. 133. Derivative financial
      instruments are initially recorded as liabilities in the consolidated balance
      sheet, at fair value. Derivative instrument liabilities are re-valued at the
      end
      of each reporting period, with changes in the fair value of the derivative
      liability recorded in our consolidated statement of operations as “Changes in
      Fair Value of Derivative Financial Instruments” in the period in which the
      changes occur. As a result, the Company’s financial statements may fluctuate
      from quarter-to-quarter based on factors, such as the price of the Company’s
      stock at the balance sheet date, the amount of shares converted by note holders
      and/or exercised by warrant holders. Consequently, our financial position and
      results of operations may vary from quarter-to-quarter based on conditions
      other
      than our operating revenues and expenses.





***Net
      Gain on Early Extinguishment of Debt***





Net
      gain on early extinguishment of debt **** increased
      from $0 in 2005 to $465,000 in 2006. In June of 2006, the company issued
      1,700,000 shares of common stock in the exchange for full settlement this
      $400,000 compensation debenture and another $240,000 convertible debenture.
      The
      combined carrying value of both debentures amounted to $685,000 which included
      the fair value of an embedded conversion option and accrued interest. The fair
      market value the stock was $850,000 on the date of settlement. The company
      realized a $165,000 loss on early extinguishment of debt as a result of the
      settlement.





In
      addition, on June 5, 2006 the Company issued to Cornell an amended and restated
      convertible debenture that consolidated all outstanding amounts of the
      convertible debenture issued by Texas Prototypes, Inc. to Cornell on June 15,
      2005 in the amount of $550,000, plus accrued and unpaid interest in the amount
      of $27,000 through June 5, 2006, for the principal sum of $577,000. The company
      reviewed EITF 05-07 “Accounting for Modifications to Conversion Options Embedded
      in Debt Instruments and Related Issues” and EIFT 96-19 “Debtor's Accounting for
      a Modification or Exchange of Debt Instruments” and deemed that the
      modifications and amendments were substantial and determined that debt
      extinguishment had occurred as the cash flow effect (including the changes
      in
      fair value of the embedded conversion option) on a present value basis exceeded
      10%. The company recorded a gain on extinguishment debt of $630,000 in the
      consolidated statements of operations as a result of the
      modification.





***Liquidity
      and Capital Resources***





TXP's
      principal potential sources of liquidity are cash on hand, cash generated from
      current revenues and cash provided from financing activities. As of June 30,
      2006, TXP had cash and cash equivalents of $205,000.





During
        2006, TXP used $735,000 in operating activities compared to using $412,000
        during 2005. Cash used in operating activities during 2006 reflects $4,298,000
        in net loss, $123,000 in depreciation, $248,000 in debt discount amortization,
        $465,000 in gain on extinguishment of debt, $18,000 in gain on sale of
        fixed assets, and $4,323,000 in change in fair value of derivative financial
        instruments. Accounts receivable, inventory, other current assets, deferred
        offering costs, and other assets increased by $553,000, $99,000, $32,000,
        $9,000
        and $1,000 respectively decreasing working capital. The Company obtained
        cash
        for working capital changes consisting of increases in accounts payable and
        accrued expenses of $29,000 and $17,000, respectively.




Cash
      used
      in operating activities during 2005 reflects $427,000 in net loss, $102,000
      of
      depreciation and amortization, $45,000 in stock compensation, and amortization
      of debt discount of $35,000. Accounts receivable, inventory, other current
      assets and deferred offering costs increased by $831,000, $3,557,000, $86,000
      and $60,000, respectively decreasing working capital. The Company obtained
      net
      cash from working capital changes of $4,367,000 consisting of increases in
      accounts payable, accrued expenses, and deferred revenue of $2,656,000, 86,000
      and $1,501,000 respectively as well as a decrease in other assets of $124,000.





During
      2006, TXP used $95,000 in investing activities reflecting capital expenditures
      for plant, property and equipment and software of $155,000 net of $60,000 in
      proceeds received from the sale of fixed assets.


5


During
      2005, TXP used $340,000 in investing activities reflecting capital expenditures
      for plant, property and equipment and software.





During
      2006, financing activities provided net cash of $693,000 as the result of
      issuances of $550,000 in convertible debentures to Cornell Capital partially
      offset by fees paid of $65,000 to secure the transaction as well as proceeds
      from an unsecured note payable from the majority shareholder for $150,000 and
      a
      draw down on our line of credit for $150,000. Total repayments on debt amounted
      to $87,000.





During
      2005, financing activities provided $445,000 the result of issuing a $550,000
      convertible debenture to Cornell Capital net discounts of $70,000. TXP received
      cash proceeds of $34,000 from a note payable to a financial institution. Total
      repayments on debt amounted to $74,000.




In
      August
      2004, TXP entered into a Standby Equity Distribution Agreement. Under this
      agreement, TXP may issue and sell Common Stock to Cornell Capital Partners
      ("Cornell") for a total purchase price of up to $15.0 million. Subject to
      certain conditions, TXP will be entitled to commence drawing down on the Standby
      Equity Distribution Agreement when the sale of Common Stock under the Standby
      Equity Distribution Agreement is registered with the SEC and the authorization
      for quotation on the National Association of Securities Dealers OTC Bulletin
      Board is obtained and TXP is within the commitment period as defined under
      the
      terms of the agreement. The commitment period shall mean the period commencing
      on the earlier to occur of the effective date, or such earlier date as TXP
      and
      the Investor may mutually agree in writing, and expiring on the earliest to
      occur of the date on which the Investor shall have made payment of Advances
      pursuant to this agreement in the aggregate amount of Fifteen Million Dollars
      ($15,000,000), or the date occurring twenty-four (24) months after the Effective
      Date.





The
      purchase price for the shares will be equal to 100% of the market price, which
      is defined as the lowest closing bid price of the Common Stock during the five
      trading days following the notice date. A cash fee equal to five percent (5%)
      of
      the cash proceeds of the draw down is also payable at the time of funding.
      To
      date, TXP has not drawn down on the Standby Equity Distribution
      Agreement.





The
      Securities and Exchange Commission will not allow registration of its shares
      as
      required by Cornell Capital under the Standby Equity Distribution Agreement
      until such time as the convertible debentures (See Note 9) have been repaid
      or
      are revised to have a fixed conversion price rather than a floating conversion
      price based upon the market price of the TXP common stock.





