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  **SECURITY AND EXCHANGE COMMISSION****WASHINGTON, D.C. 20549****FORM 10-KSB**(Mark One)   þ **ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934****For the Fiscal Year Ended November 30, 2006****OR**   o **TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934****Commission File No. 0-30746****TBX RESOURCES, INC.**(Name of Small Business Issuer in its charter)   Texas 75-2592165   (State of incorporation) (IRS Employer Identification No.)   3030 LBJ Freeway, Suite 1320  Dallas, Texas 75234 75234   (Address of Principal Executive Office) Zip CodeRegistrant’s telephone number, including Area Code: (972) 243-2610Securities registered pursuant to Section 12(b) of the Act: NoneSecurities registered pursuant to Section 12(g) of the Act: Common Stock(Title of Class)Check whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d)of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period thatthe Registrant was required to file such reports) and (2) has been subject to such filingrequirements for the past 90 days.Yes þ No oCheck if disclosure of delinquent filers in response to Item 405 of Regulation S-B is not containedin this form, and no disclosure will be contained, to the best of the Registrant’s knowledge, in10-KSB or any amendment to this Form 10-KSB.                     þIndicateby check mark whether the registrant is a shell company (as definedin Rule 12b-2 of the Exchange Act).Yeso No þThe Issuer’s revenues for the most recent fiscal year were $906,362.On May 2, 2007, the aggregate market value of voting and non-voting common equity held bynon-affiliates of the registrant was approximately $8,586,934. This amount was calculated byreducing the total number of shares of the registrant’s common stock outstanding by the totalnumber of shares of common stock held by officers and directors, and stockholders owning in excessof 5% of the registrant’s common stock, and multiplying the remainder by the average of the bid andasked price for the registrant’s common stock on May 2, 2007, as reported on the Over-The-CounterBulletin Board Market.As of May 2, 2007, the company had 3,907,417 issued and outstanding shares of common stock.Documents Incorporated by Reference: NoneTransitional Small Business Disclosure Format:                     Yes o No þ  
 

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PART IITEM 1. DESCRIPTION OF BUSINESSITEM 2. DESCRIPTION OF PROPERTYITEM 3. LEGAL PROCEEDINGSITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERSPART IIITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERSITEM 6. MANAGEMENT’S DISCUSSION AND ANALYSIS AND PLAN OF OPERATIONITEM 7. FINANCIAL STATEMENTSITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS AND FINANCIAL DISCLOSUREITEM 8A. CONTROLS AND PROCEDURESITEM 8B. OTHER INFORMATIONPART IIIITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS: COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACTITEM 10. COMPENSATION DISCUSSION AND ANALYSISITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENTITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONSITEM 13. EXHIBITS AND REPORTS ON FORM 8-KITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICESSIGNATURESAmended Employment AgreementCertification of CEO Pursuant to Section 302Certification of CEO Pursuant to Section 906

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**PART I****ITEM 1. DESCRIPTION OF BUSINESS**TBX Resources, Inc., was incorporated in the state of Texas in March 1995. Currently, our primaryfocus is to acquire additional producing oil and gas leases and wells, acquire additional oil andgas prospect leases and to acquire an exploration company that can also act as an operator of ourwells. In the past we have primarily acquired producing oil and gas properties with opportunitiesfor future development and contracted well operations to contractors. Our new focus is a change inour business philosophy but one which we believe is better responsive to the oil and gas businessopportunities available to us.As of November 30, 2006, we had total assets of $301,207 of which net oil and gas propertiesamounted to $262,581 or 87.2% of our total assets. At November 30, 2006, we had $5,250 in cash anda working capital deficit of $365,412. Our cumulative losses through November 30, 2006, totaled$10,964,095. Our revenues for our fiscal year ended November 30, 2006 were $906,362 and our netloss for the same period was $1,128,863. Our ratio of current assets to current liabilities is0.08:1; we have no long-term debt other than our asset retirement obligation of $186,761. As ofNovember 30, 2006, our shareholders’ equity was a negative $355,381.Our company has experienced operating losses over the past several years. However, with our changein focus, our management is projecting an increase in revenues from our new focus includingpotential new acquisitions, our planned participation in the drilling of new wells in the BarnettShale formation in north central Texas and the reworking of our East Texas wells. Our managementbelieves that, with the projected increases in production from the acquisition of new wells and thereworking of existing wells along with higher prices for our production our company’s financialposition should improve for the fiscal year ending November 30, 2007. However, this improvement isdependent upon many factors, some of which are not within our control and there can be no assurancethat our actual results will improve.Our mission is to be a publicly traded, independent oil and gas exploration and production companywhich can take full advantage of opportunities resulting from the major oil companies’ lack ofinterest in domestic oil and gas properties. In particular, most major oil companies are currentlymore interested in devoting their exploration dollars toward the development of oil and gas fieldsthat are either offshore and/or not located in the United States, primarily because of theassumption by the major oil companies that domestic oil and gas properties have been significantlydepleted. In addition, due to the extent of the development of domestic oil and gas properties, itis more likely that a significant new discovery in the oil and gas industry would