UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                   FORM 10-KSB


[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
    1934

                   For the fiscal year ended December 31, 2002


[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
    OF 1994

                For the transition period from _______ to _______

                         Commission File Number: 0-16179

                                   GEXA CORP.
                                   ----------
                 (Name of Small Business Issuer in Its Charter)

    Texas                                                      75-0670175
    -----                                                      ----------
(State or Other Jurisdiction                                 (IRS Employer
of Incorporation or Organization)                        Identification Number)

  24 Greenway Plaza, Ste 1826, Houston, TX                        77046
 (Address of Principal Executive Offices)                       (Zip Code)

                                 (713)-961-9399
                            -------------------------
                           (Issuer's telephone number)


             Securities registered under Section 12 (b) of the Act:

                                      None
                                      ----
                                (Title of class)

         Securities registered under Section 12(g) of the Exchange Act:

                          Common Stock, par value $.01
                          ----------------------------
                                (Title of class)

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

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

Issuer's revenues for its most recent fiscal year: $19,038,804

The aggregate market value of voting and non-voting common equity held by
non-affiliates of the issuer on March 21, 2003, was approximately
[$3,432,402.95] (based upon average bid and asked price per share as reported on
the OTC:BB on such date). For purposes of this calculation, all executive
officers, directors and 5% beneficial owners of the issuer were deemed

<PAGE>

affiliates. Such determination should not be deemed an admission by such
officers, directors and beneficial owners that they are, in fact, affiliates of
the issuer.
The number of shares of the issuer's common stock, $0.01 par value, outstanding
as of March 21, 2003, was 7,604,528 and the number of shares of the issuer's
preferred stock, $0.05 par value, outstanding as of March 21, 2003, was 508,214.
Transitional Small Business Disclosure Format (check one):  Yes  [   ] No  [ x ]

DOCUMENTS INCORPORATED BY REFERENCE:

There are no documents incorporated by reference in this Annual Report on Form
10-KSB other than as set forth in Part III, Item 13. (*) Affiliates for the
purposes of this Annual Report refer to the officers, directors and/or persons
or firms owning 5% or more of Issuer's common stock, both of record and
beneficially.


                                       2
<PAGE>
<TABLE>
<CAPTION>

TABLE OF CONTENTS
                                                                                                                 Page
                                                    PART I
<S>     <C>                                                                                                       <C>
Item 1. Description of Business.                                                                                   5
Item 2. Description of Property.                                                                                  20
Item 3. Legal Proceedings.                                                                                        20
Item 4. Submission of Matters to a Vote of Security Holders.                                                      20

                                                    PART II
Item 5. Market for Common Equity and Related Stockholder Matters.                                                 21
Item 6. Management's Discussion and Analysis.                                                                     28
Item 7. Financial Statements.                                                                                     31
Item 8. Changes In and Disagreements With Accountants on Accounting and Financial                                 49
        Disclosure.

                                                   PART III
Item 9.  Directors, Executive Officers, Promoters and Control Persons.                                            50
Item 10. Executive Compensation.                                                                                  52
Item 11. Security Ownership of Certain Beneficial Owners and Management.                                          53
Item 12. Certain Relationships and Related Transactions.                                                          54
Item 13. Exhibits and Reports on Form 8-K.                                                                        54
Item 14. Controls and Procedures                                                                                  55
</TABLE>


                                       3
<PAGE>

Forward Looking Statements

This annual report on Form 10-K includes "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended (the
"Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as
amended ("Exchange Act"). All statements other than statements of historical
fact are forward-looking statements. Forward-looking statements are subject to
certain risks, trends and uncertainties that could cause actual results to
differ materially from those projected. Among those risks, trends and
uncertainties are our estimate of the sufficiency of existing capital sources,
our ability to raise additional capital to fund cash requirements for future
operations particularly as relates to possible operations in other states, our
assumptions regarding the competitive restructuring and deregulation of the
electricity market, competition from utility companies, our dependence on the
services of certain key personnel and our ability to manage our growth
successfully. Although we believe that in making such forward-looking statements
our expectations are based upon reasonable assumptions, such statements may be
influenced by factors that could cause actual outcomes and results to be
materially different from those projected. We cannot assure you that the
assumptions upon which these statements are based will prove to have been
correct.

When used in this Form 10-K, the words "expect", "anticipate"," "intend,"
"plan," "believe," "seek," "estimate" and similar expressions are intended to
identify forward-looking statements, although not all forward-looking statements
contain these identifying words. Because these forward-looking statements
involve risks and uncertainties, actual results could differ materially from
those expressed or implied by these forward-looking statements for a number of
important reasons, including those discussed under "Management's Discussions and
Analysis of Financial Condition and Results of Operations," "Risk Factors" and
elsewhere in this Form 10-K.

You should read these statements carefully because they discuss our expectations
about our future performance, contain projections of our future operating
results or our future financial condition, or state other "forward-looking"
information. Before you invest in our stock, you should be aware that the
occurrence of any of the events described in "Management's Discussion and
Analysis," "Risk Factors" and elsewhere in this Form 10-KSB could substantially
harm our business, results of operations and financial condition and that upon
the occurrence of any of these events, the trading price of our common stock
could decline, and you could lose all or part of your investment.

We cannot guarantee any future results, levels of activity, performance or
achievements. Except as required by law, we undertake no obligation to update
any of the forward-looking statements in this Form 10-KSB after the date of this
Form 10-KSB.


                                       4
<PAGE>



                                     PART I

ITEM 1. DESCRIPTION OF BUSINESS

General Background and Reports under the Exchange Act
Gexa Corp., a Texas corporation, is sometimes referred to herein as "we", "us",
"our" and the "Company". We have previously filed our Annual Reports on Form
10-KSB for the years ended December 31, 1992, 1993, 1994, 1995, 1996, 1997,
1998, 1999, 2000 and 2001, all of which contain our audited financial statements
for the respective periods. No material change in our business occurred
following our filing for bankruptcy under Chapter XI of the US Bankruptcy Code
and our discharge by the Bankruptcy Court in 1992 through the year ended
December 31, 2000.

This Annual Report contains disclosures related to our business operations of
providing electricity which became a deregulated industry in the state of Texas
effective January 1, 2002. In August 2001, the Public Utility Commission of the
State of Texas approved Gexa's license to become a retail provider of
electricity to residential and commercial customers in Texas. Under Texas law,
since January 1, 2002, customers have had the option to purchase electricity
from independent providers, such as Gexa. Our disclosure may involve certain
estimates and plans related to the business of providing electricity, which is a
newly deregulated industry, which assumes certain events, trends and activities
will occur and the projected information based on those assumptions. We do not
know that any assumptions that we may make will be accurate. In particular, we
do not know, nor can we predict with any degree of certainty, the future growth
of the deregulated electricity industry in the State of Texas in which we have
operated since January 1, 2001. If our assumptions about any events, trends and
activities, and specifically about this new business opportunity are incorrect,
it could materially impact our current projections. Our limited resources could
also have a material negative impact on our operations.

During the fiscal year 2002, we generated revenues of $19,038,804 from normal
business operations. During the fiscal year 2002, we had cost of goods sold of
$15,264,611, and general and administrative expenses of $2,816,458, producing
income of $639,888 net of interest and taxes. We had no revenues for the year
ended December 31, 2001, and administrative expenses of $852,830.

At December 31, 2002, the Company had 32 full-time employees, and
approximately 10 part time independent contractors performing a variety of
non-sales tasks on a part time basis.

We were incorporated under the laws of Nevada on April 1, 1985. In March 2001,
concurrent with our share recapitalization, we were reincorporated under the
laws of the State of Texas. Prior to the filing of Chapter XI under the Federal
bankruptcy laws in the United States Bankruptcy Court for the District of Idaho
during the period ended June 30, 1992, we were engaged in the business of
acquiring, exploring and developing mining properties.


                                       5
<PAGE>

We emerged from this proceeding and our plan of reorganization was approved
by creditors and by the United States Bankruptcy Court in 1992. During the
period following our discharge from bankruptcy through 2000, we conducted no
commercial mining operations and had no other significant business activities.
Following the bankruptcy, we redirected our efforts and limited resources to
seeking potential new business opportunities. Since the second quarter of 2001,
Gexa's efforts have been directed solely toward competing in the deregulated
electricity industry.

Our Business

We offer consumers in restructured retail energy markets competitive energy
prices, customized billing solutions and customer-driven service. Gexa is
targeting the rapidly restructuring residential and commercial electricity
consumer markets. We believe we are well-positioned to succeed because our
competitors are not focusing on the residential, apartment dweller, or small
business markets. Our management team has significant marketing experience in a
similar deregulated environment. The Company has already been successful against
larger, better capitalized companies in selling to its target market
(residential and commercial customers) in the deregulated environment.

Business Strategy

Gexa intends to become a national provider of electricity and grow along with
deregulation after its business model has been proven in Texas. Gexa intends to
focus its service and market electricity to the residential customer, in
particular apartment dwellers and smaller commercial customers.

We have entered into marketing agreements with several apartment communities
which market our services to the apartment dweller. Through these marketing
agreements, the tenant has the opportunity to sign up for their electricity
service via telephone, facsimile through their apartment leasing office, or
online through our website at www.gexaenergy.com. To date we have reached
agreements with over 350 apartment complexes and are in discussion with others,
which will allow Gexa the right to market electric services to new tenants. Our
strategy allows tenants the ease of having electricity at the time of move-in,
and provides the apartment complex with financial incentives to promote our
services.

Gexa will continue to use the following strategy in the implementation of
its business plan:

Apartment Market
----------------

A.   Continue to secure favorable apartment location contracts throughout the
     Texas market.

B.   Continue to develop strategic synergistic partnerships with companies
     offering services to our target markets.


                                       6
<PAGE>

C.   Pursue marketing efforts through traditional channels such as independent
     contractors, on-line partnerships and channels, and in-house sales
     personnel.

D.   Effectively use its sales force to gain commercial and residential
     customers.

E.   Target and focus on market segments that are not saturated by competition
     (e.g. small strip shopping center tenants) utilizing the same strategy as
     apartment complexes.

F.   Continue to differentiate our service as being flexible, affordable and
     customer driven.

G.   Quickly establish a critical mass of customers.

H.   Integrate new products and services to existing customers.

I.   Continue growth and begin national roll out to selective retail energy
     markets.

Large Residential and Small Commercial
--------------------------------------

Gexa has a trained sales team that markets electricity services to large
residential customers and small commercial customers. The sales team uses an
approach that proved very successful in the telecommunications industry. The
target customers are in many cases the same customers that switched their
telecommunications services away from the larger, better capitalized companies,
to smaller, and more customer service oriented companies. As of December 31,
2002, such customers account for more than 50% of our sales.

Electric Retail Market in Texas
-------------------------------

The current opportunity for Gexa in the retail electricity business is as
follows:

A.       The potential market in Texas alone is huge and in its infancy. The
         total residential and small commercial electricity marketplace in the
         United States exceeds $226 billion annually, making it one of the
         largest consumer markets to undergo competitive regulatory
         restructuring.

B.       Currently, markets in fourteen states are open to retail electric
         competition. In addition, laws or regulatory plans providing for future
         retail electric competition have been adopted in numerous other states.

C.       In Harris County, Texas alone, there are over 4 million electric meters
         associated with residential and small business customers. In Texas
         there are 5.3 million residential customers.

D.       The electric retail industry in Texas is in its early stage and the
         market remains largely untapped with roughly 8% of residential and
         commercial customers having made an electricity provider switch in
         2002.

E.       We have quickly secured several major residential customers in a market
         that is being overlooked, the individual apartment dweller. Gexa has
         contracted with several large Real Estate Investment Trusts (REITs),
         apartment complex owners and purchasing aggregators all of whom have
         expressed great interest in this area. Gexa believes its marketing
         partners and commission arrangements with the apartment complex owners
         can create a significant residential customer base.


                                       7
<PAGE>


Long Term Market Potential

We believe the sub-prime and high credit risk customer utilizing a pre-paid
smart meter is another untapped market (meter reading is scheduled to be
deregulated in 2005 by the Texas PUC). The prepaid market will work exactly like
the prepaid phone cards where consumers will buy and pay for only the
electricity they need with payment made in advance of consumption. These same
customers also generally reside in lower cost apartment complexes. Prepaid
electricity options allow for greater profit margins and significant reduction
in the risk for bad debt. The potential market is also quite sizeable.
Approximately 30% of Houston residents do not have a relationship with any bank.
And in a national marketplace, Gexa believes this same potential customer base
will be found in other states as well.

Gexa estimates that the total residential and commercial electric and natural
gas marketplace in the United States exceeds $226 billion annually, making it
one of the largest consumer markets to undergo competitive regulatory
restructuring. Currently, markets in fourteen states and the District of
Columbia are open to retail electric competition. States that have deregulated
retail markets including residential customers are Arizona, Connecticut,
Delaware, District of Columbia, Maine, Maryland, Massachusetts, Michigan, New
Hampshire, New Jersey, New York, Ohio, Pennsylvania, Rhode Island, Texas and
Virginia. Illinois, Montana and Oregon have deregulated their retail electricity
markets except for residential. Arkansas and Nevada are slated for deregulation
to begin in 2003. In addition, laws or regulatory plans providing for future
retail electric competition have been adopted in numerous other states. Although
in many of these jurisdictions, final rules implementing market restructuring
are not yet finalized and effective, we estimate that by the beginning of 2005,
roughly 50% of the U.S. population, or approximately 55 million households, will
be in markets where consumers can choose either their electricity or natural gas
provider or both. As was the case in the deregulation of the long-distance
telephone markets, we believe that a significant percentage of consumers will be
receptive to switching from their monopoly energy providers to competitive
providers.

The Company's Marketing Strategy

In addition to our apartment marketing strategy, Gexa markets its products and
services to commercial customers with a sales force consisting of in-house and
independent sales representatives. Gexa also entered into contractual
relationships with shopping center owners. The procedure is essentially the same
as with an apartment complex- the landlord offers the tenant electricity at time
of move in through a pre-selected provider, such as Gexa.

We have also successfully targeted a few large commercial customers through both
in-house and independent sales representatives.


                                       8
<PAGE>

Competition

While there is competition in the retail electric market, most of the
competitors are targeting high-end residential and business customers that are
willing to sign long-term contracts. Gexa intends to pursue residential, small
business and selected larger businesses. Apartment communities and their
residents are considered a niche market within the residential market.

In addition to our current primary competitors, there will be other retail
electric providers certified providing future competition. Some of the new
entries are single client companies that are large electricity users, such as a
refinery or plant. While all of the competitors are looking to sign new clients,
their strategy is to only switch customers with high usage. Gexa differentiates
itself by focusing on small and large consumers alike. The Company offers
competitive rates that are attractive to both small and large clients, but our
small customer approach, unique sales techniques, and outstanding level of
customer service help differentiate Gexa from its competitors.