In
      conjunction with the Standby Equity Distribution Agreement, TXP issued a
      $400,000 compensation debenture to Cornell Capital. In June of 2006, the company
      issued 1,700,000 shares of common stock in the exchange for full settlement
      of
      this $400,000 compensation debenture and another $240,000 convertible debenture.
      The combined carrying value of both debentures amounted to $685,000 which
      included the fair value of an embedded conversion option and accrued interest.
      The fair market value of the stock was $850,000 on the date of settlement.
      The
      company realized a $165,000 loss on early extinguishment of debt as a result
      of
      the settlement. At the time of issuance, the $400,000 debenture was recorded
      as
      a liability and as a deferred offering cost on the balance sheet of the company.
      The deferred offering cost will be netted ratably with the proceeds from the
      issuance and sale of common stock under the Standby Equity Distribution
      Agreement. In the event TXP does not issue and sell the entire amount of
      $15,000,000 of common stock under the stock equity distribution by the end
      of
      the two-year term the remaining deferred offering cost will be
      expensed.





***August
      2005 Secured Convertible Debt***





In
      August
      of 2004, Texas Prototypes, Inc entered into Securities Purchase agreements
      with
      Cornell and Mobilepro Corp. for a secured convertible debenture of $1,400,000
      ($700,000 to each) bearing interest at five percent (5%). These convertible
      debentures have a term of three years and are convertible at the holder's
      option. If the convertible debentures have not been converted on the third
      anniversary they will be automatically converted into common stock of TXP.
      At
      any time TXP may elect to redeem all or any portion of the convertible
      debentures at the price of one hundred twenty percent (120%) of the amount
      redeemed plus accrued interest. If TXP uses this option they must then issue
      the
      holder of the debenture 50,000 warrants for every $100,000 redeemed. The
      warrants will have a two-year term and will be excisable at the fixed price
      of
      $.157 per share. The convertible debenture was assumed by TXP Corporation upon
      completion of the merger in April of 2006.





There
      are
      two ways this convertible debenture can be converted to common stock of TXP.
      First, the debentures are convertible at a fixed price of $0.157 per shares
      (“Fixed Price”). Second, the debentures are convertible at an amount equal to
      eighty percent (80%) of the volume weighted average price of TXP' common stock,
      as quoted by Bloomberg, LP, for the five days immediately preceding the
      conversion date (“Variable Price”). The conversion price elected will be the
      lower of fixed or variable price at the date of election to convert by the
      holder. The conversion term expires August 25, 2007.





In
      Q2 of
      2006, upon completion of the merger and assumption of all liabilities of Texas
      Prototypes, Inc including the secured debenture, the contingencies related
      to
      the future event of TXP common stock being quoted and traded on either the
      over-the-counter bulletin board, NASDAQ small cap market or American Stock
      Exchange was resolved. Certain conversion options were then deemed to be
      financial derivatives under SFAS 133 and EITF 00-19. The derivatives were
      bifurcated and recorded at fair value and is reflected on the Company’s balance
      sheet at June 30, 2006. The derivatives are adjusted to fair value at each
      reporting period.


6


In
      June
      of 2006, the company issued 923,657 shares of common stock to Cornell Capital
      in
      conversion of $145,000 of this convertible debenture. The conversion price
      was
      equal to $0.157 per share in accordance with the debenture agreement.




This
        convertible debenture was originally discounted by $200,000 which were fees
        paid
        to the lenders and further discounted by $1,200,000 upon bifurcation and
        recording at fair value certain financial derivative instruments embedded
        within
        the note in Q2 2006. The discount is being amortized over the life of the
        notes
        of three years. At June 30, the convertible debenture had balance of $245,000
        net $1,010,000 of unamortized discount. As of June 30, 2006, approximately
        $128,000 of interest has been accrued





***June
      5, 2006 Secured Convertible Debentures and
      Warrants***





On
      June
      5, 2006, the company consummated a securities purchase agreement dated June
      5,
      2006 with Cornell providing for the sale by the company to Cornell of its 10%
      secured convertible debentures in the aggregate principal amount of $1,127,000.
      The company also issued to Cornell warrants to purchase 1,850,000 and 1,850,000
      shares of common stock at a price equal to $0.60 and $0.75 per share,
      respectively. The warrants expire five years from the date of issuance.





The
      first
      debenture amounting to $550,000 matures on the third anniversary of the date
      of
      issuance and the company is not required to make any payments until the maturity
      Date. The debentures are convertible at any time into shares of common stock
      of
      the company at a conversion price per share equal to the lesser of (i) $0.50,
      or
      (ii) 95% of the lowest daily volume weighted average price of the Common Stock,
      as quoted by Bloomberg, LP, for the 30 trading days immediately preceding the
      date of conversion (“Variable Market Price”). Unless waived by the company, the
      holders may not, together with their affiliates, convert more than an aggregate
      of $150,000 in any 30-day period of principal amount of the debentures at the
      Variable Market Price. The Company has the right to redeem a portion or all
      amounts outstanding under the Debentures prior to the Maturity Date at a 20%
      redemption premium provided that the closing bid price of the Common Stock
      is
      less than $0.50. The convertible debentures are secured by substantially all
      the
      company’s assets. At June 30, the convertible debenture had balance of $15,000
      net $535,000 of unamortized discount. As of June 30, 2006, approximately $4,000
      of interest has been accrued.





In
      addition, on June 5, 2006 the Company issued to Cornell an amended and restated
      convertible debenture, on the same terms and conditions as set forth above
      which
      consolidates all outstanding amounts of the convertible debenture issued by
      Texas Prototypes, Inc. to Cornell on June 15, 2005 in the amount of $550,000,
      plus accrued and unpaid interest in the amount of $27,000 through June 5, 2006,
      for the principal sum of $577,000. The company reviewed EITF 05-07 “Accounting
      for Modifications to Conversion Options Embedded in Debt Instruments and Related
      Issues” and EIFT 96-19 “Debtor's Accounting for a Modification or Exchange of
      Debt Instruments” and deemed that the modifications and amendments were
      substantial and determined that debt extinguishment had occurred as the cash
      flow effect (including the changes in fair value of the embedded conversion
      option) on a present value basis exceeded 10%. The company recorded a gain
      on
      extinguishment debt of $630,000 in the consolidated statements of operations
      as
      a result of the modification. At June 30, the amended and restated convertible
      debenture had balance of $16,000 net $561,000 of unamortized discount. As of
      June 30, 2006, approximately $4,000 of interest has been accrued.





The
      company accounted for the embedded conversion features within the debentures
      and
      freestanding warrants discussed above pursuant to SFAS No. 133, "Accounting
      for
      Derivative Instruments and Hedging Activities", and EITF 00-19, “Accounting for
      Derivative Financial Instruments Indexed to and Potentially Settled in, a
      Company’s Own Stock,” (“EITF 00-19”) which requires freestanding contracts that
      are settled in a company’s own stock, including common stock warrants, to be
      designated as an equity instrument, asset or a liability. Under the provisions
      of EITF 00-19, a contract designated as an asset or a liability must be carried
      at fair value on a company’s balance sheet, with any changes in fair value
      recorded in the company’s results of operations. In accordance with EITF 00-19,
      certain warrants to purchase common stock and embedded conversion options are
      accounted for as liabilities at fair value and the unrealized changes in the
      values of these derivatives are recorded in our consolidated statement of
      operations as “Changes in Fair Value of Derivative Financial Instruments”. The
      recognition of derivative liabilities is applied first to the proceeds of such
      issuance, at the date of issuance, and the excess of derivative liabilities
      over
      the proceeds is recognized in our consolidated statement of operations as
“Changes in Fair Value of Derivative Financial Instruments.”