likely beconducted in those areas that have not been so heavily developed, generally being properties thatare not contained within the United States. Because major oil companies are more interested indeveloping their offshore and overseas holdings, they often ignore on-shore opportunities and selltheir domestic properties at prices that are attractive to independent oil companies who havesignificantly lower administrative costs than large oil companies. Due to our lower infrastructurecosts, we believe that our costs of owning and operating domestic oil and gas properties are lowerthan those same costs as experienced by major oil companies.On September 8, 2006, TBX Resources, Inc., entered into a merger agreement (the “Agreement”)with Earthwise Energy, Inc., a Nevada corporation, and TBX Acquisition, Inc., a Texas corporationand a wholly owned subsidiary of TBX. A copy of the Agreement is attached as Exhibit 10.1.Earthwise is an oil and gas company, located in Dallas, Texas, which has certain oil and gas leaseassets and manages several oil and gas joint venture partnerships. Upon closing, Earthwise willmerge with and into TBX Acquisition, Inc. Earthwise will be the surviving corporation and become awholly owned subsidiary of TBX. Earthwise stockholders will be receiving TBX common shares inreturn for all the issued and outstanding shares of Earthwise. Subject to certain adjustments, TBXanticipates issuing an approximate total of 4,062,018 common stock shares to the Earthwisestockholders.The Agreement also calls for employment agreements with Tim Burroughs, Steven Howard, DavidYork, Sherri Cecotti, and Richard O’Donnell, who will be the main officers and employees of thecombined companies, to be drafted and executed, subject to Board of Directors approval, at orshortly after the closing of the Agreement.The closing of the merger is contingent upon the occurrence of several events including: 1. Satisfactory conclusion of due diligence.  2. Registration of TBX common shares to be used as merger consideration.  3. Receipt of favorable fairness opinion by TBX that the transaction isfair to the TBX stockholders.  4. Certain incoming stockholders execute lock up agreements for the TBXcommon stock they will receive as merger consideration.There can be no assurance that TBX will receive a favorable fairness opinion or, in the eventthat it does, that all the other contingencies to closing the proposed merger will occur.JOINT VENTURE ACTIVITIESOn November 30, 2005, we entered into an agreement by which we committed to purchase, by issuanceof 800,000 shares of our common stock, a 50% partnership interest in the proposed Six Wells JointVenture, a Texas joint venture partnership. The purchase was contingent upon the approval ofEarthwise Energy, Inc., and Energy Partners International, a Texas joint venture (“EnergyPartners”) the initial members of the Six Wells Joint Venture. The approval did not occur in 2006and the agreement, by its terms, expired.During fiscal year 2004, we entered into a management contract with a company in which Mr.Burroughs is a 50% shareholder, Gulftex Operating, Inc. Under the terms of the agreement, thecompany provides project generation services and administrative assistance to Gulftex. Themanagement services provided by TBX to Gulftex are on a venture by venture basis for a fixed fee.The services continued until August 31, 2006 when the agreement was mutually terminated.WELLS HELD BY THE COMPANYAs further described in the description of properties section, we own all or a portion of 23 wellslocated in Hopkins, Franklin, and Wood Counties, Texas (East Texas). Of the 23 wells located inEast Texas, 10 wells are currently
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producing oil, 5 wells have been designated as water supply wells and the remaining 8 wells areeither currently shut-in, scheduled to be brought back into production or are designated asinjection wells. Injection wells are wells into which salt water is injected to either assist incausing oil or gas to flow to a particular well that is designated as a production well or tosimply dispose of salt water that is often produced along with oil. During the next twelve months,we hope to be able to bring some of the wells that are currently shut-in on-line so that they willbegin to produce hydrocarbons. However, our ability to re-open these wells is dependent uponobtaining sufficient financing to pay the costs associated with re-opening these wells andoperating them once re-opened. We also have an interest in two producing oil wells in Wise County,Texas. In addition, we have a minor overriding interest in one producing gas well in Parker County,Texas and five producing gas wells in Denton County, Texas. Also, we have a minor interest in fourwells in Ellis County, Oklahoma. All four of the wells are in production for oil and natural gas.DEVELOPMENT AND EXPLORATION ACTIVITIESEconomic factors prevailing in the oil and gas industry change from time to time. The uncertainnature and trend of economic conditions and energy policy in the oil and gas business generallymake flexibility of operating policies important in achieving desired profitability. We intend toevaluate continuously all conditions affecting our potential activities and to react to thoseconditions, as we deem appropriate from time to time by engaging in businesses most profitable forus.In addition, in order to finance future development and exploration activities, we will sponsor ormanage public or private partnerships depending upon the number, size and economic feasibility ofour generated prospects, the level of participation of industry partners and various other factors.However, potential investors should note that we currently do not have in place any definitefinancing opportunities and there can be no assurance that we will be able to enter into suchfinancing arrangements or that if we are able to enter into such arrangements, we will be able toachieve any profitability as a result of our operations.General RegulationsBoth state and federal authorities regulate the extraction, production, transportation, and sale ofoil, gas, and minerals. The executive and legislative branches of government at both the state andfederal