Technology

Gexa has built a single network architecture that provides an integrated
backbone for the multiple platforms required for the competitive retail market
registration process.

All retail electric providers must certify with the Electric Reliability
Council of Texas ("ERCOT"). ERCOT is continuously performing five major
processes to support the retail provider:

-    Registration

-    Market Operations

-    Power Operations

-    Load Profiling, Date Acquisition and Aggregation

-    Settlements, Billing and Financial Transfer

ERCOT Core Operations:

In its simplest form, ERCOT is responsible for coordinating and monitoring all
communications by and between the power generator, the retail electric provider
and the line transmission company. ERCOT oversees all aspects of these
communications from customer sign up, meter reading and billing the between the
end user, power generator and retail electric provider. Gexa outsources the
function of receiving and interpreting ERCOT data by utilizing the services of
Alliance Data Systems, "ADS", (formerly Exolink Corporation), a leading
innovator in the automation of back-office business processes for the emerging
deregulated energy industry. ADS is a certified processor of retail energy
information for the Texas SET group and ERCOT. The Texas Set group was
established to formulate guidelines for the processing of Electronic Data
Interchange (EDI) transactions in the Texas deregulated electricity market.


                                       9
<PAGE>

ADS provides Gexa with market interface development; ongoing maintenance
and market rule updates associated with the interface to the utility
distribution company (UDC) markets including electronic data interchange mapping
and other applicable communication protocols. Also, ADS provides access to their
online transaction service, which allows Gexa to initiate and receive
transactions on-line, and also identify and correct data errors for specific
transactions. Through these services, Gexa has the advantages of an automated
business process, data validation, data routing and online exception management.

Regulations

We are subject to regulation by various federal, state, local and foreign
governmental agencies, including the regulations described below.

In June 1999, the Texas legislature adopted legislation which substantially
amended the regulatory structure governing electric utilities in Texas in order
to allow retail competition. The legislation called for the commencement of
retail competition beginning on January 1, 2002.

The legislation also requires electric utilities in Texas to restructure their
businesses in order to separate power generation, transmission and distribution,
and retail activities into three different units, whether commonly or separately
owned. Generally, the "retail electric providers", such as Gexa, that have been
certified by the Texas Public Utility Commission obtain or buy electricity from
the wholesale generators at unregulated rates, sell electricity at retail to
their customers and pay the transmission and distribution utility a regulated
tariffed rate for delivering the electricity to their customers. Retail electric
providers are not allowed to own or operate generation assets and their retail
prices are not subject to traditional cost-of-service rate regulation. Retail
electric providers that are affiliates of, or successors in interest to,
traditional electric utilities may compete statewide for these sales.

The legislation requires the Texas Public Utility Commission to determine
procedures and criteria for designating retail electric providers to serve as
providers of last resort in areas of the state in which retail competition is in
effect. A provider of last resort is required to offer a standard retail
electric service package for each class of customers designated by the Texas
Public Utility Commission at a fixed rate approved by the Texas Public Utility
Commission, and is required to provide the service package to any requesting
retail customer in the territory for which it is the provider of last resort. In
the event that a retail electric provider fails to serve any or all of its
customers, the provider of last resort is required to offer those customers the
standard retail service package for that customer class with no interruption of
service to the customer. Pursuant to the legislation, the transmission and
distribution utility is not required to serve as the provider of last resort.
For the year ended December 31, 2002, all markets in which Gexa operates had a
provider of last resort providing service without interruption. Gexa has no
plans to apply to serve as a provider of last resort in any current or future
markets in which it may operate.


                                       10
<PAGE>

                                  RISK FACTORS

The following important factors, among others, could cause actual results to
differ from those indicated in forward-looking statements made in this document.
Further, reference is made to the disclosure in "all capitalized letters" on the
first page following the cover page of this Annual Report.

The following factors contain certain forward-looking statements.
Forward-looking statements give our current 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. They use words such as "anticipate,"
"estimate," "expect," "project," "intend," "plan," "believe," and other words
and terms of similar meaning in connection with any discussion of future
operating or financial performance. From time to time, we also may provide oral
or written forward-looking statements in other materials we release to the
public.

Any or all of our forward-looking statements in this document and in any
other public statements we make may turn out to be wrong. They can be affected
by inaccurate assumptions we might make or by known or unknown risks and
uncertainties. Many factors mentioned in the discussion below will be important
in determining future results. Consequently, no forward-looking statement can be
guaranteed. Actual future results may vary materially.

Early Stage Operating Company
-----------------------------

Gexa Corp. is an early stage operating company created for the purpose of
providing electricity to residential and business customers under the new
deregulation of the electricity market. The Company has experienced positive
growth in 2002, and future success is, to some degree, dependent upon
management's ability to continue to expand its operations through implementation
of its business plan and model while devoting adequate resources to maintaining
the customer base we have already amassed. The Company is subject to all of the
risks inherent in attempting to expand a relatively new business venture. These
risks include, but are not limited to, possible inability to implement its
business plan, the existence of undisclosed actual or contingent liabilities,
and the inability to fund the working capital requirements of its business plan.
There can be no assurance that the Company will remain profitable, or that it
will provide a return on invested capital.

Dependence on Key Personnel
---------------------------

The Company is substantially dependent upon the continued services of its
present Management. The Company does not have employment agreements with its key
current Management, including Neil Leibman, the Company's Chairman and CEO and
Marcie Zlotnik, the Company's President. The Company does not maintain key man
life insurance on either Neil Leibman or Marcie Zlotnik. To the extent that
their services become unavailable, the Company will be required to retain other
qualified personnel. There can be no assurance that it will be able to recruit
and hire qualified persons under acceptable terms.


                                       11
<PAGE>

The market in which the Company competes is highly competitive, and we may not
be able to compete effectively, especially against established industry
competitors with significantly greater financial resources.

The Company will face competition from many competitors with significantly
greater financial resources, well-established brand names and large, existing
installed customer bases. We expect the level of competition to intensify in the
future. We expect significant competition from incumbent, traditional, and new
electricity providers which may be better capitalized than our company.

Dependence on Providers of Electricity for Resale
-------------------------------------------------

The Company must rely on a limited number of suppliers of wholesale electricity
in order to meet its customer's needs. The unavailability of electricity from
one or more of our suppliers at times of high demand could have an adverse
impact on our financial condition if we are forced to purchase substantial
electricity supply in the open market to meet customer demand at a time when
energy prices are volatile.

For the fiscal year ended December 31, 2002, the Company's primary supplier of
electricity was TXU. Additional supplies were purchased from BP, ANP and Coral
Energy. In November 2002, the Company became its own Qualified Scheduling Entity
(QSE), allowing us to buy and sell power in the balancing markets to ensure our
demand each day meets with our supply needs. Prior to November 2002, the
Company's QSE services were provided by TXU.

Need for Additional Capital to Finance Expansion
------------------------------------------------

The capital demands of the Company's rapid growth in the Texas market or severe
seasonality will likely impact the Company's cash flow and require the Company
to raise additional funds through financing activities. In order to maintain the
Company's current rapid growth rate and to move into deregulated markets in
other states, the Company will have to raise additional capital which may
include securing a credit line against customer receivables.

There can be no assurance that the Company will be able to secure all financing
necessary to continue its planned expansion. In addition, the Company cannot
assure that such financing will be available on terms that will make such growth
or expansion economically viable. The Company's limited resources, however, may
make it difficult to borrow additional funds. The amount and nature of any
borrowing by us will depend on numerous factors, including the Company's capital
requirements, potential lender's evaluation of the Company's ability to meet
debt service on borrowing and the then prevailing conditions in the financial
markets, as well as general economic conditions. The inability of the Company to
raise additional capital would likely have a material adverse effect on the
Company's financial condition and future prospects. Also, any financing obtained
by the Company will subject the company to the risks normally associated with
such financing, including the risk of losing valuable property or assets in the
event the Company is unable to service such debt.


                                       12
<PAGE>

Competitive restructuring of the electric market may be delayed, or may not
---------------------------------------------------------------------------
result in viable competitive market rules
-----------------------------------------

To date, only a limited number of markets have been opened to
retail energy competition. In many of these markets, the market rules adopted
have not resulted in energy service providers being able to compete successfully
with the incumbent utilities, and customer-switching rates have been low. Only
recently have a small number of markets opened to competition under rules that
we believe may offer attractive competitive opportunities, Texas- our sole
marketplace in 2002- among them. Our business model depends on other favorable
markets opening under viable competitive rules in a timely manner. In any
particular market, there are a number of rules which will ultimately determine
the attractiveness of that market. Markets that we enter may have both favorable
and unfavorable rules. If the trend towards competitive restructuring of retail
energy markets does not continue or is delayed or reversed, our business
prospects and financial condition could be materially adversely impaired.

Retail energy market restructuring has been, and will continue to be, a
complicated regulatory process, with competing interests advanced not only by
relevant state and federal utility regulators, but also by state legislators,
federal legislators, incumbent utilities, consumer advocacy groups, and
potential market participants. As a result, the extent to which there are
legitimate competitive opportunities for alternative energy suppliers in a given
jurisdiction may vary widely, and we cannot assure you that regulatory
structures will offer us competitive opportunities to sell energy to consumers
on a profitable basis. The regulatory process could be negatively impacted by a
number of factors, including interruptions of service, significant or rapid
price increases, and other factors, which may be attributed by opponents of
competition in these markets to restructuring and to the lack of regulatory
control. The legislative and regulatory processes in some states take prolonged
periods. In a number of jurisdictions, it may be many years from the date
legislation is enacted until restructuring is completed.

In addition, although most retail energy market restructuring has been
conducted at the state and local levels, bills have been proposed in Congress in
the past that would preempt state law concerning the restructuring of the retail
energy markets. Although none of these initiatives has been successful, we
cannot assure you that federal legislation will not be passed in the future that
could materially adversely affect our business.

Need to comply with extensive governmental regulation can increase our costs
----------------------------------------------------------------------------
and slow our growth
-------------------

Significant regulations imposed at the international, federal, state and local
levels govern the provision of utility services and affect our business and our
existing and potential competitors. Delays in receiving required regulatory
approvals, the enactment of new and adverse legislation, regulations or
regulatory requirements or the application of existing laws and regulations to
certain services may have a material adverse effect on our business, financial
condition, results of operations and cash flow. In addition, future legislative,
judicial and regulatory agency actions could alter competitive conditions in the
markets in which we intend to operate, in ways not necessarily to our advantage.


                                       13
<PAGE>

We may have difficulty obtaining a sufficient number of customers
-----------------------------------------------------------------

We anticipate that we will incur significant costs as we enter new markets and
pursue customers by utilizing a variety of marketing methods. In order for us to
recover these expenses, we must attract and retain a large number of customers
to our service. To date, the company has been highly successful in gaining
sufficient customers to sustain operations in current markets, but there can be
no assurance that future efforts to secure additional customers will provide the
operating base needed to expand into additional markets.

We may experience difficulty attracting customers because many customers
may be reluctant to switch to a new company for the supply of a commodity as
critical to their well being as electric power. A major focus of our ongoing
marketing effort is to demonstrate to potential customers that we will be a
reliable provider with sufficient resources to meet our commitments. If our
marketing strategy does not continue to be successful, our business, results of
operations, and financial condition will be materially adversely affected.

We will be required to rely on utility companies with whom we will be competing
-------------------------------------------------------------------------------
to perform some functions for our customers
-------------------------------------------

Under the regulatory structures adopted in most jurisdictions, we will be
required to enter into agreements with local incumbent utilities for use of the
local distribution systems, and for the creation and operation of functional
interfaces necessary for us to serve our customers. While the Company currently
enjoys acceptable agreements in the markets in which it is participating as of
December 31, 2002, any delay in future negotiations for access to new markets or
our inability to enter into reasonable agreements to operate in new markets
could delay or negatively impact our ability to serve customers in those
jurisdictions, which could have a material negative impact on our business,
results of operations, and financial condition.

We will also be dependent on local utilities for maintenance of the
infrastructure through which we will deliver electricity and natural gas to our
customers. We are limited in our ability to control the level of service the
utilities provide to our customers. Any infrastructure failure that interrupts
or impairs delivery of electricity or natural gas to our customers could
materially negatively impact our customers' satisfaction with our service, which
could materially adversely affect our business.

Regulations in many markets require that the services of reading our
customers' energy meters and the billing and collection process be retained by
the local utility. In those states, we will be required to rely on the local
utility to provide us with our customers' information regarding energy usage and
to pay us for our customers' usage based on what the local utility collects from
our customers. We may be limited in our ability to confirm the accuracy of the
information provided by the local utility and we may not be able to control when
we receive payment from the local utility. We also may be limited in our ability
to create a supplier relationship with our customers. If we do not receive
payments from the local utility on a timely basis, our working capital may be
impaired.



                                       14
<PAGE>

In some markets, we will be required to bear credit risk and billing
--------------------------------------------------------------------
responsibility for our customers
--------------------------------

In all markets in which the Company operates as of December 31, 2002, we are
responsible for the billing and collection functions for our customers. As we
seek to expand our operations into additional markets, the billing and
collection functions may also be the responsibility of Gexa. In many of these
markets, we may be limited in our ability to terminate service to customers who
are delinquent in payment. Even if we terminate service to customers who fail to
pay their utility bill in a timely manner, we may remain liable to our suppliers
of electricity and natural gas for the cost of those commodities and to the
local utilities for services related to the transmission and distribution of
electricity and natural gas to those customers. The failure of our customers to
pay their bills in a timely manner or our failure to maintain adequate billing
and collection programs could materially adversely affect our business.

Our business model will depend in part on the continued growth and use of the
-----------------------------------------------------------------------------
internet and e-commerce.
------------------------

Although we will offer our products and services through many channels, an
important part of our marketing and customer service strategy will be to access
and serve our customers through Internet websites. Our business could be
materially adversely affected if use of the Internet does not continue to
develop, develops more slowly than expected, or becomes regulated in ways that
hinder our marketing efforts.

Capacity constraints caused by growth in the use of the Internet may, unless
resolved, impede further development of the Internet to the extent that users
experience delays, transmission errors and other difficulties. In addition, the
adoption of the Internet for commerce and communications, particularly by those
individuals and companies that have historically relied upon alternative means
of commerce and communication, generally requires the understanding and
acceptance by our customers of a new way of conducting business and exchanging
information. Further, any state or federal regulations that impose taxes upon
commerce conducted over the Internet or define privacy rights with respect to
the use of the Internet could negatively impact the usefulness of the Internet
as a commercial medium. Therefore, if the necessary infrastructure, products,
services or facilities are not developed, or if the Internet does not become a
viable commercial medium, our business, results of operations and financial
condition could be materially adversely affected.

