##### Table of Contents



SECURITY AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549


FORM 10-KSB

(Mark One)

|    |  |                                                                                     
|--- |  | ------------------------------------------------------------------------------------
|(X) |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934

For the Fiscal Year Ended November 30, 2002

OR

|      |  |                                                                                         
|----- |  | ----------------------------------------------------------------------------------------
|(   ) |  | 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)
12300 Ford Road, Suite 194 |  | (IRS Employer Identification No.)
|Dallas, Texas                                       |  | 75234                            
|                                                    |  |                                  
|(Address of Principal Executive Office)             |  | Zip Code                         

Registrants telephone number, including Area Code: (972) 243-2610

Securities registered pursuant to Section 12(b) of the Act: None

Securities 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 that the Registrant was required to file
such reports) and (2) has been subject to such filing requirements for the past
90 days.

|    |  |   
|--- |  | --
|X   |  |   
|    |  |   
|YES |  | NO

Check if disclosure of delinquent filers in response to Item 405 of Regulation
S-B is not 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. [X]

The Companys revenues for the most recent fiscal year were $205,709.

The aggregate market value of the voting stock held by non-affiliates of the
Company on February 28, 2003, was $1,183,564.

As of February 28, 2003, the Company had 30,330,373 issued and outstanding
shares of common stock.





---

TABLE OF CONTENTS



|                                                                                                       |                                                                                                                          |  |  |  |  |  |  | 
|------------------------------------------------------------------------------------------------------ | ------------------------------------------------------------------------------------------------------------------------ |  |  |  |  |  |  | 
|                                                                                                       | ITEM 1. DESCRIPTION OF BUSINESS.                                                                                        
|                                                                                                       | ITEM 2. DESCRIPTION OF PROPERTY                                                                                         
|                                                                                                       | ITEM 3. LEGAL PROCEEDINGS                                                                                               
|                                                                                                       | ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.                                                            
|                                                                                                       | ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.                                                       
|                                                                                                       | ITEM 6. MANAGEMENTS DISCUSSION AND ANALYSIS AND PLAN OF OPERATION.                                                     
|                                                                                                       | ITEM 7. FINANCIAL STATEMENTS.                                                                                           
|INDEPENDENT ACCOUNTANTS AUDIT REPORT                                                                 
|                                                                                                       | BALANCE SHEET                                                                                                           
|                                                                                                       | STATEMENTS OF OPERATIONS                                                                                                
|                                                                                                       | STATEMENTS OF CASH FLOWS                                                                                                
|                                                                                                       | STATEMENTS OF STOCKHOLDERS EQUITY                                                                                      
|                                                                                                       | NOTES TO FINANCIAL STATEMENTS                                                                                           
|                                                                                                       | ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS AND FINANCIAL DISCLOSURE.                                         
|                                                                                                       | ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS: COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.
|                                                                                                       | ITEM 10. EXECUTIVE COMPENSATION                                                                                         
|                                                                                                       | ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.                                                
|                                                                                                       | ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.                                                                
|                                                                                                       | ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K                                                                               
|SIGNATURES                                                                                            
|CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER UNDER SECURITIES AND EXCHANGE ACT RULES 13a-14 AND 15d-14
|INDEX TO EXHIBITS                                                                                     
|EX-10.1 Letter Agreement                                                                              
|EX-99.1 Certification of Officers                                                                     



---



##### Table of Contents






ITEM 1. DESCRIPTION OF BUSINESS.

BACKGROUND

TBX Resources, Inc., was incorporated in the state of Texas in March 1995,
by our president, Mr. Tim Burroughs. Our primary focus has been to acquire
producing oil and gas properties with opportunities for future development.
Prior to acquiring a property, we analyze the previous production and operating
history of the property, as well as the production history and related
operating procedures for similar wells producing from the same formations in
the general area. By acquiring producing properties that respond positively to
improved production practices and enhanced recovery techniques, we have built
an inventory of infield development drilling locations.

As of November 30, 2002, our company had total assets of $2,472,517 of
which net oil and gas properties amounted to $1,931,229 or 78.1% of our total
assets. At November 30, 2002, we had approximately $34,317 in cash and money
market accounts and a negative $109,246 in working capital, excluding deferred
income. Our accumulative losses through November 30, 2002, totaled $6,668,137.
Our revenues for our fiscal year ended November 30, 2002 were $205,709 and our
net losses for the same period were $2,263,870. Our ratio of current assets to
current liabilities is 0.4:1; we have no long-term debt. As of November 30,
2002, our shareholders equity was a positive $2,073,173.