levels have periodically proposed and considered proposals for establishment of controls onalternative fuels, energy conservation, environmental protection, taxation of crude oil imports,limitation of crude oil imports, as well as various other related programs. If any proposalsrelating to the above subjects were to be enacted, we cannot predict what effect, if any,implementation of such proposals would have upon our operations. A listing of the more significantcurrent state and federal statutory authority for regulation of our current operations and businessare provided below.Federal Regulatory ControlsHistorically, the transportation and sale of natural gas in interstate commerce have been regulatedby the Natural Gas Act of 1938 (the (“NGA”), the Natural Gas Policy Act of 1978 (the “NGPA”) andassociated regulations by the Federal Energy Regulatory Commission (“FERC”). The Natural GasWellhead Decontrol Act (the “Decontrol Act”) removed, as of January 1, 1993, all remaining federalprice controls from natural gas sold in “first sales.” The FERC’s jurisdiction over natural gastransportation was unaffected by the Decontrol Act.In 1992, the FERC issued regulations requiring interstate pipelines to provide transportation,separate or “unbundled,” from the pipelines’ sales of gas (Order 636). This regulation fosteredincreased competition within all phases of the natural gas industry. In December 1992, the FERCissued Order 547, governing the issuance of blanket market sales certificates to all natural gassellers other than interstate pipelines, and applying to non-first sales that remain subject to theFERC’s NGA jurisdiction. These orders have fostered a competitive market for natural gas by givingnatural gas purchasers access to multiple supply sources at market-driven prices. Order No. 547increased competition in markets in which we sell our natural gas.The natural gas industry historically has been very heavily regulated; therefore, there is noassurance that the less stringent regulatory approach pursued by the FERC and Congress willcontinue.
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State Regulatory ControlsIn each state where we conduct or contemplate oil and gas activities, these activities are subjectto various regulations. The regulations relate to the extraction, production, transportation andsale of oil and natural gas, the issuance of drilling permits, the methods of developing newproduction, the spacing and operation of wells, the conservation of oil and natural gas reservoirsand other similar aspects of oil and gas operations. In particular, the State of Texas (where wehave conducted the majority of our oil and gas operations to date) regulates the rate of dailyproduction allowable from both oil and gas wells on a market demand or conservation basis. At thepresent time, no significant portion of our production has been curtailed due to reducedallowables. We know of no proposed regulation that will significantly impede our operations.Environmental RegulationsOur extraction, production and drilling operations are subject to environmental protectionregulations established by federal, state, and local agencies. To the best of our knowledge, webelieve that we are in compliance with the applicable environmental regulations established by theagencies with jurisdiction over our operations. We are acutely aware that the applicableenvironmental regulations currently in effect could have a material detrimental effect upon ourearnings, capital expenditures, or prospects for profitability. Our competitors are subject to thesame regulations and therefore, the existence of such regulations does not appear to have anymaterial effect upon our position with respect to our competitors. The Texas Legislature hasmandated a regulatory program for the management of hazardous wastes generated during crude oil andnatural gas exploration and production, gas processing, oil and gas waste reclamation andtransportation operations. The disposal of these wastes, as governed by the Railroad Commission ofTexas, is becoming an increasing burden on the industry.Revenues from oil and gas production are subject to taxation by the state in which the productionoccurred. In Texas, the state receives a severance tax of 4.6% for oil production and 7.5% for gasproduction. These high percentage state taxes can have a significant impact upon the economicviability of marginal wells that we may produce and require plugging of wells sooner than would benecessary in a less arduous taxing environment.BUSINESS RISKSOur future success depends upon our ability to find, develop and acquire additional oil and gasreserves that are economically recoverable.The rate of production from oil and natural gas properties declines as reserves are depleted. As aresult, we must locate and develop or acquire new oil and gas reserves to replace those beingdepleted by production. We must do this even during periods of low oil and gas prices when it isdifficult to raise the capital necessary to finance activities. Without successful exploration oracquisition activities, our reserves and revenues will decline. We may not be able to find anddevelop or acquire additional reserves at an acceptable cost or have necessary financing for theseactivities.Oil and gas drilling is a high-risk activity.Our future success will depend on the success of our drilling programs. In addition to thenumerous operating risks described in more detail below, these activities involve the risk that nocommercially productive oil or gas reservoirs will be discovered. In addition, we are oftenuncertain as to the future cost or timing of drilling, completing and producing wells.Furthermore, our drilling operations may be curtailed, delayed or canceled as a result of a varietyof factors, including, but not limited to, the following: **–** unexpected drilling conditions;  **–** pressure or irregularities in formations;  **–** equipment failures or accidents;  **–** adverse weather conditions;  **–** inability to comply with governmental requirements; and  **–** shortage or delays in the availability of drilling rigs and the delivery of equipment.If we experience any of these problems, our ability to conduct operations could be adverselyaffected.