***Registration
      Rights Agreement***





In
      connection with the all of the above secured convertible debenture and warrants,
      the Company entered into registration rights agreements providing for the filing
      of a registration statement with the Securities and Exchange Commission
      registering the Common Stock issuable upon conversion of the Debentures and
      exercise of the Warrants. The Company is obligated to file the Registration
      Statement no later than 45 days from the date of closing and to use its best
      efforts to cause the Registration Statement to be declared effective no later
      than 120 days after filing and to insure that the registration statement remains
      in effect until all of the shares of common stock issuable upon conversion
      of
      the Debentures and exercise of the Warrants have been sold. In the event of
      a
      default of its obligations under the Registration Rights Agreements, including
      its agreement to file the Registration Statement with the Securities and
      Exchange Commission no later than 45 days from the date of closing, or if the
      Registration Statement is not declared effective within 120 days of filing,
      it
      is required that we pay to Cornell, as liquidated damages, for each month that
      the registration statement has not been filed or declared effective, as the
      case
      may be, either a cash amount or shares of our common stock equal to 2% of the
      liquidated value of the Debentures. The Company obtained a waiver from Cornell
      Capital extending the deadline for filing of the registration statement until
      August 31, 2006.





On
      April
      1, 2006 TXP renewed its revolving line of credit for $500,000. The line of
      credit has a one-year term with a variable interest rate of prime plus 2%.
      The
      line of credit is secured by all assets of the company. The majority shareholder
      has provided his personal guarantee on this loan (See NOTE 4). Interest payments
      are due monthly beginning April 1, 2006 and the principal is due when the
      one-year term expires. The line of credit has provisions that the maximum TXP
      may have outstanding is $500,000 or 70% of the borrowing base whichever is
      less.
      The borrowing base is defined as the value of accounts receivable less than
      90
      days past their invoice date. TXP was in compliance with these provisions as
      of
      June 30, 2006 and December 31, 2005. The revolving line credit also has
      financial and non-financial covenants. At June 30, 2006, the Company was in
      default due to failure to maintain certain covenants as provided for in the
      loan
      agreement. However, the lending institution subsequently waived non-compliance
      of the covenants. The balance outstanding on the note at June 30, 2006 and
      December 31, 2005 was $400,000 and $250,000 respectively.


7


On
      July
      28, 2006, TXP Corporation entered into an Agreement (the "Agreement") with
      an
      accredited investor (the "Investor") pursuant to which the Company issued to
      the
      Investor five-year warrants to purchase an aggregate of 320,000 shares of common
      stock (the "Warrants") as consideration for the Investor agreeing to pledge
      an
      aggregate of $2,000,000 in free-trading shares of common stock of Adobe Systems
      Incorporated (NASDAQ:ADBE), Fossil Incorporated (NASDAQ:FOSL) or such other
      shares of free-trading common stock having a value of $2,000,000 in the
      aggregate beneficially owned by the Investor as may be agreed upon between
      the
      parties (the “Collateral”). The Collateral is to be pledged on behalf of the
      Company in favor of First Bank of Canyon Creek, or such other lending or
      financing institution as may be agreed upon between the parties (a “Lender”), as
      Collateral for a loan to be obtained by the Company from a Lender in an amount
      up to $2,000,000 with a term of up to 2 years (the “Term”), which will be
      further guaranteed personally and through the pledge of common stock
      beneficially owned by the Company’s Chief Executive Officer. The warrants are
      exercisable into shares of the Company’s common stock at a price equal to $0.50
      per share. As additional consideration of the Investor’s agreement to pledge the
      Collateral to a Lender, the Company agreed to pay to the Investor a one-time
      commitment fee, during the Term, of $40,000 (the “Commitment Fee”) no later than
      90 days after the Collateral is deposited into the account of a Lender;
      provided, however, that the Company shall pay an additional Commitment Fee
      within 90 days after the renewal of the Loan by a Lender. TXP plans to finalize
      the loan facility with the First Bank of Canyon Creek in early Q3 2006.





Except
      for the financing agreements with Cornell Capital discussed above, existing
      financing arrangements, borrowing capacity created by the investor agreeing
      to
      pledge collateral, and revenue generated through its operations, TXP has no
      other significant sources of working capital or cash commitments. In addition,
      the Securities and Exchange Commission will not allow registration of its shares
      as required by Cornell Capital under the Standby Equity Distribution Agreement
      until such time as the convertible debentures have been repaid or are revised
      to
      have a fixed conversion price rather than a floating conversion price based
      upon
      the market price of the TXP common stock. Accordingly, TXP cannot rely upon
      access to the $15,000,000 standby equity distribution agreement until either
      of
      those events occur and there is no assurance that these events will occur.
      See
      "Risk Factors." Further no assurance can be given that TXP will raise sufficient
      funds from such financing arrangements, or that TXP will ever produce sufficient
      revenues to expand its operations to a desirable level, or that a market will
      develop for its common stock upon which a significant amount of TXP's financing
      is dependent.





Management
      believes that the financing arrangements in place or those that will be in
      place
      are sufficient to satisfy TXP's cash requirements for the next twelve months.
      Management is not depending upon the Standby Equity Distribution Agreement
      to
      meet its cash requirements for the next twelve months. If TXP is unable to
      recognize sufficient proceeds from these arrangements, management believes
      that
      TXP can limit its operations, defer payments to management and maintain its
      business at nominal levels until it can identify alternative sources of
      capital.





**Off-Balance
      Sheet Arrangements**





We
      do not
      have any off balance sheet arrangements that are reasonably likely to have
      a
      current or future effect on our financial condition, revenues, results of
      operations, liquidity or capital expenditures.


8





**Risk
      Factors**





In evaluating our
      business, prospective investors and shareholders should
      carefully consider the risks factors, any of which could have a material adverse
      impact on our business, operating results and financial condition and
      result in a complete loss of your investment.