We may not be able to manage our growth successfully
----------------------------------------------------

In 2002, our customer base and operations have grown at a rapid rate. The
further development of our operations will depend upon, among other things, our
ability to expand our customer base in our existing markets and to enter new
markets in a timely manner at reasonable costs. In addition, we anticipate that
our employee base will continue to grow in order that we may accommodate our
increased customer base. We also may experience difficulty managing the growth
of a portfolio of customers that is diverse both with respect to the types of
services they will require, the market rules in their jurisdiction and the
infrastructure delivering our products to those customers.


                                       15
<PAGE>

Expanding our operations may also require continued development of our operating
and financial controls and may place additional stress on our management and
operational resources. If we are unable to manage our growth and development
successfully, our operating results and financial condition could be materially
adversely affected.

We may face strong competition from incumbent utilities and other competitors
-----------------------------------------------------------------------------

In most markets, our principal competitor may be the local incumbent utility
company or its unregulated affiliates. This is the case in the markets in which
the Company is currently operating as of December 31, 2002. The incumbent
utilities have the advantage of long-standing relationships with their
customers, and they may have longer operating histories, greater financial and
other resources and greater name recognition in their markets than we do. In
addition, incumbent utilities have been subject to regulatory oversight, in some
cases for close to a century, and thus have a significant amount of experience
regarding the regulators' policy preferences as well as a critical economic
interest in the outcome of proceedings concerning their revenues and terms and
conditions of service. Incumbent utilities may seek to decrease their tariffed
retail rates to limit or to preclude the opportunities for competitive energy
suppliers, and otherwise seek to establish rates, terms and conditions to the
disadvantage of competitive energy suppliers.

Some of our competitors, including incumbent utilities, have formed
alliances and joint ventures in order to compete in the restructured retail
electricity and natural gas industry. Many customers of these incumbent
utilities may decide to stay with their long-time energy provider if they have
been satisfied with its service in the past. Therefore, it may be difficult for
us to compete against incumbent utilities and their affiliates for customers who
are satisfied with their historical utility provider.

In addition to competition from the incumbent utilities and their
affiliates, we may face competition from a number of other energy service
providers, including Internet start-up companies focusing on Internet marketing
and online services, and other energy industry participants who may develop
businesses that will compete with us in both local and national markets. We also
may face competition from other nationally branded providers of consumer
products and services. Some of these competitors or potential competitors may be
larger than the Company and have improved access to capital.

General Economic Risks
----------------------

The Company's current and future business plans are dependent, in large part, on
the state of the general economy. Adverse changes in national and local economic
conditions may cause substantial reduction in projected revenue, and may
adversely affect an investment therein. These conditions and other factors
beyond the Company's control include, but are not limited to: (i) regulatory
changes; and (ii) changes in operations, pricing and other controls.


                                       16
<PAGE>


Security Risks
--------------

Despite the implementation of security measures, the Company's networks may be
vulnerable to unauthorized access, computer viruses and other disruptive
problems. A party who is able to circumvent security measures could
misappropriate proprietary information or cause interruptions in the Company's
Internet operations. The Company may be required to expend significant capital
or other resources to protect against the threat of security breaches or to
alleviate problems caused by such breaches. Although the Company intends to
continue to implement industry-standard security measures, there can be no
assurance that measures implemented by the Company will not be circumvented in
the future.

No Assurance of Liquidity
-------------------------

The liquidity of our common stock traded in the Over The Counter: Bulletin Board
(OTC:BB) market is currently limited, and there can be no assurance that an
active liquid trading market will develop in the near future. Furthermore,
certain shares are "Restricted Securities" as that term is defined in Rule 144
under the 1933 Act and, as a result, cannot be resold without registration under
the 1933 Act or an exemption from registration. As a result, purchasers must
bear the economic risk of their investments for an indefinite period of time and
may have difficulty in selling the shares, if and when they decide to do so.

State Blue Sky Registration; Potential Limitations on Resale of the Securities
------------------------------------------------------------------------------

Because the class of common stock registered under the Exchange Act has not been
registered for resale under the Act or the "blue sky" laws of any state, the
holders of such shares and persons who desire to purchase them in any trading
market that might develop in the future, should be aware that there may be
significant state blue-sky law restrictions upon the ability of investors to
resell our securities. Accordingly, investors should consider the secondary
market for the Company's securities to be a limited one.

We intend to seek coverage and publication of information regarding the
Company in an accepted publication manual which permits a manual exemption. The
manual exemption permits a security to be distributed in a particular state
without being registered if the company issuing the security has a listing for
that security in a securities manual recognized by the state. However, it is not
enough for the security to be listed in a recognized manual. The listing entry
must contain (1) the names of issuers, officers, and directors, (2) an issuer's
balance sheet, and (3) a profit and loss statement for either the fiscal year
preceding the balance sheet or for the most recent fiscal year of operations.
Furthermore, the manual exemption is a nonissuer exemption restricted to
secondary trading transactions, making it unavailable for issuers selling newly
issued securities.

Most of the accepted manuals are those published in Standard and Poor's,
Moody's Investor Service, Fitch's Investment Service, and Best's Insurance
Reports, and many states expressly recognize these manuals. A smaller number of
states declare that they "recognize securities manuals" but do not specify the
recognized manuals. The following states do not have any provisions and
therefore do not expressly recognize the manual


                                       17
<PAGE>

exemption: Alabama, Georgia, Illinois, Kentucky, Louisiana, Montana, South
Dakota, Tennessee, Vermont and Wisconsin.

Cash Dividends Unlikely
-----------------------

There were no cash dividends paid in fiscal year 2002, and we do not expect to
pay cash dividends in the foreseeable future because it is expected that
management will determine to retain all cash surplus for use in the continued
expansion of the Company. Accordingly, we do not anticipate declaring any cash
dividends in the foreseeable future.

Issuances of Additional Securities
----------------------------------

Our Articles of Incorporation authorize the issuance of 75,000,000 shares of
Common Stock, par value $0.01. We may issue additional shares in consideration
for legal and consulting services as well as a substantial number of additional
shares in connection with our intent to pursue new business opportunities. To
the extent that additional shares of Common Stock are issued, our shareholders
would experience dilution of their respective ownership interests in the
Company. Additionally, if we issue a substantial number of shares of Common
Stock in connection with our intent to pursue new business opportunities, a
change in control of the Company may occur. Furthermore, the issuance of a
substantial number of shares of Common Stock may adversely affect prevailing
market prices for the Common Stock and could impair our ability to raise
additional capital through the sale of equity securities. As of December 31,
2002, the Company had 7,604,528 shares of common stock issued and outstanding
and an additional 850,000 shares of common stock may be acquired through the
exercise by holders of certain options and warrants of the Company issued and
outstanding. The Company issued 1,119,106 shares of common stock in 2002. Of
those, 33,549 shares of common stock were issued as a dividend on the Company's
preferred stock on December 31, 2002.

Our Articles of Incorporation also authorizes the issuance of 2,500,000
shares of preferred stock (the "Preferred Stock"), par value $0.05, with such
designations, powers, preferences, rights, qualifications, limitations and
restrictions and in such series as our Board of Directors, subject to the laws
of the State of Texas, may determine from time to time. Accordingly, our Board
of Directors is empowered, without shareholder approval, to issue Preferred
Stock with dividend, liquidation, conversion, voting or other rights that could
adversely affect the voting power or other rights of the holders of Common
Stock. In addition, the Preferred Stock could be utilized, under certain
circumstances, as a method of discouraging, delaying or preventing a change in
control of the Company. As of December 31, 2002, the Company had 508,214 shares
of convertible, preferred stock issued and outstanding. Interest due on those
shares was paid in the form of a common stock dividend at December 31, 2002.


                                       18
<PAGE>

Compliance with Penny Stock Rules
---------------------------------

The Company's securities are considered "penny stocks" as defined in the
Exchange Act and the rules thereunder, since the price of our shares of Common
Stock is less than $5. Unless our Common Stock is otherwise excluded from the
definition of "penny stock," the penny stock rules apply with respect to that
particular security. The penny stock rules require a broker-dealer prior to a
transaction in penny stock not otherwise exempt from the rules, to deliver a
standardized risk disclosure document prepared by the SEC that provides
information about penny stocks and the nature and level of risks in the penny
stock market. The broker-dealer also must provide the customer with current bid
and offer quotations for the penny stock, the compensation of the broker-dealer
and its sales person in the transaction, and monthly account statements showing
the market value of each penny stock held in the customer's account. In
addition, the penny stock rules require that the broker-dealer, not otherwise
exempt from such rules, must make a special written determination that the penny
stock is suitable for the purchaser and receive the purchaser's written
agreement to the transaction. These disclosure rules have the effect of reducing
the level of trading activity in the secondary market for a stock that becomes
subject to the penny stock rules. So long as the common stock is subject to the
penny stock rules, it may become more difficult to sell such securities. Such
requirements, if applicable, could result in reduction in the level of trading
activity for that particular security of Gexa and could make it more difficult
for investors to sell that particular security.



                                       19
<PAGE>


ITEM 2. DESCRIPTION OF PROPERTY

Our offices are presently located at 24 Greenway Plaza, Suite 1826, Houston,
Texas. The office facility consists of approximately 4,400 square feet of office
space under lease through 2007. Subsequent to December 31, 2002, we expanded to
incorporate 900 square feet of adjacent space on February 28, 2003. Additional
expansion of our offices is planned to occur in the second quarter of 2003.

ITEM 3. LEGAL PROCEEDINGS
None.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.




                                       20
<PAGE>

                                     PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

(A) Market Information

Our Common Stock was listed for trading on the OTC Bulletin Board (OTC:BB) under
the symbol "GEXA" until our common stock was delisted in 1992 following our
bankruptcy filing under Chapter XI after which date our common stock was quoted
from time to time on the pink sheets under the symbol GEXA. However, we do not
believe that there has been any active trading market in the Company's common
stock during 1999 and 2000. The Company changed its symbol to GEXC in March 31,
2001. We were also delisted from the OTC:BB as a result of our not being a
current reporting company under the Exchange Act. Our common stock became again
subject to quotation on the OTC:BB market on January 2, 2002 under the symbol
GEXC.OB, and remains quoted and current with the OTC:BB.

The following information with respect to the high and low bid price of our
shares was obtained from the National Quotation Bureau.
<TABLE>
<CAPTION>

                                                                                High                         Low
Calendar Year 2002

<S>                                                                             <C>                         <C>
Quarter Ended March 31,                                                         $7.50                       $2.60

Quarter Ended June 30,                                                          $5.00                       $3.05

Quarter Ended September 30,                                                     $4.00                       $1.70

Quarter Ended December 31, 2002                                                 $1.85                       $1.20

Calendar Year 2003
Period Ending March 21, 2003                                                    $1.90                       $1.12

</TABLE>


(B) Holders of Common Stock

At March 21, 2003, there were approximately 2,464 holders of record of Gexa
Corp.'s common stock.

(C) Dividends

We have not paid any of dividends on our Common Stock, and do not intend to
pay dividends for the foreseeable future. We intend to retain earnings, if any,
to finance the development and expansion of our business. Payment of dividends
in the future will depend, among other things, upon our ability to generate
earnings, need for capital and overall financial condition.


                                       21
<PAGE>

The Company's preferred stock carries a stock interest yield paid at the
close of each fiscal year. At December 31, 2002, 33,549 shares of common stock
valued at $50,323 were distributed as dividends to holders of shares of Gexa's
preferred stock.


                                       22
<PAGE>


Recent sales of unregistered Securities

The following information is given with regard to unregistered securities sold
by Gexa during the fiscal year ended December 31, 2002, including the dates and
amounts of securities sold; the persons to whom we sold the securities; the
consideration received in connection with such sales and if the securities were
issued or sold other than for cash, the description of the transaction and the
type and amount of consideration received.

<TABLE>
<CAPTION>
                                                                                Private Placement for $1.25 per share
<S>              <C>                 <C>                <C>                     <C>
   1/8/2002      Common Stock        10,000             Curt Miersma            or $12,500
---------------- ----------------- ----------- -------------------------------- -----------------------------------------
   1/8/2002      Common Stock        8,000             Carl Kleinmann           Private Placement for $1.25 per share
                                                                                or $10,000
---------------- ----------------- ----------- -------------------------------- -----------------------------------------
                                                                                Private Placement for $1.25 per share
   1/8/2002      Common Stock        8,000               John Romero            or $10,000
---------------- ----------------- ----------- -------------------------------- -----------------------------------------
                                                                                Private Placement for $1.25 per share
   1/8/2002      Common Stock        12,000            Bob Stamatatos           or $15,000
---------------- ----------------- ----------- -------------------------------- -----------------------------------------
----------------
   1/10/2002     Common Stock        40,000             Guide Master            Private Placement for $1.25 per share
                                                                                or $50,000
---------------- ----------------- ----------- -------------------------------- -----------------------------------------
   1/12/2002     Common Stock        7,000              Chong Hui Han           Private Placement for $1.00 per share
                                                                                or $7,000
---------------- ----------------- ----------- -------------------------------- -----------------------------------------
                                                                                Private Placement for $1.00 per share
   1/12/2002     Common Stock        14,000           Jennifer Soo Choi         or $14,000
---------------- ----------------- ----------- -------------------------------- -----------------------------------------
                                                                                Private Placement for $1.00 per share
   1/12/2002     Common Stock        2,000             Hyeon Cheol Roh          or $2,000
---------------- ----------------- ----------- -------------------------------- -----------------------------------------
                                                                                Private Placement for $1.00 per share
   1/12/2002     Common Stock        2,000              Chin Suk Choi           or $2,000
---------------- ----------------- ----------- -------------------------------- -----------------------------------------
                                                                                Private Placement for $1.00 per share
   1/12/2002     Common Stock        1,000               Pepper Lee             or $1,000
---------------- ----------------- ----------- -------------------------------- -----------------------------------------
                                                                                Private Placement for $1.25 per share
   1/15/2002     Common Stock        8,000               Paul Morris            or $10,000
---------------- ----------------- ----------- -------------------------------- -----------------------------------------
                                                                                Private Placement for $1.25 per share
   1/17/2002     Common Stock        8,000              Van Arrington           or $10,000
---------------- ----------------- ----------- -------------------------------- -----------------------------------------
                                                                                Private Placement for $1.25 per share
   1/18/2002     Common Stock        8,000                 Veto Lo              or $10,000
---------------- ----------------- ----------- -------------------------------- -----------------------------------------
                                                                                Private Placement for $1.25 per share
   1/23/2002     Common Stock        4,000              Robert Moser            or $5,000
---------------- ----------------- ----------- -------------------------------- -----------------------------------------
                                                                                Private Placement for $1.25 per share
   1/25/2002     Common Stock        11,000         CR Capital Resources        or $13,750
---------------- ----------------- ----------- -------------------------------- -----------------------------------------
                                                                                Private Placement for $1.25 per share
   1/25/2002     Common Stock        32,000            Bernard Cobble           or $40,000
---------------- ----------------- ----------- -------------------------------- -----------------------------------------
                                                                                Private Placement for $1.00 per share
   1/29/2002     Common Stock        3,000              Frank Morales           or $3,000
---------------- ----------------- ----------- -------------------------------- -----------------------------------------
                                                                                Private Placement for $1.25 per share
   1/31/2002     Common Stock        16,000            Cheng, Hillich           or $20,000
---------------- ----------------- ----------- -------------------------------- -----------------------------------------
                                                                                Private Placement for $1.00 per share
   1/31/2002     Common Stock        5,000                Mai Tran              or $5,000
---------------- ----------------- ----------- -------------------------------- -----------------------------------------
                                                                                Private Placement for $.41 per share or
   1/31/2002     Common Stock        80,000             Kyle Holland            $32,800
---------------- ----------------- ----------- -------------------------------- -----------------------------------------
                                                                                Private Placement for $1.00 per share
   1/31/2002     Common Stock        75,000             Kyle Holland            or $75,000
---------------- ----------------- ----------- -------------------------------- -----------------------------------------
                                                                                Private Placement for $1.00 per share
   1/31/2002     Common Stock        3,000            Sharon Mattingly          or $3,000
---------------- ----------------- ----------- -------------------------------- -----------------------------------------
</TABLE>