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Factors beyond our control affect our ability to market oil and gas.Our ability to market oil and gas from our wells depends upon numerous factors beyond our control.These factors include, but are not limited to, the following: **–** the level of domestic production and imports of oil and gas;  **–** the proximity of gas production to gas pipelines;  **–** the availability of pipeline capacity;  **–** the demand for oil and gas by utilities and other end users;  **–** the availability of alternate fuel sources;  **–** the effect of inclement weather;  **–** state and federal regulation of oil and gas marketing; and  **–** federal regulation of gas sold or transported in interstate commerce.If these factors were to change dramatically, our ability to market oil and gas or obtain favorableprices for our oil and gas could be adversely affected.The marketability of our production may be dependent upon transportation facilities over which wehave no control.The marketability of our production depends in part upon the availability, proximity, and capacityof pipelines, natural gas gathering systems and processing facilities. Any significant change inmarket factors affecting these infrastructure facilities could harm our business. We deliver someof our oil and natural gas through gathering systems and pipelines that we do not own. Thesefacilities may not be available to us in the future.Oil and natural gas prices are volatile. A substantial decrease in oil and natural gas pricescould adversely affect our financial results.Our future financial condition, results of operations and the carrying value of our oil and naturalgas properties depend primarily upon the prices we receive for our oil and natural gas production.Oil and natural gas prices historically have been volatile and likely will continue to be volatilein the future, especially given world geopolitical conditions. Our cash flow from operations ishighly dependent on the prices that we receive for oil and natural gas. This price volatility alsoaffects the amount of our cash flow available for capital expenditures and our ability to borrowmoney or raise additional capital. The amount we can borrow or have outstanding under or bankcredit facility is subject to semi-annual redeterminations. Oil prices are likely to affect usmore than natural gas prices because approximately 70% of our proved reserves are oil. The pricesfor oil and natural gas are subject to a variety of additional factors that are beyond our control.These factors include: **–** the level of consumer demand for oil and natural gas;  **–** the domestic and foreign supply of oil and natural gas;  **–** the ability of the members of the Organization of Petroleum Exporting Countriesto agree to and maintain oil price and production controls;  **–** the price of foreign oil and natural gas;  **–** domestic governmental regulations and taxes;  **–** the price and availability of alternative fuel sources;  **–** weather conditions, including hurricanes and tropical storms in and around the Gulf of Mexico;  **–** market uncertainty;  **–** political conditions in oil and natural gas producing regions, including the Middle East; and  **–** world wide economic conditions.These factors and the volatility of the energy markets generally make it extremely difficult topredict future oil and natural gas price movements with any certainty. Also, oil and natural gasprices do not necessarily move in tandem. Declines in oil and natural gas prices would not onlyreduce revenue, but could reduce the amount of oil and natural gas that we can produce economicallyand, as a result, could have a material adverse effect upon our financial condition, results ofoperations, oil and natural gas reserves and the carrying values of our oil and natural gasproperties. If the oil and natural gas industry experiences significant price declines, we may,among other things, be unable to meet our financial obligations or make planned expenditures.