***TXP
      IS SUBJECT TO VARIOUS RISKS THAT MAY MATERIALLY HARM ITS BUSINESS, FINANCIAL
      CONDITION AND RESULTS OF OPERATIONS. IF ANY OF THESE RISKS OR UNCERTAINTIES
      ACTUALLY OCCURS, ITS BUSINESS, FINANCIAL CONDITION OR OPERATING RESULTS COULD
      BE
      MATERIALLY HARMED.***





***TXP
      IS AN EARLY-STAGE COMPANY WITH A SHORT OPERATING HISTORY, WHICH MAKES IT
      DIFFICULT TO EVALUATE ITS CURRENT BUSINESS AND FUTURE
      PROSPECTS.***





TXP
      has
      only a limited operating history upon which to base an evaluation of its current
      business and future prospects. It was founded in March 2002 and began selling
      its services that same month. TXP's limited operating history makes an
      evaluation of TXP's business and prospects very difficult. These risks and
      difficulties include, but are not limited to, the following:




·
            TXP's
                  new business and technology
                  models;





·
            a
                limited number of service offerings and risks associated with developing
                new service offerings;





·
            the
                difficulties TXP faces in managing rapid growth in personnel and
                operations;




·
            the
                  negative impact on TXP's brand, reputation or trustworthiness caused
                  by
                  any significant unavailability of its
                  service;


·
            the
                  failure to perform TXP's service at its customers expectations
                  including
                  quick turnaround and product
                  quality;




·
            the
                timing and success of new service introductions and new technologies
                by
                TXP's competitors; and





·
            TXP's
                ability to build brand awareness in a highly fragmented
                market





TXP
      may
      not be able to successfully address any of these risks or others. Failure to
      adequately do so could seriously harm its business and cause its operating
      results to suffer.





***BECAUSE
      A SMALL NUMBER OF CUSTOMERS ACCOUNT FOR A SUBSTANTIAL PORTION OF TXP'S NET
      SALES, ITS NET SALES COULD DECLINE SIGNIFICANTLY IF IT LOSES A MAJOR CUSTOMER
      OR
      IF A MAJOR CUSTOMER ORDERS FEWER OF TXP'S SERVICES OR CANCELS OR DELAYS
      ORDERS.***





Historically,
      TXP has derived a significant portion of its net sales from a limited number
      of
      customers. Its top five customers, which may vary from year to year, represented
      80% and 73% of TXP's net sales in fiscal 2004 and 2005, respectively and 63%
      for
      the six months ending June 30, 2006. It expects to continue to depend upon
      a
      small number of customers for a significant portion of its net sales for the
      foreseeable future. The loss of, or decline in, orders from one or more major
      customers could reduce its net sales.




***BECAUSE
      TXP GENERALLY DOES NOT HAVE LONG-TERM CONTRACTS WITH ITS CUSTOMERS, IT IS
      SUBJECT TO UNCERTAINTIES AND VARIABILITY IN DEMAND BY TXP'S CUSTOMERS, WHICH
      COULD DECREASE NET SALES AND NEGATIVELY AFFECT ITS OPERATING
      RESULTS.***





As
      is
      common in TXP's industry, it generally does not have long-term contracts with
      its customers, and, consequently, TXP's net sales are subject to short-term
      variability in demand by its customers. Customers have no obligation to order
      from TXP and may cancel, reduce or delay orders for a variety of reasons. The
      level and timing of orders placed by its customers vary due to:





·
            fluctuation
                in demand for its customers'
                products;




·
            changes
                  in customers' manufacturing strategies, such as a decision by a
                  customer
                  to either diversify or consolidate the number of prototyping contract
                  manufacturers used;




·
            customers'
                inventory management; and





·
            changes
                in new product introductions.





TXP
      has
      experienced terminations, reductions and delays in its customers' orders.
      Further terminations, reductions or delays in its customers' orders could lower
      its production asset utilization, which would lower its gross margins, decrease
      its net sales and negatively affect its business.


9


***BECAUSE
      TXP HAS ONLY ONE FACILITY, IT COULD BE HARMED BY ADVERSE WEATHER OR OPERATING
      CONDITIONS.***





TXP's
      only facility is located in Richardson, Texas. Its inability to continue
      production at this facility as a result of weather conditions, or a prolonged
      power shortage, fire or other natural disaster, could prevent it from supplying
      products to its customers, and could harm its business, results of operations
      and financial condition.





***PRODUCTS
      TXP ASSEMBLES MAY CONTAIN DEFECTS, WHICH COULD RESULT IN REDUCED DEMAND FOR
      ITS
      SERVICES AND LIABILITY CLAIMS AGAINST IT.***





TXP
      assembles highly complex products to its customers' specifications. These
      products may contain assembly errors or failures despite its quality control
      and
      quality assurance efforts. Defects in the products it assembles, whether caused
      by a design, assembly or materials failure or error, may result in delayed
      shipments, customer dissatisfaction, or a reduction in or cancellation of
      purchase orders. If these defects occur either in large quantities or too
      frequently, TXP's business reputation may be impaired. Since its products are
      used in products that are integral to its customers' businesses, errors, defects
      or other performance problems could result in financial or other damages to
      TXP's customers beyond the cost of the printed circuit board, for which it
      may
      be liable. Although sales arrangements generally contain provisions designed
      to
      limit its exposure to liability and related claims, existing or future laws
      or
      unfavorable judicial decisions could negate these limitation of liability
      provisions. Liability litigation against TXP, even if it were unsuccessful,
      would be time consuming and costly to defend.





***TXP
      IS EXPOSED TO THE CREDIT RISK OF SOME OF ITS CUSTOMERS AND AS A RESULT OF A
      CONCENTRATION OF ITS CUSTOMER BASE.***





Most
      of
      TXP's sales are on an "open credit" basis, with standard industry payment terms.
      It monitors individual customer payment capability in granting open credit
      arrangements, seeks to limit open credit to amounts management believes the
      customers can pay, and maintains reserves it believes are adequate to cover
      exposure for doubtful accounts. During periods of economic downturn in the
      global economy and the electronics industry, TXP's exposure to credit risks
      from
      its customers increases. Although it has programs in place to monitor and
      mitigate the associated risk, those programs may not be effective in reducing
      TXP's credit risks.





Five
      companies represented approximately 67% of TXP's net trade accounts receivable
      at June 30, 2006, with individual percentages for those companies ranging from
      7% to 27%. Its OEM customers direct their sales to a relatively limited number
      of EMS providers. TXP's management expects to continue to be subject to the
      credit risk of a limited number of customers. This concentration of customers
      exposes TXP to increased credit risks. If one or more of TXP's significant
      customers were to become insolvent or were otherwise unable to pay it, its
      results of operations would be harmed.





***TXP
      DEPENDS ON INDUSTRIES THAT CONTINUALLY PRODUCE TECHNOLOGICALLY ADVANCED PRODUCTS
      WITH SHORT LIFE CYCLES.***




Factors
      affecting these industries in general could seriously harm TXP's customers
      and,
      as a result, TXP. These factors include:




·
            slower
                  changes in technology, which result in longer product life
                  cycles;


·
            lack
                  of competitive pressure on its customers to develop new
                  products;




·
            the
                inability of its customers to successfully develop new product
                innovations, and the failure of these innovations to gain widespread
                market acceptance for commercialization;
                and





·
            maturation
                of the technology markets served by its customers or market periods
                characterized by a lack of disruptions in the enabling
                technology.