                                       23
<PAGE>
<TABLE>
<CAPTION>


                                                                                Private Placement for $1.25 per share
<S>              <C>                 <C>              <C>                       <C>
   2/1/2002      Common Stock        40,000           Geneva Insurance          or $50,000
---------------- ----------------- ----------- -------------------------------- -----------------------------------------
                                                                                Private Placement for $1.00 per share
   2/8/2002      Common Stock        3,000             Robert Swinton           or $3,000
---------------- ----------------- ----------- -------------------------------- -----------------------------------------
                                                                                Private Placement for $1.00 per share
   2/11/2002     Common Stock       300,000       Don Aron/ David Mincberg      or $300,000
---------------- ----------------- ----------- -------------------------------- -----------------------------------------
                                                                                Private Placement for $1.00 per share
   2/12/2002     Common Stock        7,000         Kyung Hong/ Pepper Lee       or $7,000
---------------- ----------------- ----------- -------------------------------- -----------------------------------------
                                                                                Private Placement for $1.00 per share
   2/13/2002     Common Stock        20,000              John McConn            or $20,000
---------------- ----------------- ----------- -------------------------------- -----------------------------------------
                                                                                Private Placement for $1.25 per share
   2/15/2002     Common Stock        8,000              Steven Crump            or $10,000
---------------- ----------------- ----------- -------------------------------- -----------------------------------------
                                                                                Private Placement for $1.25 per share
   2/15/2002     Common Stock        24,000           Vaneerburg/Kimber         or $30,000
---------------- ----------------- ----------- -------------------------------- -----------------------------------------
   2/22/2002     Common Stock        2,800               Gary Moore             In lieu of commissions, par value at
                                                                                $.01
---------------- ----------------- ----------- -------------------------------- -----------------------------------------
                                                                                In lieu of commissions, par value at
   2/22/2002     Common Stock         800                JazBermaine            $.01
---------------- ----------------- ----------- -------------------------------- -----------------------------------------
                                                                                In lieu of commissions, par value at
   2/22/2002     Common Stock         400               Robert Wilson           $.01
---------------- ----------------- ----------- -------------------------------- -----------------------------------------
   2/22/2002     Common Stock        5,500            Phillip Bartlett          Private Placement for $1.25 per share
                                                                                or $6,875
---------------- ----------------- ----------- -------------------------------- -----------------------------------------
                                                                                Private Placement for $1.00 per share
   2/25/2002     Common Stock        3,000           Lai, Lyi & Robinson        or $3,000
---------------- ----------------- ----------- -------------------------------- -----------------------------------------
                                                                                Private Placement for $.10 per share or
   2/25/2002     Common Stock        10,000            Robert McDougal          $1,000
---------------- ----------------- ----------- -------------------------------- -----------------------------------------
                                                                                Private Placement for $1.00 per share
   2/27/2002     Common Stock         500               Mary Mitchell           or $500
---------------- ----------------- ----------- -------------------------------- -----------------------------------------
                                                                                Private Placement for $1.00 per share
   2/27/2002     Common Stock        1,000                Hyeon Roh             or $1,000
---------------- ----------------- ----------- -------------------------------- -----------------------------------------
                                                                                Private Placement for $1.25 per share
   2/27/2002     Common Stock        25,000       John Nelson, Curt Miersma     or $31,250
---------------- ----------------- ----------- -------------------------------- -----------------------------------------
                                                                                Private Placement for $1.25 per share
   2/27/2002     Common Stock        20,000               Jay Reese             or $25,000
---------------- ----------------- ----------- -------------------------------- -----------------------------------------
                                                                                Private Placement for $1.00 per share
   2/28/2002     Common Stock        5,000               Frank Klaus            or $5,000
---------------- ----------------- ----------- -------------------------------- -----------------------------------------
                                                                                Private Placement for $1.00 per share
   2/28/2002     Common Stock        7,000            Sharon Mattingly          or $7,000
---------------- ----------------- ----------- -------------------------------- -----------------------------------------
                                                                                Private Placement for $1.00 per share
   2/28/2002     Common Stock        20,000              David Atiqi            or $20,000
---------------- ----------------- ----------- -------------------------------- -----------------------------------------
                                                                                Private Placement for $1.00 per share
   2/28/2002     Common Stock        7,000          Joyce & CurtisKimber        or $7,000
---------------- ----------------- ----------- -------------------------------- -----------------------------------------
                                                                                Private Placement for $2.00 per share
   2/28/2002     Preferred Stock     7,500               Nikki Garre            or $15,000
---------------- ----------------- ----------- -------------------------------- -----------------------------------------
                                                                                Private Placement for $2.00 per share
   2/28/2002     Preferred Stock     10,000             Brennan Trust           or $20,000
---------------- ----------------- ----------- -------------------------------- -----------------------------------------
                                                                                Private Placement for $2.00 per share
   2/28/2002     Preferred Stock     5,000             Susan Wodopian           or $10,000
---------------- ----------------- ----------- -------------------------------- -----------------------------------------
                                                                                Private Placement for $2.00 per share
   2/28/2002     Preferred Stock     5,000             Richard Hunter           or $10,000
---------------- ----------------- ----------- -------------------------------- -----------------------------------------
                                                                                Private Placement for $2.00 per share
   2/28/2002     Preferred Stock     10,000             Laura Webber            or $20,000
---------------- ----------------- ----------- -------------------------------- -----------------------------------------
                                                                                Private Placement for $2.00 per share
   2/28/2002     Preferred Stock     15,000              Greg Brown             or $30,000
---------------- ----------------- ----------- -------------------------------- -----------------------------------------
</TABLE>


                                       24
<PAGE>
<TABLE>
<CAPTION>

                                                                                Private Placement for $2.00 per share
<S>             <C>                  <C>                <C>                     <C>
   2/28/2002     Preferred Stock     6,000              Charles Pridy           or $12,000
---------------- ----------------- ----------- -------------------------------- -----------------------------------------
                                                                                Private Placement for $2.00 per share
   2/28/2002     Preferred Stock     5,000            Dr John McCormick         or $10,000
---------------- ----------------- ----------- -------------------------------- -----------------------------------------
                                                                                Private Placement for $2.00 per share
   2/28/2002     Preferred Stock     2,500                Joel Sher             or $5,000
---------------- ----------------- ----------- -------------------------------- -----------------------------------------
                                                                                Private Placement for $2.00 per share
   2/28/2002     Preferred Stock     2,500           Sher Children Trust        or $5,000
---------------- ----------------- ----------- -------------------------------- -----------------------------------------
                                                                                Private Placement for $2.00 per share
   2/28/2002     Preferred Stock     5,000               Lee Wolski             or $10,000
---------------- ----------------- ----------- -------------------------------- -----------------------------------------
                                                                                Private Placement for $2.00 per share
   2/28/2002     Preferred Stock     10,000          Azar Computer, Inc.        or $20,000
---------------- ----------------- ----------- -------------------------------- -----------------------------------------
                                                                                Private Placement for $2.00 per share
   2/28/2002     Preferred Stock     7,500            Robert Radebaugh          or $15,000
---------------- ----------------- ----------- -------------------------------- -----------------------------------------
                                                                                Private Placement for $2.00 per share
   2/28/2002     Preferred Stock     5,000             Daniel Garza II          or $10,000
---------------- ----------------- ----------- -------------------------------- -----------------------------------------
                                               First Clearing FBA John Austin   Private Placement for $2.00 per share
   3/1/2002      Preferred Stock     6,000                   IRA                or $12,000
---------------- ----------------- ----------- -------------------------------- -----------------------------------------
                                               First Clearing FBA Ronald Byrd   Private Placement for $2.00 per share
   3/1/2002      Preferred Stock     5,000                   IRA                or $10,000
---------------- ----------------- ----------- -------------------------------- -----------------------------------------
                                                                                Private Placement for $.10 per share or
   3/1/2002      Common Stock        25,000              Terry Dunne            $2,500
---------------- ----------------- ----------- -------------------------------- -----------------------------------------
                                                                                Private Placement for $2.00 per share
   3/1/2002      Preferred Stock     5,000               Sharon Tuan            or $10,000
---------------- ----------------- ----------- -------------------------------- -----------------------------------------
                                                                                Private Placement for $2.00 per share
   3/6/2002      Preferred Stock     5,000            Thomas Lowe Trust         or $10,000
---------------- ----------------- ----------- -------------------------------- -----------------------------------------
                                                                                Private Placement for $2.00 per share
   3/6/2002      Preferred Stock     5,000              Paul Bessette           or $10,000
---------------- ----------------- ----------- -------------------------------- -----------------------------------------
                                                                                Private Placement for $2.00 per share
   3/7/2002      Preferred Stock     5,000                Naomi Lam             or $10,000
---------------- ----------------- ----------- -------------------------------- -----------------------------------------
                                                                                Private Placement for $2.00 per share
   3/11/2002     Preferred Stock     5,000             Donald Garrett           or $10,000
---------------- ----------------- ----------- -------------------------------- -----------------------------------------
                                                                                Private Placement for $2.00 per share
   3/12/2002     Preferred Stock     25,000              George Holt            or $50,000
---------------- ----------------- ----------- -------------------------------- -----------------------------------------
                                                                                Private Placement for $1.75 per share
   3/20/2002     Preferred Stock     5,714              Jacob Cariker           or $9,999.50
---------------- ----------------- ----------- -------------------------------- -----------------------------------------
                                                                                Private Placement for $2.00 per share
   3/20/2002     Preferred Stock     10,000             Jerry Gandre            or $20,000
---------------- ----------------- ----------- -------------------------------- -----------------------------------------
                                                                                Private Placement for $2.00 per share
   3/22/2002     Preferred Stock     5,000               Jack Swiley            or $10,000
---------------- ----------------- ----------- -------------------------------- -----------------------------------------
                                                                                Private Placement for $2.00 per share
   3/25/2002     Preferred Stock     3,750             Shane Phillips           or $7,500
---------------- ----------------- ----------- -------------------------------- -----------------------------------------
                                                                                Private Placement for $2.00 per share
   3/25/2002     Preferred Stock     2,500            Darrel Richoloson         or $5,000
---------------- ----------------- ----------- -------------------------------- -----------------------------------------
   3/25/2002     Common Stock        1,000             Steven Gentile           Exercise of Stock warrants at $1.50 per
                                                                                share
---------------- -----------------             -------------------------------- -----------------------------------------
                                   -----------
   3/26/2002     Preferred Stock     12,500          G7 Investments Inc         Private Placement for $2.00 per share
                                                                                or $25,000
---------------- ----------------- ----------- -------------------------------- -----------------------------------------
   3/26/2002     Preferred Stock     5,000              Robert Garza            Private Placement for $2.00 per share
                                                                                or $10,000
---------------- ----------------- ----------- -------------------------------- -----------------------------------------
                                                                                Private Placement for $2.00 per share
   3/26/2002     Preferred Stock     10,000             George Nezlek           or $20,000
---------------- ----------------- ----------- -------------------------------- -----------------------------------------
                                                                                Private Placement for $2.00 per share
   3/26/2002     Preferred Stock     12,500             Malcolm Gray            or $25,000
---------------- ----------------- ----------- -------------------------------- -----------------------------------------
</TABLE>