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Since the end of 1998, oil prices have gone from near historic low prices to historic highs. Atthe end of 1998, NYMEX oil prices were at historic lows of approximately $1.00 per Bbl, but havegenerally increased since that time, albeit with fluctuations. For 2006, NYMEX oil prices werehigh throughout the year, averaging over $66.00 per Bbl for 2006. While we attempt to obtain thebest price for our crude in our marketing efforts, we cannot control these market price swings andare subject to the market volatility for this type of oil. These price differentials relative toNYMEX prices can have as much of an impact on our profitability as does the volatility in the NYMEXoil prices.Natural gas prices have also experienced volatility during the last few years. During 1999,natural gas prices averaged approximately $2.35 per Mcf and, like crude oil, have generally trendedupward since that time, although with significant fluctuations along the way. During 2005, NUMEXnatural gas prices averaged $8.97 per MMBtu and in 2006, averaged $7.33 per MMBtu.We may not be able to replace our reserves or generate cash flows if we are unable to raisecapital.We make, and will continue to make, substantial capital expenditures for the exploration,acquisition and production of oil and gas reserves. Historically, we have financed theseexpenditures primarily with cash generated by operations and proceeds from bank borrowings andequity financing. If our revenues or borrowing base decrease as a result of lower oil and gasprices, operating difficulties or decline in reserves, we may have limited ability to expend thecapital necessary to undertake or complete future drilling programs. Additional debt or equityfinancing or cash generated by operations may not be available to meet these requirements.We face strong competition from other energy companies that may negatively affect our ability tocarry on operations.We operate in the highly competitive areas of oil and gas exploration, development and production.Factors that affect our ability to successfully compete in the marketplace include, but are notlimited to, the following: **–** the availability of funds and information relating to a property;  **–** the standards established by us for the minimum projected return on investment;  **–** the availability of alternate fuel sources; and  **–** the intermediate transportation of gas.Our competitors include major integrated oil companies, substantial independent energy companies,affiliates of major interstate and intrastate pipelines and national and local gas gatherers. Manyof these competitors possess greater financial and other resources than we do.The inability to control other associated entities could adversely affect our business.To the extent that we do not operate all of our properties, our success depends in part uponoperations on certain properties in which we may have an interest along with other businessentities. Because we have no control over such entities, we are able to neither direct theiroperations, nor ensure that their operations on our behalf will be completed in a timely andefficient manner. Any delay in such business entities’ operations could adversely affect ouroperations.There are risks in acquiring producing properties.We constantly evaluate opportunities to acquire oil and natural gas properties and frequentlyengage in bidding and negotiating for these acquisitions. If successful in this process, we mayalter or increase our capitalization through the issuance of additional debt or equity securities,the sale of production payments or other measures. Any change in capitalization affects our riskprofile.A change in capitalization, however, is not the only way acquisitions affect our risk profile.Acquisitions may alter the nature of our business. This could occur when the character of acquiredproperties is substantially different from our existing properties in terms of operating orgeologic characteristics.Operating hazards may adversely affect our ability to conduct business.Our operations are subject to risks inherent in the oil and gas industry, including but not limitedto the following:
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 **–** blowouts;  **–** cratering;  **–** explosions;  **–** uncontrollable flows of oil, gas or well fluids;  **–** fires;  **–** pollution; and  **–** other environmental risks.These risks could result in substantial losses to us from injury and loss of life, damage to anddestruction of property and equipment, pollution and other environmental damage and suspension ofoperations. Governmental regulations may impose liability for pollution damage or result in theinterruption or termination of operations.Losses and liabilities from uninsured or underinsured drilling and operating activities could havea material adverse effect on our financial condition and operations.Although we maintain several types of insurance to cover our operations, we may not be able tomaintain adequate insurance in the future at rates we consider reasonable, or losses may exceed themaximum limits under our insurance policies. If a significant event that is not fully insured orindemnified occurs, it could materially affect our financial condition and results of operations.Compliance with environmental and other government regulations could be costly and could negativelyimpact production.Our operations are subject to numerous laws and regulations governing the discharge of materialsinto the environment or otherwise relating to environmental protection. Without limiting thegenerality of the foregoing, these laws and regulations may: **–** require the acquisition of a permit before drilling commences;  **–** restrict the types, quantities and concentration of various substances that canbe released into the environment from drilling and production activities;  **–** limit or prohibit drilling activities on certain lands lying within wilderness,wetlands, and other protected areas;  **–** require remedial measures to mitigate pollution from former operations, such asplugging abandoned wells; and  **–** impose substantial liabilities for pollution resulting from our operations.The recent trend toward stricter standards in environmental legislation and regulation is likely tocontinue. The enactment of stricter legislation or the adoption of stricter regulation could havea significant impact on our operating costs, as well as on the oil and gas industry in general.Our operations could result in liability for personal injuries, property damage, oil spills,discharge of hazardous materials, remediation and clean-up costs and other environmental damages.We could also be liable for environmental damages caused by previous property owners. As a result,substantial liabilities to third parties or governmental entities may be incurred which could havea material adverse effect on our financial condition and results of operations. We maintaininsurance coverage for our operations, but we do not believe that insurance coverage forenvironmental damages that occur over time or complete coverage for sudden and accidentalenvironmental damages is available at a reasonable cost. Accordingly, we may be subject toliability or may lose the privilege to continue exploration or production activities uponsubstantial portions of our properties if certain environmental damages occur.You should not place undue reliance on reserve information because reserve information representsestimates.While estimates of our and gas reserves, and future net cash flows attributable to those reserves,were prepared by independent petroleum engineers, there are numerous uncertainties inherent inestimating quantities of proved reserves and cash flows from such reserves, including factorsbeyond our control and the control of engineers. Reserve engineering is a subjective process ofestimating underground accumulations of oil and gas that cannot be measured in an