***IF
      TXP CANNOT DELIVER THE CUSTOMIZED COMPLEX PRODUCTS IN THE TIME DEMANDED BY
      ITS
      CUSTOMERS, IT WILL BE UNABLE TO ATTRACT NEW
      CUSTOMERS.***





TXP's
      future success depends upon its ability to respond quickly to the needs of
      its
      customers and to analyze and advise regarding the best design of complex
      products in a quick and cost efficient manner.




***IN
      THE PAST, TXP'S CUSTOMERS HAVE CANCELED THEIR ORDERS, CHANGED PRE-PRODUCTION
      QUANTITIES OR LOCATIONS OR DELAYED PRE-PRODUCTION AND NEW PRODUCT DESIGN CYCLES,
      AND MAY DO SO AGAIN IN THE FUTURE.***





As
      a
      provider of electronic pre-manufacturing services, TXP must provide increasingly
      rapid product turnaround for its customers. It generally does not obtain firm,
      long-term purchase commitments from its customers, and TXP often experiences
      reduced lead-times in customer orders. Customers cancel their orders, change
      pre-production quantities, and delay pre-production for a number of reasons.
      Uncertain economic and geopolitical conditions have resulted, and may continue
      to result, in some of TXP's customers delaying prototyping of products that
      it
      is to assemble in a period, causing a delay in repayment of its expenditures
      for
      inventory in preparation for customer orders and lower asset utilization,
      resulting in lower gross margins.


10


In
      addition, management makes significant decisions, including determining the
      levels of business that it seeks and accepts, production schedules, component
      procurement commitments, personnel needs and other resource requirements, based
      on its estimates of customer requirements. The short-term nature of TXP's
      customers' commitments and rapid changes in demand for their products reduces
      TXP's ability to estimate accurately future customer requirements. This makes
      it
      difficult to schedule prototyping production and maximize utilization of its
      operating capacity. It may be forced to increase staffing, increase capacity
      and
      incur other expenses to meet the anticipated demand of TXP's customers, which
      may cause reductions in its gross margins if customer orders are cancelled.
      Anticipated orders may not materialize and delivery schedules may be deferred
      as
      a result of changes in demand for its customers' products. On occasion,
      customers may require increases in production development services, which strain
      TXP's resources and reduce its margins. Although it has increased its capacity,
      and may plan further increases, TXP may not have significant capacity at any
      given time to meet its customers' demands. In addition, because many of TXP's
      cost and operating expenses are relatively fixed, a reduction in customer demand
      harms its gross profit and operating income.





***TXP'S
      OPERATING RESULTS MAY VARY SIGNIFICANTLY FROM PERIOD TO
      PERIOD.***





TXP
      experiences significant fluctuations in its results of operations. Some of
      the
      principal factors that contribute to these fluctuations are:




·
            changes
                  in demand for TXP's services;





·
            TXP's
                effectiveness in managing manufacturing processes and costs in order
                to
                decrease manufacturing expenses;




·
            changes
                  in TXP's low volume, high mix, high complexity manufacturing
                  requirements;




·
            changes
                in the cost and availability of labor and components, which often
                occur in
                the electronics manufacturing industry and which affect TXP's margins
                and
                its ability to meet delivery
                schedules;




·
            the
                  degree to which TXP is able to utilize its available manufacturing
                  capacity;




·
            TXP's
                ability to manage the timing of its component purchases so that components
                are available when needed for production, while avoiding the risks
                of
                purchasing inventory in excess of immediate prototyping
                needs;





·
            local
                conditions and events that may effect TXP's production volumes, such
                as
                labor conditions, political instability and local holidays;
                and




·
            changes
                  in demand in TXP's customers' end
                  markets.




***INTELLECTUAL
      PROPERTY INFRINGEMENT CLAIMS AGAINST TXP'S CUSTOMERS COULD HARM ITS
      BUSINESS.***





Customers
      for TXP's services typically require that it indemnify them against the risk
      of
      intellectual property infringement. If any claims are brought against TXP or
      its
      customers for such infringement, whether or not these have merit, it could
      be
      required to expend significant resources in defense of such claims. In the
      event
      of such an infringement claim, it may be required to spend a significant amount
      of money to develop non-infringing alternatives or obtain licenses. It may
      not
      be successful in developing such alternatives or obtaining such a license on
      reasonable terms or at all.





***TXP
      DEPENDS ON THE CONTINUING TREND OF OUTSOURCING BY
      OEMS.***





Future
      growth in TXP's revenue depends on new outsourcing opportunities in which it
      assumes additional manufacturing and design responsibilities from OEMs. To
      the
      extent that these opportunities are not available, either because OEMs decide
      to
      perform these functions internally or because they use other providers of these
      services, its future growth would be limited.





***TXP'S
      INDUSTRY IS EXTREMELY COMPETITIVE.***





The
      prototyping and quick turn sector of the electronics manufacturing services
      industry is extremely competitive and highly fragmented. TXP principally
      competes in the time-critical segment of the industry against small independent
      private companies and integrated subsidiaries of large, broadly based volume
      producers, as well as the internal capacity of OEMs. Management believes that
      competition in the market segment it serves is less driven by price because
      customers are willing to pay a premium for a responsive, broad-reaching
      capability to design customized complex products in a very short time, it
      competes primarily on the basis of quick turnaround, product quality and
      customer service.




11




***TXP'S
      CUSTOMERS MAY BE ADVERSELY AFFECTED BY RAPID TECHNOLOGICAL CHANGE, WHICH MAY
      DECREASE ITS REVENUES.***


TXP's
      customers compete in markets that are characterized by rapidly changing
      technology, evolving industry standards and continuous improvement in products
      and services. These conditions frequently result in a disruption in a product's
      development life cycle. Customers may be adversely affected by maturation of
      the
      technology markets they serve. This lack of innovation and competitive pressure
      in technology development could impact the research and development plans of
      some technology companies. TXP's success will depend largely on the success
      achieved by its customers in continually developing and marketing new products.
      If the technologies or product development activity supported by TXP's customers
      matures, its business could be adversely affected. TXP's Limited Operating
      History May Impede Acceptance Of Its Service By Medium-Sized And Large Customers
      And Reduce Its Revenues.