                                       25
<PAGE>
<TABLE>
<CAPTION>

                                                                                Private Placement for $2.00 per share
<S>             <C>                  <C>              <C>                       <C>
   3/26/2002     Preferred Stock     10,000           Richard Gambrill          or $20,000
---------------- ----------------- ----------- -------------------------------- -----------------------------------------
                                                                                Private Placement for $2.00 per share
   3/27/2002     Preferred Stock     10,000              Randy Ross             or $20,000
---------------- ----------------- ----------- -------------------------------- -----------------------------------------
                                                                                Private Placement for $2.00 per share
   3/28/2002     Preferred Stock     5,000     Mark Pruett FBO Mark Pruett IRA  or $10,000
---------------- ----------------- ----------- -------------------------------- -----------------------------------------
                                                                                Private Placement for $2.00 per share
   4/1/2002      Preferred Stock     5,000               Mark Pruett            or $10,000
---------------- ----------------- ----------- -------------------------------- -----------------------------------------
                                                                                Private Placement for $2.00 per share
   4/1/2002      Preferred Stock     10,000              Don Goldman            or $20,000
---------------- ----------------- ----------- -------------------------------- -----------------------------------------
                                                                                Private Placement for $2.00 per share
   4/2/2002      Preferred Stock     7,500           Donnelly Trust 1983        or $15,000
---------------- ----------------- ----------- -------------------------------- -----------------------------------------
                                                                                Private Placement for $2.00 per share
   4/9/2002      Preferred Stock     25,000           George Frederick          or $50,000
---------------- ----------------- ----------- -------------------------------- -----------------------------------------
                                                                                Private Placement for $2.00 per share
   4/10/2002     Preferred Stock     12,500          Terrence Pattinson         or $25,000
---------------- ----------------- ----------- -------------------------------- -----------------------------------------
                                                                                Private Placement for $2.00 per share
   4/13/2002     Preferred Stock     5,000             Dennis Kuhlman           or $10,000
---------------- ----------------- ----------- -------------------------------- -----------------------------------------
                                                                                Private Placement for $2.00 per share
   4/18/2002     Preferred Stock     15,000              Carl Conley            or $30,000
---------------- ----------------- ----------- -------------------------------- -----------------------------------------
                                                                                Private Placement for $2.00 per share
   4/23/2002     Preferred Stock     50,000            Quentin Foreman          or $100,000
---------------- ----------------- ----------- -------------------------------- -----------------------------------------
                                                                                Private Placement for $2.00 per share
   5/6/2002      Preferred Stock     7,500              Tim Bilberry            or $15,000
---------------- ----------------- ----------- -------------------------------- -----------------------------------------
                                                                                Private Placement for $2.00 per share
   5/6/2002      Preferred Stock     12,500             Paul Bilberry           or $25,000
---------------- ----------------- ----------- -------------------------------- -----------------------------------------
                                                                                Private Placement for $2.00 per share
   5/7/2002      Preferred Stock     5,000            Daniel Garza III          or $10,000
---------------- ----------------- ----------- -------------------------------- -----------------------------------------
                                                                                Private Placement for $2.00 per share
   5/10/2002     Preferred Stock     10,000             Kaushai Gupta           or $20,000
---------------- ----------------- ----------- -------------------------------- -----------------------------------------
                                                                                Private Placement for $2.00 per share
   5/10/2002     Preferred Stock     5,000             George Bilberry          or $10,000
---------------- ----------------- ----------- -------------------------------- -----------------------------------------
                                                                                Private Placement for $2.00 per share
   5/17/2002     Preferred Stock     15,000              Randy Ross             or $30,000
---------------- ----------------- ----------- -------------------------------- -----------------------------------------
                                                                                Private Placement for $2.00 per share
   5/21/2002     Preferred Stock     5,000               Jon Steuart            or $10,000
---------------- ----------------- ----------- -------------------------------- -----------------------------------------
                                                                                Private Placement for $2.00 per share
   5/24/2002     Preferred Stock     25,000            Robert Solomon           or $50,000
---------------- ----------------- ----------- -------------------------------- -----------------------------------------
                                                                                Private Placement for $2.00 per share
   6/5/2002      Preferred Stock     25,000         Dr Guillermo Pechero        or $50,000
---------------- ----------------- ----------- -------------------------------- -----------------------------------------
                                                                                Private Placement for $2.00 per share
   6/10/2002     Preferred Stock     14,250         Dr Guillermo Pechero        or $28,500
---------------- ----------------- ----------- -------------------------------- -----------------------------------------
                                                                                Private Placement for $2.00 per share
   6/21/2002     Preferred Stock     5,000              John Steuart            or $10,000
---------------- ----------------- ----------- -------------------------------- -----------------------------------------
   7/19/2002     Common Stock        2,000          Jamie Rigell, Officer       In lieu of salary
---------------- ----------------- ----------- -------------------------------- -----------------------------------------
   8/5/2002      Common Stock        33,334             Gaylor Trust            Common stock at 1.50 per share
---------------- ----------------- ----------- -------------------------------- -----------------------------------------
                                                                                Exercise of Stock warrants at $1.75 per
   8/31/2002     Common Stock        8,000              Roberto Garza           share
---------------- ----------------- ----------- -------------------------------- -----------------------------------------
                                                                                Exercise of Stock warrants at $1.75 per
   8/31/2002     Common Stock        2,500        Robert R. Donnelly Trust      share
---------------- ----------------- ----------- -------------------------------- -----------------------------------------
                                                                                Exercise of Stock warrants at $1.75 per
   8/31/2002     Common Stock        2,500          Jan D. O'Neill Trust        share
---------------- ----------------- ----------- -------------------------------- -----------------------------------------
                                                                                Exercise of Stock warrants at $1.75 per
   8/31/2002     Common Stock        2,500      G. Arthur Donnelly III Trust    share
---------------- ----------------- ----------- -------------------------------- -----------------------------------------
</TABLE>

                                       26
<PAGE>
<TABLE>
<CAPTION>

                                                                                Exercise of Stock warrants at $1.75 per
<S>              <C>                 <C>                <C>                     <C>
   8/31/2002     Common Stock        20,000             Stanley Beard           share
---------------- ----------------- ----------- -------------------------------- -----------------------------------------
                                                                                Exercise of Stock warrants at $1.75 per
   8/31/2002     Common Stock        8,000              Van Arrington           share
---------------- ----------------- ----------- -------------------------------- -----------------------------------------
                                                                                Exercise of Stock warrants at $1.75 per
   8/31/2002     Common Stock        40,000             Guide Master            share
---------------- ----------------- ----------- -------------------------------- -----------------------------------------
                                                                                Exercise of Stock warrants at $1.75 per
   8/31/2002     Common Stock        40,000           Geneva Insurance          share
---------------- ----------------- ----------- -------------------------------- -----------------------------------------
                                                                                Exercise of Stock warrants at $1.75 per
   8/31/2002     Common Stock        8,000              Paul Bessette           share
---------------- ----------------- ----------- -------------------------------- -----------------------------------------
                                                                                Exercise of Stock warrants at $1.75 per
   8/31/2002     Common Stock        24,000            John Middleton           share
---------------- ----------------- ----------- -------------------------------- -----------------------------------------
   8/31/2002     Common Stock        8,000              Dewey Coffman           Exercise of Stock warrants at $1.75 per
                                                                                share
---------------- ----------------- -----------                                  -----------------------------------------
                                               --------------------------------
   8/31/2002     Common Stock        8,000               Rich Lewis             Exercise of Stock warrants at $1.75 per
                                                                                share
---------------- ----------------- ----------- -------------------------------- -----------------------------------------
   8/31/2002     Common Stock        4,057             John McCormick           Exercise of Stock warrants at $1.75 per
                                                                                share
---------------- ----------------- ----------- -------------------------------- -----------------------------------------
                                                                                Exercise of Stock warrants at $1.75 per
   8/31/2002     Common Stock        10,000             Mike Santori            share
---------------- ----------------- ----------- -------------------------------- -----------------------------------------
  12/31/2002     Common Stock        10,000              Stan Dowell            In lieu of commissions
---------------- ----------------- ----------- -------------------------------- -----------------------------------------
                                                                                -----------------------------------------
  12/31/2002     Common Stock        33,549        Preferred Stockholders       Preferred stock dividend paid with
                                                                                common stock valued at $1.50 per share,
                                                                                or $50,323
---------------- ----------------- ----------- -------------------------------- -----------------------------------------

</TABLE>

                                       27
<PAGE>



ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS

Overview

In fiscal year 2002, we entered into the business of providing electricity in
Texas, which became a deregulated industry effective January 1, 2002. On August
2, 2001, we received approval of our application to the Public Utility
Commission of the State of Texas for the purpose of becoming a retail provider
of electricity to residential and small commercial customers in Texas. Gexa is
targeting the rapidly restructuring residential and commercial electricity
consumers. We believe we are well-positioned to succeed because other
competitors are not focusing on short term residential apartment dweller and
small commercial markets. The Company has already been successful against
larger, better capitalized companies in selling to its target market
(residential and commercial customers) in a deregulated environment. Moreover,
the better capitalized companies, some of which engaged in wholesale power
trading, have since experienced a tightening in their liquidity, forcing these
companies to cease trading and retail purchase of electricity. This has created
less competition in the retail power markets. See also disclosure under Item 1.
Description of Business.

Results of Operations

During the year ended December 31, 2002, we generated $19,038,804 in
revenues from business operations. For the year ended December 31, 2002, we
incurred cost of goods sold totaling $15,264,611, and administrative expenses of
$2,816,458. In fiscal year 2002, we had interest income in the amount of
$23,284, which interest income was offset by interest expenses of $(9,660).
After income tax expense of $(331,471), the company posted a net profit of
$639,888 for the year.

As of December 31, 2002, we had 25,000 active meter accounts utilizing in excess
of 30 million kilowatt hours (kWh) per month. Our customer count continues to
grow and as of March 25, 2003 exceeded 32,000 active customer meters. We
anticipate serving in excess of 60,000 meters by December 31, 2003.

Significant Events

In September 2002, the Company's third party billing services provider became
insolvent. Gexa, along with another of the billing provider's customers, created
Gexa Cirro LLC and obtained a perpetual use license for the billing software to
manage billing operations. The recurring costs of operating our own billing
company are equal to or less than billing costs currently being quoted to
management for comparable billing services from third party providers. Our
current billing company offers Gexa a more personalized and responsive billing
services solution.


                                       28
<PAGE>

In October 2002, the Company consented to a termination of its financing
agreement with an unrelated corporation as a result of the other entity's
decision to exit the energy financing market. See Note 9 to the financial
statements.

Liquidity and Capital Resources

At December 31, 2002, we had current assets of $3,399,962 in cash and cash
equivalents, net accounts receivable of $6,880,792, and a current deferred tax
asset of $111,034. Other receivables totaled $67,378. We had a long term
deferred tax asset of $83,820 and total other assets of $244,563 consisting of
$85,600 in intangible assets, a $100,000 deposit in connection with our PUC
license application, and other deposits and prepaid items. We had total assets
of $10,988,962 at December 31, 2002.

Our total current liabilities at December 31, 2002 were $7,529,577, which
consisted of $4,702,395 accounts payable and accrued liabilities, sales taxes
payable of $1,344,423, income taxes payable of $368,839, customer deposits of
$585,887, a revolving credit line balance of $28,033., and a $500,000 credit
facility provided by Aquila Merchant Services Inc., that was repaid in January
2003 (see Note 9.) We had also a $100,000 long-term note outstanding as of
December 31, 2002.

For the year ended December 31, 2002, we had cash flow from operations of
$821,735. Our cash used in investing activities was $232,907. We generated
$2,225,620 from financing activities in 2002 through the issuance of restricted
shares of stock and the receipt of a $500,000 credit line as part of our
agreement with Aquila Merchant Services, Inc.

We have our current orders hedged against long term power supply contracts
which, for the most part, expire on December 31, 2003. This strategy allows us
to lock in a set margin and avoid, to the extent possible, the market risks
associated with a volatile commodity like electricity. Our sales force bases
their pricing quotes to potential customers on our minimum margin targets,
ensuring better integrity of our cash flow from continued operations.

We believe our rapid growth will continue in the Texas market for 2003. In April
2003, we plan on expanding into the West Texas market which should also greatly
contribute to our growth. We have no plans to enter additional markets without
raising additional capital in advance. While we do continue to assess new
deregulated markets in other states, our growth within the Texas market takes
precedence.

In order to sustain our current growth, we will need to secure lines of credit
and engage in fundraising via the sale of stock in 2003. Also, in order for us
to move into deregulated markets in other states, we will have to raise
additional capital.

We may determine to seek to raise additional funds from the sale of equity
or debt securities or other borrowings. We may issue additional shares, and, to
the extent that such additional shares are issued, our


                                       29
<PAGE>

shareholders will experience a dilution in their ownership interest.

The company has 32 full-time employees at December 31, 2002. While we expect to
hire additional staff in 2003, the extent to which we do so will largely depend
on our continued growth- both in terms of company size and in terms of new
markets entered both within Texas and also in other states.

There currently are no limitations on our ability to borrow funds. However, our
limited resources may make it difficult to borrow additional funds. The amount
and nature of any borrowing by us will depend on numerous factors, including
Gexa's capital requirements, potential lenders' evaluation of Gexa's ability to
meet debt service on borrowing and the then prevailing conditions in the
financial markets, as well as general economic conditions. The inability of Gexa
to borrow additional funds, or to provide funds for an additional infusion of
capital, may have a material adverse affect on Gexa's financial condition and
future prospects. To the extent that debt financing ultimately proves to be
available, any borrowing will subject Gexa to various risks.

On March 24, 2003 one of our Board members, Mr. Don Aron, agreed to purchase
company receivables for $700,000. In consideration of the purchase, Mr. Aron
shall receive a factoring fee of 3% per month for a minimum term of 60 days.
Additionally, as part of the agreement, Mr. Leibman and Ms. Zlotnik, our two
largest shareholders and members of our management team were required to pledge
their stock and provide personal guarantees to Mr. Aron.

Critical Accounting Policies

Revenue Recognition
-------------------

The Company's revenues are composed of retail electricity sales. The Company
recognizes revenue and expenses in the month incurred based upon monthly usage
period for each customer.

The Company also collects pass through charges on behalf of the Transmission and
Distribution Charge Providers, TDPSs, who maintain the electricity grid and
provide metering services to customers. These charges are passed on to the
customer at cost and recorded as cost of goods sold to net against the charge
recorded in revenues.

Allowance for Doubtful Accounts
-------------------------------

The allowance for doubtful accounts is increased each month by a fixed
percentage of revenue based on historic expectations of bad debt occurrence, and
will also be adjusted to anticipate issues relating to specific customers on a
case by case basis. The aged receivables are reviewed and evaluated each week to
facilitate identification of any accounts that are past due and may become
uncollectible.


                                       30
<PAGE>

ITEM 7. FINANCIAL STATEMENTS

Set forth below are the audited financial statements for the Company as of the
year ended December 31, 2002, and for the years ended December 31, 2002 and
2001.
<TABLE>
<CAPTION>

                                      INDEX TO FINANCIAL STATEMENTS

                                                                                                            Page
<S>                                                                                                         <C>
  Independent Auditor's Report                                                                              32

  Balance Sheet                                                                                             34

  Statements of Operations                                                                                  36

  Statements of Stockholders' Equity                                                                        37

  Statements of Cash Flows                                                                                  38

  Notes to Financial Statements                                                                             41

</TABLE>

                                       31
<PAGE>

                          INDEPENDENT AUDITOR'S REPORT



To the Board of Directors and Stockholders of Gexa Corp.


We have audited the accompanying balance sheet of Gexa Corp. as of December 31,
2002, and the related statements of operations, stockholders' equity and cash
flows for the year then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Gexa Corp. at December 31,
2002, and the results of its operations and its cash flows for the year then
ended in conformity with accounting principles generally accepted in the United
States.



/s/ Hein + Associates LLP
February 21, 2003, except as to Note 16, which is as of March 25, 2003.
Houston, Texas



                                       32
<PAGE>




                        Independent Auditors' Report

Board of Directors
Gexa Corp.
24 Greenway Plaza, Suite 1826
Houston, Texas 77046

Members of the Board:

We have audited the accompanying balance sheets of Gexa Corp. (a development
stage enterprise) as of December 31, 2001 and 2000, and the related statements
of operations, stockholders' equity and cash flows for the years then ended and
for the period from January 1, 2001 (date of inception) to December 31, 2001.
These financial statements are the responsibility of Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Gexa Corporation (a development
stage enterprise) as of December 31, 2001 and 2000, and the results of its
operations, its changes in stockholders' equity and its cash flows for the years
then ended and for the period from January 1, 2001 (date of inception) to
December 31, 2001 in conformity with accounting principles generally accepted in
the United States of America.

                      / s / Grassano Accounting, P.A.