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exact manner. The accuracy of an estimate of quantities of reserves, or of cash flows attributableto these reserves, is a function of many factors, including but not limited to, the following: **–** the available data;  **–** assumptions regarding future oil and gas prices;  **–** expenditures for future development and exploitation activities; and  **–** engineering and geological interpretation and judgment.Reserves and future cash flows may also be subject to material downward or upward revisions basedupon production history, development and exploitation activities and oil and gas prices. Actualfuture production, revenue, taxes, development expenditures, operating expenses, quantities ofrecoverable reserves and value of cash flows from those reserves may vary significantly from theestimates. In addition, reserve engineers may make different estimates of reserves and cash flowsbased on the same available data. For the reserve calculations, oil was converted to gasequivalent at six Mcf of gas for one Bbl of oil. This ration approximates the energy equivalencyof gas to oil on a Btu basis. However, it may not represent the relative prices received from thesale of our oil and gas production.The estimated quantities of proved reserves and the discounted present value of future net cashflows attributable to those reserves included in this document were prepared by independentpetroleum engineers in accordance with the rules of the SFA69 and the SEC. These estimates are notintended to represent the fair market value of our reserves.Loss of executive officers or other key employees could adversely affect our business.Our success is dependent upon the continued services and skills of our current executivemanagement. The loss of services of any of these key personnel could have a negative impact on ourbusiness because of such personnel’s skills and industry experience and the difficulty of promptlyfinding qualified replacement personnel.Acquisition of entire businesses may be a component of our growth strategy; our failure to completefuture acquisitions successfully could reduce the earnings and slow our growth.While our business strategy does not currently contemplate the acquisition of entire businesses, itis possible that we might acquire entire businesses in the future. Potential risks involved in theacquisition of such businesses include the inability to continue to identify business entities foracquisition or the inability to make acquisitions on terms that we consider economicallyacceptable. Furthermore, there is intense competition for acquisition opportunities in ourindustry. Competition for acquisitions may increase the cost of, or cause us to refrain from,completing acquisitions. Our strategy of completing acquisitions would be dependent upon, amongother things, our ability to obtain debt and equity financing and, in some cases, regulatoryapprovals. Our ability to pursue our growth strategy may be hindered if we are not able to obtainfinancing or regulatory approvals. Our ability to grow through acquisitions and manage growthwould require us to continue to invest in operational, financial and management information systemsand to attract, retain, motivate and effectively manage our employees. The inability toeffectively manage the integration of acquisitions could reduce our focus on subsequentacquisitions and current operations, which, in turn, could negatively impact our earnings andgrowth. Our financial position and results of operation may fluctuate significantly from period toperiod, based on whether or not significant acquisitions are completed in particular periods.Risks Related to Our Common StockWe may need additional capitalIt is very likely our board of directors will determine in the future that we need to obtainadditional capital through the issuance of additional shares of preferred stock, common stock, orother securities. Any such issuance will dilute the ownership interests of the current holders ofthe common stock.We may issue additional shares of Common Stock.Pursuant to our certificate of incorporation, our board of directors has the authority to issueadditional series of common stock and to determine the rights and restrictions of shares of thoseseries without the approval of our stockholders. The rights of the holders of the current series ofcommon stock may be junior to the rights of common stock that may be issued in the future.
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There may be future dilution of our Common Stock.To the extent options to purchase common stock under employee and director stock option plans areexercised, holders of our common stock will be diluted. If available funds and cash generated fromour operations are insufficient to satisfy our needs, we may be compelled to sell additional equityor convertible debt securities. The sale of additional equity or convertible debt securities couldresult in additional dilution to our stockholders.Our management controls a significant percentage of our outstanding common stock and theirinterests may conflict with those of our stockholders.Our directors and executive officers and their affiliates beneficially own a substantial percentageof our outstanding common stock. This concentration of ownership could have the effect of delayingor preventing a change in control of the company, or otherwise discouraging a potential acquirerfrom attempting to obtain control of the company. This could have a material adverse effect on themarket price of the common stock or prevent our stockholders from realizing a premium over the thenprevailing market prices for their shares of common stock.Sales of substantial amounts of our common stock may adversely affect our stock price and makefuture offerings to raise more capital difficult.Sales of a large number of shares of our common stock in the market or the perception that salesmay occur could adversely affect the trading price of our common stock. We may issue restrictedsecurities or register additional shares of common stock in the future for our use in connectionwith future acquisitions. Except for volume limitations and certain other regulatory requirementsapplicable to affiliates, such shares may be freely tradable unless we contractually restrict theirresale.The availability for sale, or sale, of the shares of common stock eligible for future sale couldadversely affect the market price of our common stock.OFFICESWe maintain our corporate offices at 3030 LBJ Freeway, Suite 1320, Dallas, Texas 75234, and paymonthly base rental of $5,644. Our lease runs from February 1, 2004 through July 31, 2011 at a costof approximately $454,629. As of November 30, 2006 the company’s continuing obligation under thebase lease is approximately $296,590.**ITEM 2. DESCRIPTION OF PROPERTY**GENERAL. Following is information concerning production from our oil and gas wells, productive wellcounts and both producing and undeveloped acreage. Our oil and gas properties are located withinthe northern part of the east Texas salt basin. The earliest exploration in this area dates back tothe early 1920s and 1930s, when frontier oil producers were exploring areas adjacent to the famous“East Texas field” located near the town of Kilgore, Texas. We have leasehold rights in three oiland gas fields located in Hopkins, Franklin, and Wood Counties, Texas. During the previous year weacquired an interest in two Barnett Shale gas wells in Wise County, Texas. We also have a minoroverriding interest in six Barnett Shale gas wells. We previously acquired several wells andacreages in Oklahoma that are described following the Texas properties below.RESERVES REPORTED TO OTHER AGENCIES. We are not required and do not file any estimates of total,proved net oil or gas reserves with reports to any federal authority or agency.