Although
      TXP competes in a highly fragmented market its ability to increase revenue
      and
      achieve profitability depends, in large part, on widespread acceptance of its
      service by medium-sized and large businesses. TXP's efforts to sell to these
      customers may not be successful. In particular, because TXP is a relatively
      new
      company with a limited operating history, these target customers may have
      concerns regarding its viability and may prefer to purchase services from one
      of
      its larger, more established competitors. Even if TXP is able to sell its
      service to these types of customers, they may insist on additional assurances
      from it that it will be able to provide adequate levels of service, which could
      harm its business.





***AS
      MORE OF TXP'S SALES EFFORTS ARE TARGETED AT LARGER CUSTOMERS, ITS SALES CYCLE
      MAY BECOME MORE TIME-CONSUMING AND EXPENSIVE, POTENTIALLY DIVERTING RESOURCES
      AND REDUCING ITS REVENUES.***





As
      TXP
      targets more of its sales efforts at larger customers, it will face greater
      costs, longer sales cycles and less predictability in completing some of its
      sales. In this market segment, the customer's decision to use TXP's service
      may
      be an enterprise-wide decision and, if so, these types of sales would require
      TXP to provide greater levels of education to prospective customers regarding
      the use and benefits of its service. In addition, larger customers may demand
      more customization, services and features. As a result of these factors, these
      sales opportunities may require it to devote greater sales support and
      professional services resources to individual sales, driving up costs and time
      required to complete sales and diverting sales and professional services
      resources to a smaller number of larger transactions.





***IF
      TXP FAILS TO DEVELOP ITS BRAND COST-EFFECTIVELY, ITS REVENUES MAY
      DECLINE.***





TXP's
      management believes that developing and maintaining awareness of TXP's brand
      in
      a cost-effective manner is critical to achieving widespread acceptance of its
      existing and future services and is an important element in attracting new
      customers. Furthermore, management believes that the importance of brand
      recognition will increase as competition in TXP's market develops. Successful
      promotion of its brand will depend largely on the effectiveness of TXP's
      marketing efforts and on its ability to provide reliable and useful services
      at
      competitive prices. In the past, its efforts to build TXP's brand have involved
      significant expense. Brand promotion activities may not yield increased revenue,
      and even if they do, any increased revenue may not offset the expenses it
      incurred in building its brand. If TXP fails to successfully promote and
      maintain its brand, or incurs substantial expenses in an unsuccessful attempt
      to
      promote and maintain its brand, TXP may fail to attract enough new customers
      or
      retain its existing customers to the extent necessary to realize a sufficient
      return on its brand-building efforts, and TXP's business could
      suffer.





***TXP
      IS SUBJECT TO ENVIRONMENTAL COMPLIANCE RISKS.***





TXP
      is
      subject to various federal, state, local and foreign environmental laws and
      regulations, including those governing the use, storage, discharge and disposal
      of hazardous substances in the ordinary course of its manufacturing process.
      Further, environmental matters may arise in the future at sites where no problem
      is currently known or at sites that it may acquire in the future. Currently
      unexpected costs that it may incur with respect to environmental matters may
      result in loss contingencies, the quantification of which cannot be determined
      at this time.





***THERE
      ARE A LARGE NUMBER OF SHARES UNDERLYING OUR CONVERTIBLE NOTES AND WARRANTS
      AND
      THE SALE OF THESE SHARES MAY DEPRESS THE MARKET PRICE OF OUR COMMON
      STOCK.***




As
      of
      August 2, 2006, we had 96,919,372 shares of common stock issued and outstanding.
      In connection with the financing arrangements that we entered into in 2005
      and
      2006, we also have outstanding secured convertible debentures or an obligation
      to issue callable secured convertible notes that may be converted into an
      estimated 12,738,000 shares of common stock at current market prices, and
      outstanding warrants or an obligation to issue warrants to purchase 3,700,000
      shares of common stock.





The
      debentures issued in 2005 and 2006 are at a conversion price per share equal
      to
      the lesser of (i) $0.50, or (ii) 95% of the lowest daily volume weighted average
      price of the common stock, as quoted by Bloomberg, LP, for the 30 trading days
      immediately preceding the date of conversion. Unless waived by us, Cornell
      may
      not, together with its affiliates, convert more than an aggregate of $150,000
      in
      any 30-day period of principal amount of the debentures at the conversion price
      with respect to the debentures issued in June 2006. Nevertheless, the number
      of
      shares of common stock issuable upon conversion of the outstanding secured
      convertible debentures issued may increase if the market price of our stock
      declines. Upon effectiveness of a registration statement, all of the shares,
      including all of the shares issuable upon conversion of the notes and upon
      exercise of our warrants, may be sold without restriction. The sale of these
      shares may adversely affect the market price of our common stock.


12


The
      variable price feature of our convertible debentures issued could require us
      to
      issue a substantially greater number of shares, which will cause dilution to
      our
      existing stockholders. The number of shares we will be required to issue upon
      conversion of the debentures will increase if the market price of our stock
      decreases. This will cause dilution to our existing stockholders.





***THE
      LOWER OUR STOCK PRICE, THE GREATER NUMBER OF SHARES ARE ISSUABLE UNDER THE
      CONVERTIBLE DEBENTURES.***





The
      number of shares issuable upon conversion of the debentures is determined by
      the
      market price of our common stock prevailing at the time of each conversion.
      The
      debentures issued limit the principal amount to be converted at the floating
      conversion price during any 30-day period to $150,000 with respect to the
      debentures issued in June 2006. Nevertheless, the lower the market price, the
      greater the number of shares issuable under the debentures. Upon issuance of
      the
      shares, to the extent that holders of those shares will attempt to sell the
      shares into the market, these sales may further reduce the market price of
      our
      common stock. This in turn will increase the number of shares issuable under
      the
      debentures. This may lead to an escalation of lower market prices and an
      increasing number of shares to be issued. A larger number of shares issuable
      at
      a discount to a continuously declining stock price will expose our shareholders
      to greater dilution and a reduction of the value of their investment.





***A
      LOWER STOCK PRICE WILL PROVIDE AN INCENTIVE TO CORNELL TO SELL ADDITIONAL SHARES
      INTO THE MARKET.*** ****





The
      number of shares that Cornell will receive under the convertible debentures
      is
      determined by the market price of our common stock prevailing at the time of
      each conversion. The lower the market price, the greater the number of shares
      issuable under the debentures. As a result, Cornell will have an incentive
      to
      sell as large a number of shares as possible to obtain a lower conversion price.
      This will lead to greater dilution of exiting shareholders and a reduction
      of
      the value of their investment





***THE
      ISSUANCE OF OUR STOCK UPON THE CONVERSION OF THE DEBENTURES COULD ENCOURAGE
      SHORT SALES BY THIRD PARTIES, WHICH COULD CONTRIBUTE TO THE FUTURE DECLINE
      OF
      OUR STOCK PRICE AND MATERIALLY DILUTE THE EXISTING STOCKHOLDER’S EQUITY AND
      VOTING RIGHTS.*** .