Boca Raton, Florida
March 11, 2002 (except for Note 6 and 8, which are as of May 31, 2002)




                                       33
<PAGE>
<TABLE>
<CAPTION>



                                          GEXA CORP.
                                         BALANCE SHEET

                                                                                 December 31,
                                    ASSETS                                           2002
                                    ------
                                                                               -----------------

Current assets:
<S>                                                                         <C>
     Cash and cash equivalents                                              $         3,399,962
     Accounts receivable, net                                                         6,880,792
     Other receivables                                                                   67,378
     Current deferred tax asset                                                         111,034
                                                                               -----------------
       Total current assets                                                          10,459,166

Property and equipment, net                                                             201,413

Deferred tax asset- long term                                                            83,820
Other assets                                                                            244,563
                                                                               -----------------

     Total assets                                                           $        10,988,962
                                                                               =================

</TABLE>

                                       34
<PAGE>
<TABLE>
<CAPTION>





                     LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
<S>                                                                         <C>
     Revolving credit line                                                  $            28,033
     Credit facility                                                                    500,000
     Accounts payable and accrued liabilities                                         4,702,395
     Sales tax payable                                                                1,344,423
     Income tax payable                                                                 368,839
     Customer deposits                                                                  585,887
                                                                               -----------------
          Total current liabilities                                                   7,529,577

Notes payable-officer                                                                   100,000
Accrued interest payable- officer                                                        11,961
                                                                               -----------------

          Total liabilities                                                           7,641,538

Commitments and Contingencies (see Note 7)

Stockholders' equity:
     Preferred stock, $.05 par value;
           2,500,000 shares authorized;
          508,214 issued and outstanding                                                 25,412
    Common stock, $.01 par value; 75,000,000 shares authorized;
          7,604,528 shares issued (7,597,862 outstanding)                                76,046
     Additional paid-in capital                                                       6,194,608
     Less:  Stock subscriptions receivable                                             (13,848)
     Treasury Stock, at cost; 6,666 shares                                              (9,999)

     Accumulated deficit                                                            (2,924,795)
                                                                               -----------------

     Total stockholders' equity                                                       3,347,424
                                                                               -----------------

     Total liabilities and stockholders' equity                             $        10,988,962
                                                                               =================
                                                                               =================

                        See accompanying notes to financial statements.



</TABLE>

                                       35
<PAGE>
<TABLE>
<CAPTION>



                                         GEXA CORP.
                                  STATEMENTS OF OPERATIONS

                                                                         Years Ended
                                                                         December 31,
                                                                 -----------------------------
                                                                 ------------- -- ------------
                                                                     2002            2001
                                                                 -------------    ------------


<S>                                                           <C>              <C>
Sales                                                         $    19,038,804  $            -
Cost of sales                                                      15,264,611               -
                                                                 -------------    ------------
     Gross profit                                                   3,774,193               -
General and administrative expenses                                 2,816,458         852,830
                                                                 -------------    ------------
     Income (loss) from operations                                    957,735       (852,830)
Interest income                                                        23,284           4,783
Interest expense                                                      (9,660)         (6,018)
                                                                 -------------    ------------
     Income (loss) before income taxes                                971,359       (854,065)
Income tax expense (benefit)                                          331,471       (157,486)
                                                                 -------------    ------------

     Net income (loss)                                                639,888       (696,579)

Preferred stock dividend                                             (50,323)               -
                                                                 -------------    ------------

     Net income (loss) available to common stockholders       $       589,565  $    (696,579)
                                                                 =============    ============

Basic net income (loss) per share                             $           .08  $        (.17)
                                                                 =============    ============

Basic weighted average shares outstanding                           7,327,642       4,209,177
                                                                 =============    ============

Diluted net income (loss) per share                           $           .08  $        (.17)
                                                                 =============    ============

Diluted weighted average shares outstanding                         8,402,307       4,209,177
                                                                 =============    ============

                       See accompanying notes to financial statements.

</TABLE>

                                       36
<PAGE>
<TABLE>
<CAPTION>





                                           Preferred Stock                Common Stock
                                       ------------------------    ---------------------------
                                       ----------- --- --------    ------------- -- ----------
                                         Shares        Amount         Shares         Amount
                                         ------        ------         ------         ------

<S>                                        <C>        <C>                <C>       <C>
Balances, December 31, 2000 .........       944,495    $    47,225        348,142   $     3,481

Converted preferred stock into
common stock ........................      (944,495)       (47,225)        37,780           378
Issued common stock for services ....          --             --        4,115,000        41,150
Issued common stock to EZ Utilities
assets ..............................          --             --          300,000         3,000
Issued common stock for note interest          --             --           10,000           100
Sale of common stock ................          --             --        1,314,500        13,145
Contributions by officers ...........          --             --             --            --
Issued common stock to repay officer
loan ................................          --             --          360,000         3,600
Net loss ............................          --             --             --            --
                                        -----------    -----------    -----------   -----------

Balances, December 31, 2001 .........          --             --        6,485,422        64,854

Issued common stock for services ....          --             --          401,000         4,010
Sale of preferred stock .............       508,214         25,412           --            --
Sale of common stock ................          --             --          684,557         6,846
Company purchased treasury stock ....          --             --             --            --
Sale of treasury stock ..............          --             --             --            --
Warrants issued in financing
agreement ...........................          --             --             --            --
Warrants canceled from financing
agreement ...........................          --             --             --            --
Common stock dividend to preferred
stockholders ........................          --             --           33,549           336
Stock subscription receivable .......          --             --             --            --
Net income ..........................          --             --             --            --
                                        -----------    -----------    -----------   -----------

Balance December 31, 2002 ...........       508,214    $    25,412      7,604,528   $    76,046
                                        ===========    ===========    ===========   ===========

</TABLE>
<TABLE>
<CAPTION>





                                        Additional                      Stock
                                         Paid-in        Treasury     Subscription    Accumulated
                                         Capital         Stock       Receivable        Deficit         Total
                                         -------         -----       ----------        -------         -----

<S>                                    <C>            <C>            <C>            <C>            <C>
Balances, December 31, 2000 .........   $ 2,776,142    $      --      $      --      $(2,817,781)   $     9,067

Converted preferred stock into
common stock ........................        37,780           --             --             --           (9,067)
Issued common stock for services ....         7,680           --             --             --           48,830
Issued common stock to EZ Utilities
assets ..............................        57,600           --             --             --           60,600
Issued common stock for note interest         2,400           --             --             --            2,500
Sale of common stock ................       789,403           --             --             --          802,548
Contributions by officers ...........        30,800           --             --             --           30,800
Issued common stock to repay officer
loan ................................       356,400           --             --             --          360,000
Net loss ............................          --             --             --         (696,579)      (696,579)
                                        -----------    -----------    -----------    -----------    -----------

Balances, December 31, 2001 .........     4,058,205           --             --       (3,514,360)       608,699

Issued common stock for services ....       297,240           --             --             --          301,250
Sale of preferred stock .............       900,218           --             --             --          925,630
Sale of common stock ................       788,958           --             --             --          795,804
Company purchased treasury stock ....          --          (60,000)          --             --          (60,000)
Sale of treasury stock ..............          --           50,001           --             --           50,001
Warrants issued in financing
agreement ...........................       300,000           --             --             --          300,000
Warrants canceled from financing
agreement ...........................      (200,000)          --             --             --         (200,000)
Common stock dividend to preferred
stockholders ........................        49,987           --             --          (50,323)          --
Stock subscription receivable .......          --             --          (13,848)          --          (13,848)
Net income ..........................          --             --             --          639,888        639,888
                                        -----------    -----------    -----------    -----------    -----------

Balance December 31, 2002 ...........   $ 6,194,608    $    (9,999)   $   (13,848)   $(2,924,795)   $ 3,347,424
                                        ===========    ===========    ===========    ===========    ===========

</TABLE>


                                       37
<PAGE>
<TABLE>
<CAPTION>




                                           GEXA CORP.
                                    STATEMENTS OF CASH FLOWS

                                                                        Years Ended
                                                                        December 31,
                                                           ---------------------------------------
                                                           ----------------- --- -----------------
                                                                 2002                  2001
                                                           -----------------     -----------------


Cash flows from operating activities:
<S>                                                     <C>                             <C>
Net income (loss)                                       $           639,888             (696,579)
Adjustments to reconcile net income (loss) to
  net cash provided by (used in) operating activities
     Depreciation and amortization                                  132,967                    78
     Stock issued for services                                      301,250               386,330
     Deferred income taxes                                         (37,368)             (157,486)
     Changes in operating assets and liabilities:
       Accounts receivable                                      (6,880,792)                     -
       Other receivables                                           (65,561)                     -
       Employee advances                                            (1,817)                     -
       Deposits                                                    (52,669)             (100,000)
       Prepaids                                                     (6,295)                     -
       Accounts payable and accrued liabilities                   4,484,890               217,505
       Sales tax payable                                          1,344,423                     -
       Income tax payable                                           368,839                     -
       Customer deposits                                            585,537                   350
       Accrued interest payable                                       8,443                 3,518
                                                           -----------------     -----------------

Net cash provided by (used in) operating activities                 821,735             (346,284)

Cash flows from investing activities-
     Purchases of property and equipment                          (232,907)               (1,550)

Cash flows from financing activities:
     Borrowings on credit facility                                  500,000                     -
     Increase in revolving credit line                               28,033                     -
     Proceeds from the sale of preferred stock                      925,630                     -
     Proceeds from notes payable                                          -               100,000
     Proceeds from sale of common stock                             795,804               842,215
     Additional contributions by officers                                 -                30,800
     Payments to corporate consultants                                    -              (33,500)
     Purchase of treasury stock                                    (60,000)
</TABLE>


                                       38
<PAGE>
<TABLE>
<CAPTION>

<S>                                                                  <C>                      <C>
     Sale of treasury stock                                          50,001                     -
     Stock subscriptions receivable                                (13,848)                     -
     Payments for stock offering expenses                                 -               (6,167)
                                                           -----------------     -----------------

Net cash provided by financing activities                         2,225,620               933,348
                                                           -----------------     -----------------

Net change in cash and cash equivalents                           2,814,448               585,514

Cash and cash equivalents at beginning of year                      585,514                     -
                                                           -----------------     -----------------

Cash and cash equivalents at end of year                $         3,399,962               585,514
                                                           =================     =================

Supplemental Disclosure of Cash Flows Information


Cash paid during the period for interest                $             1,184     $               -
                                                               ------------        --------------


Cash paid during the period for taxes                   $                 -     $              -
                                                          -----------------       --------------


                See accompanying notes to financial statements.
</TABLE>


                                       39
<PAGE>



                                   Gexa Corp.
                          Notes to Financial Statements

1. Organization

Gexa Corp. ("the Company" or "Gexa") was incorporated on April 1, 1985 under the
laws of the state of Nevada for the purpose of exploring and developing silver
and gold mineral properties in the Western United States.

On November 1, 1989, the Company ceased being a development stage company
with the commencement of commercial production of gold at the Mother Lode mine,
a heap leach facility near Beatty, Nevada.

During the three months ended June 30, 1992, the Company filed for bankruptcy
and disposed of all of its assets and liabilities. It was inactive since the
bankruptcy settlement until new management and investors assumed control of the
Company at the beginning of 2001.

On August 2, 2001, the Company received its license from the Texas Public
Utility Commission to serve as a provider of electricity to residential and
commercial customers in deregulated markets within the state of Texas. On
January 1, 2002, Gexa began to provide retail electric services in the State of
Texas.

2. Basis of Presentation and Significant Accounting Policies

The accompanying financial statements have been prepared in accordance with
accounting principles generally accepted in the United States of America.

Revenue and Cost Recognition

Sales of electric power are recognized as the power is delivered to the
Company's customers. Sales represent the total proceeds from energy sales-
including pass through charges from the Transmission and Distribution Provdiders
(TDSPs) billed to the customer at cost. Cost of sales includes electric power
purchased, sales commissions, and pass through charges from the TDSPs in the
areas serviced by the Company- Oncor in the greater Dallas area and CenterPoint
in the greater Houston area. TDSP charges are costs for metering services and
maintenance of the electric grid.

Use of estimates

The preparation of financial statements in accordance 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 and the disclosure of contingent assets and liabilities at the date
of the financial statements


                                       40
<PAGE>

and revenues and expenses during the reporting period. Actual results could
differ from those estimates.

Cash and Cash Equivalents

The Company considers all highly liquid short-term investments purchased with a
maturity of twelve months or less at the date of purchase to be cash
equivalents.

Property and Equipment

Property and equipment are stated at cost. Maintenance, repairs and minor
renewals are expensed when incurred.

Substantially all of the Company's assets are classified as furniture,
computer hardware, computer software, or other technology-related items. All of
these items are depreciated on a straight-line basis over a three year period.
Due to the nature of these items, no salvage values are retained.

Intangible Assets

Intangible assets consist of software development and a website portal owned by
the Company. This asset is not depreciated as it is being held with the
intention that it will be sold.

Long-Lived Assets

The Company periodically
reviews the values assigned to long-lived assets to determine whether any
impairments are other than temporary. Management believes that the long-lived
assets in the accompanying balance sheets are appropriately valued.

Income Taxes

The Company accounts for income taxes pursuant to the asset and liability method
which required deferred income tax assets and liabilities to be computed
annually for temporary differences between the financial statement and tax bases
of assets and liabilities that will result in taxable or deductible amounts in
the future based on enacted tax laws and rates applicable to the periods in
which the differences are expected to affect taxable income. Valuation
allowances are established when necessary to reduce deferred tax assets to the
amount expected to be realized. The income tax provision or benefit is the tax
payable or refundable for the period plus or minus the change during the period
in deferred tax assets and liabilities.


                                       41
<PAGE>

Earnings (loss) per share

The Company presents "basic" earnings (loss) per share and, if applicable,
"diluted" earnings per share. Basic earnings (losses) per share is calculated by
dividing net income or loss by the weighted average number of shares outstanding
during each period. The calculation of diluted earnings (loss) per share is
similar to that of basic earnings per share, except that the denominator is
increased to include the number of additional common shares that would have been
outstanding if all of the common stock equivalents were exercised, and if all of
the preferred stock had been converted to common shares.

Comprehensive income

Statement of Financial Accounting Standards No. 130 "Reporting Comprehensive
Income," (SFAS 130), requires that total comprehensive income be reported in the
financial statements. There were no components of comprehensive income (other
than earnings of the Company); consequently, no separate statement of
comprehensive income has been presented.

Recent accounting pronouncements

In December 2002, SFAS No. 148, Accounting for Stock Based Compensation -
Transition and Disclosure - an amendment of FASB Statement No. 123, was issued.
This Statement provides alternative methods of transition for a voluntary change
to fair value-based method of accounting for stock-based compensation. Prominent
disclosure in both annual and interim financial statements about the method of
accounting for stock-based employee compensation and the effect on reported
results is required. The provisions of FAS 148 are effective for financial
statements for fiscal years & interim periods ending after December 15, 2002.
The disclosure provisions of FAS 148 have been adopted by the company.