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PROPERTIES. The following is a breakdown of our properties:           **Oil**  **Gas**   **(BBL)**  **(MCF)**    **Proved Reserves November 30, 2005**  31,424   17,528 Revisions to previous estimates  (13,318)  57,587 Purchases  —   — Production  (3,153)  (13,520)Sales, transfers and retirements  —   —    **Proved Reserves November 30, 2006**  14,953   61,595         The following information pertains to our properties as of November 30, 2006:                           **Proved**  **Proved**   **Proved**  **Proved**  **Developed**  **Developed**   **Reserves:**  **Reserves:**  **Reserves:**  **Reserves:** **Name of** **Oil**  **Gas**  **Oil**  **Gas** **Field or Well** **(bbls)**  **(mcf)**  **(bbls)**  **(mcf)** Manziel Field  8,726   0   8,726   0 Quitman Field  1,515   0   1,515   0 Newark East  4,428   61,538   4,428   61,538 Bridgeport Field  0   0   0   0 Camargo NW Field  277   0   277   0 Harmon SE Field  7   57   7   57 PRODUCTIVE WELLS AND ACREAGE                                   **Total**      **Total**      **Total**  **Net**  **Gross**  **Net**  **Gross**  **Total Net**   **Gross Oil**  **Productive**  **Gas**  **Productive**  **Developed**  **Developed** **Geographic Area** **Wells**  **Oil Wells**  **Wells**  **Gas Wells**  **Acres**  **Acres**    East Texas Region  10   6.04   —   —   1,172.20   1,166.34 Wise County  2   0.73   —   —   224   83 Parker and Denton Counties  —   —   6   .024   —   — Anadarko Basin  4   0.29   —   —   480   14 Notes:1. Total Gross Oil Wells was calculated by subtracting 5 wells designated as Injection Wells and8 shut-in wells from the 29 wells owned and/or operated by TBX Resources, Inc. as of November30, 2006.2. Net Productive Oil Wells were calculated by multiplying the working interest held by TBXResources, Inc. in each of the 10 Gross Oil Wells and adding the resulting products.3. Total Gross Developed Acres is equal to the total surface acres of the properties in whichTBX Resources, Inc. holds an interest.4. Net Developed Acres is equal to the Total Gross Developed Acres multiplied by the percentageof the total working interest held by TBX Resources, Inc. in the respective properties.5. All acreage in which we hold a working interest as of November 30, 2006 have or had existingwells located thereon; thus all acreage leased by TBX Resources, Inc. may be accuratelyclassified as developed.6. Acreage that has existing wells and may be classified as developed may also have additionaldevelopment potential based on the number of producible zones beneath the surface acreage. Amore comprehensive study of all properties currently leased by us would be required todetermine precise developmental potential.
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**ITEM 3. LEGAL PROCEEDINGS**There are no material pending legal proceedings, other than ordinary routine litigation incidentalto the business, to which we are a party or of which our property is the subject.
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**ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.**No matters were submitted to a vote of the security holders during fiscal year 2006.**PART II****ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.**Prices for our common stock are currently quoted in the over-the-counter Bulletin Board maintainedby the NASD and our ticker symbol is TBXC.PK. Prices for our stock were approved for quotation onthe over-the-counter on January 27, 2001. The following table shows the high and low bidinformation for our common stock for each quarter during which prices for our common stock havebeen quoted.         **QUARTER** **LOW BID** **HIGH BID**Quarter ending February 28, 2006 $4.20  $4.40 Quarter ending May 31, 2006 $2.60  $3.00 Quarter ending August 31, 2006 $2.10  $2.90 Quarter ending November 30, 2006 $3.50  $3.50          **QUARTER** **LOW BID** **HIGH BID**Quarter ending February 28, 2005 $2.80  $3.20 Quarter ending May 31, 2005 $1.40  $1.70 Quarter ending August 31, 2005 $2.50  $2.70 Quarter ending November 30, 2005 $3.10  $3.50 The above information was obtained from the NASD and reflects the post 10-1 reverse split whichoccurred during the fourth quarter of 2005 fiscal year. Because these are over-the-counter marketquotations, these quotations reflect inter-dealer prices, without retail mark-up, markdown orcommissions and may not represent actual transactions. We have 822 shareholders of record for ourcommon stock as of April 30, 2007.**ITEM 6. MANAGEMENT’S DISCUSSION AND ANALYSIS AND PLAN OF OPERATION.**MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THETWELVE MONTHS ENDED NOVEMBER 30, 2006 AND 2005CAUTIONARY STATEMENTStatements in this report which are not purely historical facts, including statements regarding thecompany’s anticipations, beliefs, expectations, hopes, intentions or strategies for the future, maybe forward-looking statements within the meaning of Section 21E of the Securities Act of 1934, asamended. All forward-looking statements in this report are based upon information available to uson the date of the report. Any forward-looking statements involve risks and uncertainties thatcould cause actual results or events to differ materially from events or results described in theforward-looking statements. Readers are cautioned not to place undue reliance on theseforward-looking statements.