The
      debentures have the potential to cause significant downward pressure on the
      price of our common stock. This is particularly the case if the shares being
      placed into the market exceed the market's ability to absorb the increased
      number of shares of stock. Such an event could place further downward pressure
      on the price of our common stock, which presents an opportunity to short sellers
      and others to contribute to the future decline of our stock price. If there
      are
      significant short sales of our stock, the price decline that would result from
      this activity will cause the share price to decline more so, which, in turn,
      may
      cause long holders of the stock to sell their shares thereby contributing to
      sales of stock in the market. If there is an imbalance on the sell side of
      the
      market for the stock, our stock price will decline. If this occurs, the number
      of shares of our common stock that is issuable upon conversion of the debentures
      will increase, which will materially dilute existing stockholders' equity and
      voting rights.





***IF
      WE ARE REQUIRED FOR ANY REASON TO REPAY OUR OUTSTANDING CONVERTIBLE DEBENTURES,
      WE WOULD BE REQUIRED TO DEPLETE OUR WORKING CAPITAL, IF AVAILABLE, OR RAISE
      ADDITIONAL FUNDS. OUR FAILURE TO REPAY THE CONVERTIBLE DEBENTURES, IF REQUIRED,
      COULD RESULT IN LEGAL ACTION AGAINST US, WHICH COULD REQUIRE THE SALE OF
      SUBSTANTIAL ASSETS*** .




These
      debentures are due and payable, with interest, three years from their respective
      dates of issuance, unless sooner converted into shares of our common stock.
      Any
      event of default such as our failure to repay the principal or interest when
      due, our failure to issue shares of common stock upon conversion by the holder,
      or our failure to timely file a registration statement or have such registration
      statement declared effective, could require the early repayment of the
      convertible debentures. We anticipate that the full amount of the convertible
      debentures will be converted into shares of our common stock, in accordance
      with
      the terms of these debentures. If we were required to repay the convertible
      debentures, we would be required to use our limited working capital and raise
      additional funds. If we were unable to repay the debentures when required,
      the
      holders could commence legal action against us and foreclose on all of our
      assets to recover the amounts due. Any such action would require us to curtail
      or cease operations.





***IF
      AN EVENT OF DEFAULT OCCURS UNDER THE SECURITIES PURCHASE AGREEMENT, SECURED
      CONVERTIBLE DEBENTURES, WARRANTS, OR SECURITY AGREEMENT OR INTELLECTUAL PROPERTY
      SECURITY AGREEMENT, CORNELL COULD TAKE POSSESSION OF ALL OUR GOODS, INVENTORY,
      CONTRACTUAL RIGHTS AND GENERAL INTANGIBLES, RECEIVABLES, DOCUMENTS, INSTRUMENTS,
      AND CHATTEL PAPER, AND INTELLECTUAL PROPERTY.***





In
      connection with the Securities Purchase Agreements we entered into in 2005
      and
      2006, we executed a Security Agreement in favor of the investors granting them
      a
      second priority security interest in all of our goods, inventory, contractual
      rights and general intangibles, receivables, documents, instruments, and chattel
      paper. The Security Agreement states that if an even of default occurs under
      the
      Securities Purchase Agreements, Convertible Debentures, Warrants, or Security
      Agreement, Cornell has the right to take possession of the collateral, to
      operate our business using the collateral, and have the right to assign, sell,
      lease or otherwise dispose of and deliver all or any part of the collateral,
      at
      public or private sale or otherwise to satisfy our obligations under these
      agreements.


13


***OUR
      STOCK PRICE MAY BE VOLATILE.***





The
      market price of our common stock is likely to be highly volatile and could
      fluctuate widely in price in response to various factors, many of which are
      beyond our control, including:





· technological innovations or new products and services by us or our competitors;


· additions or departures of key personnel;


· sales of
      our common stock;


· our
      ability to integrate operations, technology, products and services;


· our
      ability to execute our business plan;


· operating results below expectations;


· loss of
      any strategic relationship;


· industry
      developments;


· economic
      and other external factors; and


· period-to-period fluctuations in our financial results.





Because
      we have a limited operating history, you may consider any one of these factors
      to be material. Our stock price may fluctuate widely as a result of any of
      the
      above listed factors.





In
      addition, the securities markets have from time to time experienced significant
      price and volume fluctuations that are unrelated to the operating performance
      of
      particular companies. These market fluctuations may also materially and
      adversely affect the market price of our common stock.





***WE
      HAVE NOT PAID DIVIDENDS IN THE PAST AND DO NOT EXPECT TO PAY DIVIDENDS IN THE
      FUTURE. ANY RETURNS ON INVESTMENT MAY BE LIMITED TO THE VALUE OF OUR COMMON
      STOCK.***





We
      have
      never paid cash dividends on our common stock and do not anticipate paying
      cash
      dividends in the foreseeable future. The payment of dividends on our common
      stock will depend on earnings, financial condition and other business and
      economic factors affecting it at such time as the board of directors may
      consider relevant. If we do not pay dividends, our common stock may be less
      valuable because a return on your investment will only occur if its stock price
      appreciates.





***OUR
      COMMON STOCK IS DEEMED TO BE “PENNY STOCK” WITH A LIMITED TRADING
      MARKET.*** ****





Our
      common stock is currently listed for trading on the OTC Bulletin Board which
      is
      generally considered to be a less efficient market than markets such as NASDAQ
      or other national exchanges, and which may cause difficulty in conducting trades
      and difficulty in obtaining future financing. Further, our securities are
      subject to the "penny stock rules" adopted pursuant to Section 15 (g) of the
      Securities Exchange Act of 1934, as amended, or Exchange Act. The penny stock
      rules apply to non-NASDAQ companies whose common stock trades at less than
      $5.00
      per share or which have tangible net worth of less than $5,000,000 ($2,000,000
      if the company has been operating for three or more years). Such rules require,
      among other things, that brokers who trade "penny stock" to persons other than
      "established customers" complete certain documentation, make suitability
      inquiries of investors and provide investors with certain information concerning
      trading in the security, including a risk disclosure document and quote
      information under certain circumstances. Many brokers have decided not to trade
      "penny stock" because of the requirements of the penny stock rules and, as
      a
      result, the number of broker-dealers willing to act as market makers in such
      securities is limited. In the event that we remain subject to the "penny stock
      rules" for any significant period, there may develop an adverse impact on the
      market, if any, for our securities. Because our securities are subject to the
      "penny stock rules," investors will find it more difficult to dispose of our
      securities. Further, for companies whose securities are traded in the OTC
      Bulletin Board, it is more difficult: (i) to obtain accurate quotations, (ii)
      to
      obtain coverage for significant news events because major wire services, such
      as
      the Dow Jones News Service, generally do not publish press releases about such
      companies, and (iii) to obtain needed capital.