3. Accounts Receivable

The Company's customers are billed monthly at various dates throughout the
month. Unbilled receivables represent the revenues associated with electric
power delivered to customers as of the end of the month, but not yet billed.

The allowance for bad debt at December 31, 2002 was
designed, and is expected, to cover all bad debt relating to 2002 that will
potentially be written off subsequent to year end. The Company writes off
receivables related to accounts for which payment has not been received for 60
days and for which no suitable payment plan can be established. Also, on a
case-by-case basis if a customer is discovered to be likely unable to satisfy
their current financial obligations, the account will be reserved and written
off if no suitable payment plan can be established within a reasonable period of
time.

                                       42
<PAGE>

As of December 31, 2002, Accounts Receivable contains billed receivables,
allowance for doubtful accounts and unbilled receivables as follows:
<TABLE>
<CAPTION>

<S>                                                 <C>
Billed receivables                                  $                   3,400,556
Allowance for doubtful accounts                                         (326,570)
Unbilled receivables                                                    3,806,806
                                                        --------------------------

Accounts receivable, net                            $                   6,880,792
                                                        ==========================
</TABLE>

4. Property and Equipment

Property and equipment by asset class at December 31, 2002 consisted of the
following:
<TABLE>
<CAPTION>

               Asset Class                    Estimated Life

<S>                                              <C>             <C>
Computers and printers                           3 years         $           55,125
Furniture and fixtures                           3 years                    108,135
Telephone system                                 3 years                     33,831
Software and programs                            3 years                     37,288

Less: accumulated depreciation                                             (32,966)
                                                                    ----------------
                                                                    ----------------

Property and equipment, net                                      $          201,413
                                                                    ================
</TABLE>

5. Other Assets

Other assets at December 31, 2002 consisted of the following:

Deposits                                        $                     152,669
Intangible assets- held for sale                                       85,600
Prepaids                                                                6,294
                                                    --------------------------
                                                    --------------------------

Total other assets                              $                     244,563
                                                    ==========================


                                       43
<PAGE>




6. Accounts Payable and Accrued Liabilities

Accounts payable and accrued liabilities at December 31, 2002 consisted of the
following:
<TABLE>
<CAPTION>

<S>                                                         <C>
Trade payables                                              $              108,274
Accrued electricity purchases                                            2,934,627
Accrued sales commissions                                                   10,203
Accrued TDSP charges                                                     1,649,291
                                                               --------------------
                                                               --------------------

Total accounts payable and accrued liabilities             $             4,702,395
                                                               ====================
</TABLE>

7. Commitments and Contingencies

The Company receives the bulk of its electricity for resale through advance
contract purchases. As of December 31, 2002, the Company has contracts for the
future delivery of electricity in the amount of $23,172,662 for 2003. The
Company has no commitments for delivery of electricity beyond December 31, 2003.

At December 31, 2002, the Company's lease commitments included a rental contract
through April 2007 for its corporate offices, and cancelable operating leases
for document production and postal machines ending in 2006. Lease expense for
the company was $81,112 and $9,174 in 2002 and 2001, respectively. The
approximate minimum future obligations for rent and operating leases, by fiscal
year, are as follows:

                          2003            $                117,000
                          2004                             117,000
                          2005                             117,000
                          2006                             110,000
                          2007                              25,000
                                              ---------------------
                                              ---------------------

                          Total                            486,000
                                              =====================
8. Related Party Transactions

On May 31, 2001, the Chairman and Chief Executive Officer of the Company lent
the Company $100,000 for five years evidenced by an unsecured promissory note
with an interest rate of 6% per annum. Interest is accrued and to be paid on
return of the principal on or before May 31, 2006.


                                       44
<PAGE>


9. Credit Facility

At December 31, 2002, the Company had a $500,000 credit facility provided by an
unrelated corporation as part of a financing agreement that was terminated
effective December 31, 2002. Under the terms of the termination, the balance
outstanding was repaid in January 2003. In addition to repaying the credit
outstanding, effective December 31, 2002 the Company terminated the unrelated
corporation's 300,000 stock warrants that had been issued as part of the
financing agreement. During the course of the agreement, $100,000 of interest
expense had been recognized.

10. Stock Transactions

During the twelve months ended December 31, 2002, the Board authorized stock
issuances as follows; of 86,000 shares of common stock to consultants for
services valued at $88,750; 3,000 shares of common stock to an employee for
services valued at $3,000; and 10,000 shares of common stock valued at $20,000
to an independent contractor in lieu of commissions; 300,000 shares to a Board
member in exchange for $112,500 and a marketing agreement valued at $187,500;
and one employee was awarded merit-based compensation in the form of 2,000
common shares of Gexa stock valued at $1.00 per share.

During the twelve months ended December 31, 2002, the Company issued stock
options to its primary creditor as part of the Company's financing agreement.
The options for 300,000 shares are valued at $300,000 and were amortized at
$8,333 per month to match the three year term of the financing agreement. At
December 31, 2002, the financing agreement was terminated and the value of the
options, net of amortization, was retired. See Note 9.

During the twelve months ended December 31, 2002, the Company issued 33,549
shares of common stock, valued at $50,323, as dividend payments to holders of
the Company's preferred stock.

During the twelve months ended December 31, 2002, three employees exercised
their stock options to purchase 32,000 shares of common stock at $1.00 per
share. During the nine months ended September 30, 2002, one of the three
employees was terminated and that employee's 5,000 shares were canceled. As of
December 31, 2002, only one employee has not yet fully paid for them, resulting
in stock subscriptions receivable of $13,848. The shares are being held by the
Company for the benefit of that employee until payment has been made in full. In
the event payment is not made by the employee by May 1, 2003, the remaining
shares for which money is owed shall be cancelled.

During the twelve months ended December 31, 2002, 508,214 shares of preferred
stock were issued. These shares are convertible to common stock.



                                       45
<PAGE>

During the year ended December 31, 2002, 100,050 in stock warrants were issued
to shareholders and promoters. As of December 31, 2002, none of these warrants
have been exercised. 50,000 of these warrants allow the purchase of one share of
stock at $2.25- with the warrants expiring on July 1, 2003. The remaining 50,050
warrants provide for the purchase of one share of stock at $1.75 and expire on
August 31, 2003.

As of December 31, 2001, 1,301,872 warrants had been issued to promoters and
shareholders permitting the purchase of shares of common stock at $1.75 per
share. These warrants expired on August 31, 2002. 185,557 of these warrants were
exercised prior to the expiration date, and the remaining 1,116,315 expired on
August 31, 2002.

11.  Stockholder's Equity

Earnings Per Share

Basic earnings per share is computed based on weighted average shares
outstanding and excludes dilutive securities. Diluted earnings per share is
computed including the impacts of all potentially dilutive securities. The
following table sets forth the computation of basic and diluted earnings per
share for the year ended December 31, 2001 and 2002:
<TABLE>
<CAPTION>

                                                                      2002              2001
                                                                  ------------- --- --------------

Basic:
<S>                                                                  <C>                <C>
Basic weighted average shares outstanding                            7,327,642          4,209,177
                                                                  =============     ==============
                                                                  =============     ==============

Net (loss) income                                             $        639,888  $       (696,579)
Convertible preferred stock dividend                                    50,323                  -

Net (loss) income attributable to common shareholders                  589,565          (696,579)
                                                                  -------------     --------------
Per share amount                                              $           0.08  $          (0.17)
                                                                  =============     ==============

Diluted:
Basic weighted average shares outstanding                            7,327,642          4,209,177
Net effect of dilutive stock options
    based on the treasury stock method                                 600,000                  -
Assumed conversion of convertible
    preferred stock                                                    474,665                  -
                                                                  -------------     --------------
Total                                                                8,402,307          4,209,177
                                                                  -------------     --------------

Net (loss) income                                             $        639,888  $       (696,579)
                                                                  -------------     --------------
Per share amount                                              $           0.08  $          (0.17)
                                                                  =============     ==============
</TABLE>


At December 31, 2002, there were 685 common stock equivalents that would be
anti-dilutive and were excluded from the computation of diluted earnings per
share.

For 2001, stock options and the convertible stock would be anti-dilutive and are
excluded from the computation of diluted earnings per share.


                                       46
<PAGE>


Stock-Based Compensation

The Company has elected to follow APB No. 25, and related Interpretations in
accounting for its employee stock options because, as discussed below, the
alternative fair value accounting provided for under SFAS No. 148 requires the
use of option valuation models that were not developed for use in valuing
employee stock options. Under APB 25, no compensation expense is recognized if
the exercise price of the Company's employee stock options equals the market
price of the underlying stock on the date of grant. No compensation expense was
recognized under APB No.25 during the two years ended December 31, 2001 and
2002.

Pro forma information regarding net income and earnings per share is required by
SFAS No. 148 and has been determined as if the Company had accounted for its
stock options under the fair value method as provided therein. The fair value of
each option grant is estimated on the date of grant using the Black-Scholes
option-pricing model with the following weighted average assumptions used for
options issued in 2001 and 2002: risk-free interest rate of 5.0% for 2001 and
2002; expected lives of three years, assumed volatility of 1% for 2001 and 124%
for 2002; and no expected dividends.

For purposes of pro forma disclosures, the estimated fair value of the options
is amortized to expense over the options' vesting period. Set forth below is a
summary of the Company's net income and earnings per share as reported and pro
forma as if the fair value-based method of accounting defined in SFAS No. 148
had been applied.
<TABLE>
<CAPTION>

                                                             2002                                     2001
                                           -------------------------------------     ------------------------------------
                                                          Pro Forma                                Pro Forma
                                                As       Stock Option      Pro            As     Stock Option     Pro
                                             Reported      Expense        Forma        Reported     Expense      Forma
                                           ------------- ------------    -------     ----------  ------------ -----------


Net (loss) income attributable to
<S>                                        <C>               <C>       <C>           <C>            <C>        <C>
 common shareholders                       $     589,565        --     $ 589,565     $  (696,579)   (80,786)   $ (777,365)
Basic (loss) earnings per common share              0.08        --          0.08           (0.17)     (0.01)        (0.18)
Diluted (loss) earnings per common share   $        0.08        --     $    0.08     $     (0.17)     (0.01)   $    (0.18)
</TABLE>


                                       47
<PAGE>

Stock Options Activity

Stock options granted in 2001 have an exercise price of $1.50 per share, were
fully vested as of December 31, 2001, and expire on December 31, 2005. Stock
options granted in 2002 have an exercise price of $2.00 per share, will vest on
June 1, 2003, and expire on June 1, 2005.
<TABLE>
<CAPTION>

                                                                       Average Per Share
                                                              -------------------------------------
                                              Shares
                                             Subject             Exercise               Fair
                                            To Option             Price                Value
                                          ---------------     ---------------     -----------------

<S>                                                   <C>               <C>                    <C>
Balance at December 31, 2000                           -                   -                     -

Granted                                          600,000   $            1.50   $              1.50
Exercised                                              -                   -                     -
Cancelled                                              -                   -                     -
                                          ---------------     ---------------     -----------------
                                          ---------------     ---------------     -----------------

Balance at December 31, 2001                     600,000
                                          ---------------     ---------------     -----------------
                                          ---------------     ---------------     -----------------

Granted                                          250,000                2.00                  1.70
Exercised                                              -                   -                     -
Cancelled                                              -                   -                     -
                                          ---------------     ---------------     -----------------
                                          ---------------     ---------------     -----------------

Balance at December 31, 2002                     850,000                       $              1.70
                                          ===============                         =================
</TABLE>

12. Income Taxes

The provision for income taxes consisted of the following for the years ended
December 31:

<TABLE>
<CAPTION>
                                                             2002                    2001
                                                       -----------------       -----------------
                                                       -----------------       -----------------

<S>                                               <C>                     <C>
Current expense                                  $             368,839   $                   -
Deferred benefit                                               (37,368)               (157,486)
                                                       -----------------       -----------------
                                                       -----------------       -----------------

Total income tax expense (benefit)                $             331,471   $           (157,486)
                                                       =================       =================
</TABLE>

The deferred tax asset at December 31, 2002 is comprised of the following:
<TABLE>
<CAPTION>

<S>                                                                <C>
Allowance for bad debts                                            $         111,034
Amounts capitalized for tax and not for book                                  83,820
                                                                       --------------
                                                                       --------------

Deferred tax asset                                                 $         194,854
                                                                       ==============
</TABLE>


                                       48
<PAGE>

13. Employee Benefits

The Company offers a PPO Health Plan to all full time employees after the first
month of full time service. The Company pays for 75% of the employee's coverage,
with the employee responsible for the remaining 25% plus any expenses for added
family members. The Company also offers Dental Insurance at employee expense and
a 401K plan- both of which become available after one month of full time
service. At this time, the Company is not offering matching contributions to any
employee contributions to their 401K accounts.

14. Legal Proceedings

As of and for the year ended December 31, 2002, the Company neither engaged
in nor was subject to any material legal proceedings.

15. Concentration of Credit Risk

For the year ended December 31, 2002, the Company's primary supplier of
electricity was TXU. Additional supplies were purchased from BP, ANP and Coral
Energy. In November 2002, the Company became its own Qualified Scheduling Entity
(QSE), allowing us to buy and sell power in the balancing markets to ensure our
supply needs over and above contract purchases each day covers all usage by our
customers. Prior to November 2002, the Company's QSE services were provided by
TXU.

As of December 31, 2002, the Company has secured several large commercial
customers, however none is of sufficient size to pose a significant threat to
our cash flow or ability to continue operations in the event of default, refusal
to pay, or undue delay in payment. At December 31, 2002, no single customer
accounted for more than 3% of revenues.

16. Subsequent Events

Effective January 20, 2003, the Company entered into a new financing agreement
with an unrelated public company to serve as the Company's primary provider of
electricity. Upon initiation of this agreement, the Company repaid the $500,000
credit facility that had been extended by an unrelated corporation as part of
the Company's previous financing agreement. See Note 9.

Related Party Transaction:
On March 24, 2003 one of our Board members, Mr. Don Aron, agreed to purchase
company receivables for $700,000. In consideration of the purchase, Mr. Aron
shall receive a factoring fee of 3% per month for a minimum term of 60 days.
Additionally, as part of the agreement, Mr. Leibman and Ms. Zlontik, our two
largest shareholders and members of our management team were required to pledge
their stock and provide personal guarantees to Mr. Aron.

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.