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RECENT DEVELOPMENTS**Going Concern and Liquidity Problems**Our auditors have included an explanatory paragraph in their audit opinion with respect to ourconsolidated financial statements at November 30, 2006. The paragraph states that our recurringlosses from operations and resulting continued dependence on access to external financing raisesubstantial doubts about our ability to continue as a going concern. Furthermore, the factorsleading to and the existence of the explanatory paragraph may adversely affect our relationshipwith customers and suppliers and have an adverse effect on our ability to obtain financing.We do not have sufficient working capital to sustain our operations. We have been unable togenerate sufficient revenues to sustain our operations. We will have to obtain funds to meet ourcash requirements through business alliances, such as strategic or financial transactions withthird parties, the sale of securities or other financing arrangements, or we may be required tocurtail our operations, seek a merger partner, or seek protection under federal bankruptcy laws.Any of the foregoing may be on terms that are unfavorable to us or disadvantageous to existingstockholders. In addition, no assurance may be given that we will be successful in raisingadditional funds or entering into business alliances.Six Wells Joint VentureOn November 30, 2005, we entered into an agreement by which we committed to purchase, by issuanceof 800,000 shares of our common stock, a 50% partnership interest in the Six Wells Joint Venture, aTexas Joint Venture Partnership. The purchase was contingent upon the approval of Earthwise Energy,Inc., and Energy Partners International, a Texas Joint Venture (“Energy Partners”), the initialmembers of the Six Wells Joint Venture. The approval did not occur in 2006 and the agreement, byits terms, expired.Employment AgreementsThe company executed an amended Employment Agreement effective August 4, 2005 with our presidentMr. Burroughs for three years. Under the terms of the agreement, Mr. Burroughs was entitled toreceive an annual compensation of $150,000, and other items enumerated in the agreement, plusbonuses of up to 10% for material changes to the company; for example, when the company completes amajor acquisition, funding or financing. Mr. Burroughs has agreed with our Board of Directors togive up the 10% bonus provision. The agreement provides that Mr. Burroughs has the contractualright to require TBX to issue, upon his request, up to 250,000 common share options subject tocertain conditions. The conditions are that the options will not issue unless Mr. Burroughs makes ademand for their issuance and the number of shares so demanded have vested (the agreement providesthat 50,000 potential options vest at the beginning of each employment year for the five year termof the agreement and are cumulative subject to Mr. Burroughs serving as an employee of the companyfor a three year period.) The amendment also changed how the options are to be priced. The optionsare to be priced at a maximum exercise price of one-half the bid price for TBX common stock as ofAugust 4, 2005 or $0.70 per share (one-half $1.40 the closing bid price on August 4, 2005.) In theevent the closing bid price of TBX’s common stock is below $0.70 on the date of a call by Mr.Burroughs, the exercise price would be reduced to the lower actual bid price. In April 2007, inexchange for TBX dropping the three year service requirement, Mr. Burroughs agreed to forgo hiseligibility to call for stock options for fiscal years 2005 and 2006.The company executed an amended Employment Agreement effective April 1, 2006 with our VicePresident of Investor Relations, Mr. O’Donnell, having a term of one (1) year, which automaticallyrenews unless otherwise terminated as provided in said agreement. Under the terms of the agreement,Mr. O’Donnell is entitled to receive 100,000 shares of TBX common stock upon execution and Boardapproval of the agreement. In addition, we agreed to issue Mr. O’Donnell options to acquire 25,000shares of common stock per quarter beginning April 1, 2006 for a period of up to three years at anexercise price of $0.15 per share. The option exercise period is one year from its date.Acquisition of Interests in Joint VenturesDuring the previous fiscal year, the company purchased certain partnership interests in the JohnsonNo. A1 and Johnson No. A2 joint ventures from third parties and has consolidated the individualbalance sheets and related income statements into the company’s consolidated financial statementsas of November 30, 2006 and 2005 on a proportionate ownership basis. The company also purchasedcertain venture partnership interests in the Hagansport Unit I and II and has consolidated theindividual balance sheets and related income statements into the company’s consolidated financial
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statements as of November 30, 2006 and 2005 on a proportionate ownership basis. We purchased theinterests by issuing 475,271 common stock shares valued at $952,592.