**Item
      3. Controls and Procedures**





a) ***Evaluation
      of Disclosure Controls and Procedures*** .
      As of
      the end of the period covered by this report, we conducted an evaluation, under
      the supervision and with the participation of our chief executive officer and
      chief financial officer of our disclosure controls and procedures (as defined
      in
      Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act). Based upon this
      evaluation, our chief executive officer and chief financial officer concluded
      that our disclosure controls and procedures are effective to ensure that
      information required to be disclosed by us in the reports that we file or submit
      under the Exchange Act is recorded, processed, summarized and reported, within
      the time periods specified in the Commission's rules and forms.





b) ***Changes
      in internal controls*** .
      There
      was no change in our internal controls or in other factors that could affect
      these controls during our last fiscal quarter that has materially affected,
      or
      is reasonably likely to materially affect, our internal control over financial
      reporting.




14


**PART
      II**




**Item
      1. Legal Proceedings.**




None.





**Item
      2. Unregistered Sales of Equity Securities and Use of
      Proceeds.**




On
      April
      28, 2006, the Company issued shares of its common stock to Texas Prototypes,
      Inc. (“TXP”) equal to 94.7% of its total outstanding shares of common stock, or
      89,298,042 shares, within three days after completion of the closing conditions
      under the Agreement and Plan of Merger with the Company’s wholly owned
      subsidiary and TXP.




In
      June
      of 2006, the company issued 923,657 shares of common stock to Cornell Capital
      in
      conversion of $145,000 of convertible debentures. The conversion price was
      equal
      to $0.157 per share in accordance with debenture agreement.




On
      June
      5, 2006, the Company consummated a Securities Purchase Agreement (the "Purchase
      Agreement") with Cornell Capital Partners L.P. ("Cornell") providing for the
      sale by the Company to Cornell of its 10% secured convertible debentures in
      the
      aggregate principal amount of $550,000 (the "Debentures"). Under the Purchase
      Agreement, the Company also issued to Cornell five-year warrants to purchase
      1,850,000 and 1,850,000 shares of Common Stock at a price equal to $0.60 and
      $0.75 per share, respectively (collectively, the "Warrants").




The
      Debentures mature on the third anniversary of the date of issuance (the
      "Maturity Date") and the Company is not required to make any payments until
      the
      Maturity Date. The Debentures are convertible at any time into shares of common
      stock of the Company (the "Common Stock") at a conversion price per share equal
      to the lesser of (i) $0.50, or (ii) 95% of the lowest daily volume weighted
      average price of the Common Stock, as quoted by Bloomberg, LP, for the 30
      trading days immediately preceding the date of conversion (the "Variable Market
      Price"). Unless waived by the Company, the Holders may not, together with their
      affiliates, convert more than an aggregate of $150,000 in any 30-day period
      of
      principal amount of the Debentures at the Variable Market Price.




The
      Company has the right to redeem a portion or all amounts outstanding under
      the
      Debentures prior to the Maturity Date at a 20% redemption premium provided
      that
      the closing bid price of the Common Stock is less than $0.50.





In
      addition, on June 5, 2006 the Company issued to Cornell an Amended and Restated
      Convertible Debenture (the “Amended and Restated Convertible Debenture”), which
      consolidates all outstanding amounts of the convertible debenture issued by
      Texas Prototypes, Inc. (“TXP”), the Company’s wholly owned subsidiary, to
      Cornell on June 15, 2005 in the $550,000, plus accrued and unpaid interest
      in
      the amount of $26,897 through June 5, 2006, for the principal sum of $576,897.
      Further, the Company issued an aggregate of 1,700,000 shares of its Common
      Stock
      to Cornell in consideration for the cancellation of the convertible debenture
      issued by the Company dated June 14, 2005 in the $240,000 issued in connection
      with the Standby Equity Distribution Agreement dated June 14, 2004 and the
      cancellation of the convertible debenture issued by TXP dated August 25, 2004
      in
      the amount of $400,000 issued in connection with the Standby Equity Distribution
      Agreement dated August 25, 2004.





*
      All of
      the above offerings and sales were deemed to be exempt under rule 506 of
      Regulation D and Section 4(2) of the Securities Act of 1933, as amended. No
      advertising or general solicitation was employed in offering the securities.
      The
      offerings and sales were made to a limited number of persons, all of whom were
      accredited investors, business associates of TXP Corporation or executive
      officers of TXP Corporation, and transfer was restricted by TXP Corporation
      in
      accordance with the requirements of the Securities Act of 1933. In addition
      to
      representations by the above-referenced persons, we have made independent
      determinations that all of the above-referenced persons were accredited or
      sophisticated investors, and that they were capable of analyzing the merits
      and
      risks of their investment, and that they understood the speculative nature
      of
      their investment. Furthermore, all of the above-referenced persons were provided
      with access to our Securities and Exchange Commission filings.





**Item
      3. Default Upon Senior Securities.**




None.





**Item
      4. Submission of Matters to a Vote of Security Holders** **.**





On
      July
      10, 2006, we amended our Articles of Incorporation to: (i) change the name
      of
      our company from YTXP Corporation to TXP Corporation, (ii) increase the number
      of authorized shares of common stock, par value $.001 per share, of the Company
      from 100,000,000 shares to 300,000,000 shares, and (iii) adopt our 2006 Stock
      Incentive Plan, each pursuant to a written consent of a majority of stockholders
      dated June 8, 2006, in lieu of a special meeting of the stockholders. Out of
      a
      total of 95,995,713 possible votes on the aforementioned matters submitted
      to
      the stockholders, the majority of stockholders voting in favor of the amendment
      by written consent of a majority of stockholders held in aggregate 81,640,295
      votes.





**ITEM
      5. Other Information.**





None.


15


**Item
      6. Exhibits.**





**Exhibit
                No.**
            
            **Description**31.1
            
            Certification
                by Chief Executive Officer pursuant to Sarbanes Oxley Section
                302.31.2
            
            Certification
                by Chief Financial Officer pursuant to Sarbanes Oxley Section
                302.32.1
            
            Certification
                by Chief Executive Officer pursuant to 18 U.S.C. Section
                1350.32.2
            
            Certification
                by Chief Financial Officer pursuant to 18 U.S.C. Section
                1350.





16


**Signatures**





Pursuant
      to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
      1934,as amended, the Registrant has duly caused this report to be signed on
      its
      behalf by the undersigned, thereunto duly authorized, on this 7 th day of
      August 2006.




**TXP
              CORPORATION***/s/ Michael
              Shores*Michael
              ShoresChief
                Executive*Officer (Principal Executive
                Officer)*





*/s/ Robert
              Bruce*Robert
              Bruce*Chief
              Financial Officer (Principal Accounting and Financial
              Officer)*




17