                                       49
<PAGE>

                                    PART III

ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
At present, we have two executive officers and five directors. We have elected
to maintain seven board seats to serve one year terms. We may elect more
additional directors and appoint additional officers in connection with a
Business Combination transaction. Our director(s) are elected to serve until the
next annual meeting of shareholders and until his (their) respective successors
will have been elected and will have qualified.
The following table sets forth as the name, age and position held with respect
to our directors and executive officer:
<TABLE>
<CAPTION>

Name
                              Age                 Positions                     Term
<S>                            <C>            <C>                             <C>
Neil Leibman                   42             Chairman and CEO                one year
Marcie Zlotnik                 40          President, and Director            one year
Don Aron                       57                 Director                    one year
Stuart C. Gaylor               41                 Director                    one year
Dan C. Fogarty                 38                 Director                    one year
Bobby Orr                      42                 Director                    one year
Tom D. O'Leary                 44                 Director                    one year
</TABLE>

Mr. Leibman, CEO: Mr. Neil Leibman has an undergraduate degree from Emory
University and a Juris Doctor and Master of Business Administration degree from
the State University of New York at Buffalo. Since 1984, Mr. Leibman had been
practicing law in Texas. His law firm specialized in corporate law and business
litigation. In addition, he serves as Vice Chairman of the Board of Trustees of
The Fay School and sits on the Development Council of Texas Children's Hospital.
Mr. Leibman has not held any position in a reporting public company during the
last five years.

Ms. Marcie Zlotnik, President: Ms. Zlotnik graduated in 1987 from the University
of Texas at Austin with a Bachelor of Business Administration in Accounting. Ms.
Zlotnik has been working in the telecommunication industry for the last 10
years. During these years, Ms. Zlotnik was Chief Operating Officer for Coastal
Telephone Company, which was sold to Broadwing Communication. Following her
managing position at Coastal Telephone Company, Ms. Zlotnik became President of
TotalNet Communications, Inc., a long distance telephone company in Houston,
Texas which she subsequently sold to GST Telecom. Ms. Zlotnik has not held any
position in a reporting public company during the last five years.

Don Aron: Mr. Aron received his Bachelor's Degree in Business in 1968 and
afterward served six years in the United States Air Force Reserves. Although his
business career has primarily evolved within the real estate industry, his
emphasis in recent years has been on investments including mezzanine capital,
bridge capital and venture financing.


                                       50
<PAGE>

Mr. Aron has been associated with numerous private and public companies,
and currently serves on several corporate boards. Mr. Aron is also a very active
philanthropist- particularly with Houston Juvenile Diabetes Foundation where he
holds the first Chairman's role for JDF Friends.

Stuart C. Gaylor: Mr. Gaylor is a 1983 graduate of the University of
Texas where he graduated with a Bachelor of Business Administration degree with
a major in Accounting and Data Processing. Mr. Gaylor is President and Chief
Financial Officer of Al's Formal Wear of Houston, Ltd., one of the country's
largest formal wear retail and rental chains. Al's Formal wear is the parent
company of BridesMart, Ascot Tuxedos, Louise Blum, A.B. Graham Formal Clothiers
and Ascot Formal Wear.

Dan C. Fogarty: Mr. Fogarty graduated in 1990 with a B.A. in Marketing from
St. Edwards University. Mr. Fogarty served as an account supervisor for Banner
Radio in Houston until 1993 when he joined Fogarty Klein Monroe, a full service
marketing and advertising agency with annual billings of over $250 million to
head up its non-traditional media unit. In 1999, he co-founded Worldtalk,
L.L.C., a company that provides long distance service to Central America and the
Spanish speaking Caribbean. Mr. Fogarty also serves as a director of Worldtalk.

Bobby Orr: Mr. Orr graduated from the University of Texas. For the last five
years, he has been involved in every aspect of the real estate business.
Currently, Mr. Orr develops commercial projects, which he either sells and
manages or maintains for his own portfolio of projects.

Tom D. O'Leary: Mr. O'Leary received an undergraduate degree of Architecture in
1981 and a Master of Business Administration degree in 1984, both from the
University of Houston. Since 1991 he has been president of PDS Group and PDS
Management Group, LLC, a real estate project management company focused on
independent oversight for construction and development projects throughout the
Southwest. Mr. O'Leary currently sits on the Board of The Fay School and MUD 89
located in Montgomery County.

Section 16(a) Beneficial Ownership Reporting

Compliance:
Name of Officer/Director
                                                            Forms Filed
Neil Leibman                                             Forms 3, 4  and 5
Marcie Zlotnik                                           Forms 3, 4  and 5


                                       51
<PAGE>
<TABLE>
<CAPTION>



ITEM 10. EXECUTIVE COMPENSATION
--------------------------- -------- ---------- --------------- ------- ----------------------------------------- --------------

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

                                            Annual Compensation                    Awards               Payouts
--------------------------- -------- ---------------------------------- ------------------------------ ----------

           (a)                (b)       (c)       (d)         (e)            (f)             (g)          (h)          (i)
--------------------------- -------- ---------- -------- -------------- --------------- -------------- ---------- --------------

<S>                         <C>       <C>       <C>      <C>              <C>           <C>            <C>          <C>
Name and Principal           Year     Salary     Bonus   Other Annual     Restricted     Securities    LTIP         All other
Position(1)                                              Compensation    Stock Award     Underlying     Payouts   compensation
                                                                                         Options/SAR
--------------------------- -------- ---------- -------- -------------- --------------- -------------- ---------- --------------
                                                  ($)         ($)            ($)             (#)          ($)          ($)
                                        ($)
--------------------------- -------- ---------- -------- -------------- --------------- -------------- ---------- --------------
                             2002     117,000    8,000         0              0               0            0            0
Neil Leibman, Chairman
and CEO since 3-2001
--------------------------- -------- ---------- -------- -------------- --------------- -------------- ---------- --------------
Marcie Zlotnik,              2002     111,000    8,000         0              0               0            0            0
President, Director since
3-2001
--------------------------- -------- ---------- -------- -------------- --------------- -------------- ---------- --------------
Don Aron, Director since     2002        0         0           0              0               0            0         93,750
2-2002
--------------------------- -------- ---------- -------- -------------- --------------- -------------- ---------- --------------
Stuart C. Gaylor,            2002        0         0           0              0               0            0            0
Director since 3-2001
--------------------------- -------- ---------- -------- -------------- --------------- -------------- ---------- --------------
Dan C. Fogarty,              2002        0         0           0              0               0            0            0
Director since 3-2001
--------------------------- -------- ---------- -------- -------------- --------------- -------------- ---------- --------------
Bobby Orr, Director since    2002        0         0           0              0               0            0            0
3-2001
--------------------------- -------- ---------- -------- -------------- --------------- -------------- ---------- --------------
Justin L. Rice              2000-1991    0         0           0              0               0            0            0
--------------------------- -------- ---------- -------- -------------- --------------- -------------- ---------- --------------
Gary L. Rice                2000-1991    0         0           0              0               0            0            0
--------------------------- -------- ---------- -------- -------------- --------------- -------------- ---------- --------------
David E.P. Lindh            2000-1991    0         0           0              0               0            0            0
--------------------------- -------- ---------- -------- -------------- --------------- -------------- ---------- --------------
Henry C.B. Lindh            2000-1991    0         0           0              0               0            0            0
--------------------------- -------- ---------- -------- -------------- --------------- -------------- ---------- --------------
Robert McDougal             2000-1991    0         0           0              0               0            0            0
--------------------------- -------- ---------- -------- -------------- --------------- -------------- ---------- --------------
Dale Stringfellow           2000-1991    0         0           0              0               0            0            0
--------------------------- -------- ---------- -------- -------------- --------------- -------------- ---------- --------------
Laura B. Kalbfleisch        2000-1991    0         0           0              0               0            0            0
--------------------------- -------- ---------- -------- -------------- --------------- -------------- ---------- --------------

(1) All new officers commenced serving in such positions in March 2001. Since
our discharge from bankruptcy in 1992- through 2001, we paid no executive
compensation, because we lacked the cash flow and financial resources. The
Company has no employment agreement with any of its officers and directors.
</TABLE>


                                       52
<PAGE>

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information regarding the beneficial
ownership of the Common Stock of Gexa as of March 21, 2003, and the date of the
filing of this Form 10-KSB for the year ended December 31, 2002, beneficially by
each person owning more than 5% of such common shares and the directors and
executive officers, and by all officers and directors, as a group.
<TABLE>
<CAPTION>
                                                                               Amount and Nature of     Percent of Class
                                                                               Beneficial Ownership      Outstanding(a)
Name and Address of Beneficial Owner
<S>                                                                                         <C>                <C>

Neil Leibman, CEO, 24 Greenway, Suite 1826, Houston, TX 77046(1)                            3,500,000
                                                                                                                    46.03%
Marcie Zlotnik, President, 24 Greenway, Suite 1826, Houston, TX 77046                       1,000,000
                                                                                                                    13.15%
Don Aron, Director
                                                                                              150,000                1.97%
Stuart Gaylor, Director
                                                                                               33,334                 .44%
All Officers and Directors as a Group (one person)
                                                                                            4,683,334               61.59%
</TABLE>

(a) Based on 7,604,528 shares of Common Stock outstanding as of March 21, 2003.

(1) Mr. Leibman became the Company's Chairman and CEO in March 2001. These
shares include the restricted shares issued to Boxer Capital, Ltd., an entity
controlled by Mr. Leibman and 360,000 restricted shares issued after conversion
of a $25,000 note.

(2) Ms. Zlotnik became the Company's President and director in March 2001.


                                       53
<PAGE>

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The following transactions or proposed transactions, to which the Company was or
is to be a party, in which any Officer, Director or Control Person had a direct
or indirect material interest occurred during the last two fiscal years:

On March 21, 2001, the Company issued 2,840,000 shares of common stock to
the Company's Chairman, Neil Leibman and 960,000 shares to the Company's
President, Marcie Zlotnik in lieu of compensation. The Company issued issued
120,000 restricted shares to former directors of the Company.

On May 31, 2001, Mr. Leibman, our CEO and Chairman lent the Company $100,000 for
five years evidenced by an unsecured promissory note with an interest rate of 6%
per annum. On July 1, 2001, the Company purchased assets valued at $85,600,
which consisted of software development and contracts with vendors, of EZ
Utilities, an entity controlled by Neil Leibman, our CEO and Chairman, for
300,000 restricted shares and the assumption of a $25,000 note payable to our
CEO and Chairman. The note was converted into 360,000 restricted shares of the
Company on December 31, 2001. On September 1, 2001, the company issued 40,000
restricted shares of common stock to Marcie Zlotnik, the Company's President,
for services rendered.


ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

(A) Exhibits

<TABLE>
<CAPTION>

Exhibit No.                                                 Description

<C>                                                                             <C>
3.1             Articles of Incorporation (incorporated by reference to Exhibit 3.1 to the Registration Statement
                on Form 8KA filed June 21, 2001.

3.2             Bylaws (incorporated by reference to Exhibit 3.2 to the Company's Registration Statement on Form
                8KA filed June 21, 2001.

99.1*           Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
                Sarbanes-Oxley Act of 2002.

* filed herewith

</TABLE>

(B) Reports on Form 8-K
Current Report on Form 8-K dated August 7, 2002, announcing a change in the
Company's independent auditor to Hein + Associates LLP.


                                       54
<PAGE>

ITEM 14.      CONTROLS AND PROCEDURES

Our management, including our CEO and President, conducted an evaluation of the
effectiveness of our disclosure controls and procedures (as defined in Rule
13a-14(c) promulgated under the Securities and Exchange Act of 1934, as amended)
as of a date (the "Evaluation Date") within 90 days prior to the filing date of
this report. Based upon that evaluation, our CEO and President have concluded,
that our disclosure controls and procedures are effective for timely gathering,
analyzing and disclosing the information we are required to disclose in our
reports filed under the Securities Exchange Act of 1934, as amended. There have
been no significant changes made in our internal controls or in other factors
that could significantly affect our internal controls subsequent to the
Evaluation Date.

                                       55
<PAGE>

                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized. Gexa Corp.

By: /s/
Neil Leibman, Chairman and CEO
Houston, TX
Dated: March 31, 2003

Gexa Corp.

By: /s/ Marcie Zlotnik
Marcie Zlotnik, President
Houston, TX
Dated: March 31, 2003

By: /s/ Don Aron                            March 31, 2003
----------------
        Don Aron
        Director

By: /s/ Stuart C. Gaylor                    March 31, 2003
------------------------
        Stuart C. Gaylor
        Director

By: /s/ Bobby Orr                           March 31, 2003
-----------------
        Bobby Orr
        Director

                                       56
<PAGE>


I, Neil Leibman, certify that:

1. I have reviewed this annual report on Form 10-KSB of Gexa Corp.;

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;


                                       57
<PAGE>

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

         a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this annual report is being prepared;

         b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of this
annual report (the ""Evaluation Date""); and

         c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):

         a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and

         b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls; and

6. The registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

Date:     March 31, 2003

By:_/s/ Neil Leibman
Neil Leibman
Chairman and CEO
(Principal Executive Officer)


                                       58
<PAGE>



I, Marcie Zlotnik, certify that:

1. I have reviewed this annual report on Form 10-KSB of Gexa Corp.;

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

         a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this annual report is being prepared;

         b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of this
annual report (the ""Evaluation Date""); and

         c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):

         a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and

         b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls; and

6. The registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent
to the date of our most recent


                                       59
<PAGE>

evaluation, including any corrective actions with regard to significant
deficiencies and material weaknesses.

Date:     March 31, 2003

By:_/s/ Marcie Zlotnik
Marcie Zlotnik
President
(Principal Financial Officer)


                                       60
<PAGE>



                                                                   Exhibit 99.1

                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350,
                       AS ADOPTED PURSUANT TO SECTION 906
                        OF THE SARBANES-OXLEY ACT OF 2002

         In connection with the Annual Report of Gexa Corp. (the "Company") on
Form 10-KSB for the period ending December 31, 2002 (the "Report"), as filed
with the Securities and Exchange Commission on the date hereof, each of I Neil
Leibman, Chairman CEO of the Company and I, Marcie Zlotnik, President of the
Company cerrtify separately and independently, pursuant to 18 U.S.C. Sec. 1350,
as adopted pursuant to Sec .906 of the Sarbanes-Oxley Act of 2002, that:

1.   The Report fully complies with the requirements of section 13(a) or 15(d)
     of the Securities Exchange Act of 1934, as amended; and

2.   The information contained in the Report fairly presents, in all material
     respects, the financial condition and result of operations of the Company.

A signed original of this written statement required by Section 906 has been
provided to Gexa Corp. and will be retained by Gexa Corp. and furnished to the
Securities and Exchange Commission or it staff upon request.


By:_/s/ Neil Leibman                        March 31, 2003
    ----------------
     Neil Leibman
     Chairman and CEO
     (Principal Executive Officer)


By:_/s/ Marcie Zlotnik                      March 31, 2003
    ------------------
     Marcie Zlotnik
     President
     (Principal Financial Officer)


                                       61
<PAGE>