Our company has experienced losses over the past years. However, our
management is projecting a decrease in general and administrative expenses, an
increase in prices obtained for our oil and gas produced and an increase in our
total production, due to more of our wells being brought on-line. Our
management believes that, with the projected lower general and administrative
expenses, increases in production and higher prices for our production, our
companys financial position should improve for the fiscal year ending November
30, 2003. However, this success is dependent upon many factors, some of which
are not within our control and there can be no assurance that our actual
results will improve.

Our mission is to be a publicly traded, independent oil and gas
exploration and production company which can take full advantage of
opportunities resulting from the major oil companies divestiture of domestic
oil and gas properties. In particular, most major oil companies are currently
more interested in devoting their exploration dollars toward the development of
oil and gas fields that are not located in the United States, primarily because
of the assumption by the major oil companies that domestic oil and gas
properties have been significantly depleted. In addition, due to the extent of
the development of domestic oil and gas properties, it is more likely that a
significant new discovery in the oil and gas industry would likely be conducted
in those areas that have not been so heavily developed, generally being
properties that are not contained within the United States. Because major oil
companies are more interested in developing their overseas holdings, they often
sell their domestic properties at prices that are attractive to independent oil
companies, especially since we have significantly lower administrative costs
than large oil companies. Due to our lower infrastructure costs, we believe
that our costs of owning and operating domestic oil and gas properties are
lower than those same costs as experienced by major oil companies.

JOINT VENTURES

In September of this year, we obtained an option to purchase 2,800 acres
of oil and gas leases in the Barnett Shale play in the Fort Worth Basin of Wise
County, Texas. In October of this year, we formed the Grasslands I, Limited
Partnership in which we are acting as the General Partner for the purpose of
acquiring the Wise County acreage for potential development drilling. The Company has a
20% interest in the Partnership and is reimbursed on a turnkey basis for 100%
of the organization and offering costs, lease acquisition costs and
administrative expenses.

Previously the Company acted as the joint venture manager for 11 Joint
Ventures, all of which were located in east Texas and western Louisiana. The
joint ventures we developed were essentially rolled up into our company in
that we exchanged shares of our common stock in return for our joint venture
partners interest in the properties developed by their joint ventures.

2



---



##### Table of Contents



WELLS HELD BY THE COMPANY

As more particularly described in the description of properties section,
we own or operate all or a portion of 40 wells located in Gregg, Hopkins,
Franklin, Panola and Wood Counties, Texas. Of these 40 wells, 8 wells have been
designated as injection wells. Injection wells are wells into which salt water
is injected to either assist in causing oil or gas to flow to a particular well
that is designated as a production well or to simply dispose of salt water that
is often produced along with oil. In addition, 3 wells are currently producing
oil. The remaining 29 wells are either currently shut-in, scheduled to be
brought back into production or are designated as injection wells. 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 will begin to produce oil. However, our
ability to re-open these wells is dependent upon obtaining sufficient financing
to pay the costs associated with re-opening these wells and operating the same
once re-opened. We recently added 2 new wells to our inventory of 5 wells
making a total of 7 Oklahoma wells. These wells are located in Ellis, Beckham,
Garfield, Caddo and Canadian Counties, Oklahoma. Six of the wells are in
production for natural gas. The seventh well is not completed. The wells are
either not seasoned to the point where a reliable estimate of production and
provable reserves can be made or the production is minor and will not have a
major impact on the Companys reserve value.

DEVELOPMENT AND EXPLORATION ACTIVITIES

Economic factors prevailing in the oil and gas industry change from time
to time. The uncertain nature and trend of economic conditions and energy
policy in the oil and gas business generally make flexibility of operating
policies important in achieving desired profitability. We intend to evaluate
continuously all conditions affecting our potential activities and to react to
those conditions, as we deem appropriate from time to time by engaging in
businesses most profitable for us.

In addition, in order to finance future development and exploration
activities, we will sponsor public or private partnerships depending upon the
number, size and economic feasibility of our generated prospects, the level of
participation of our industry partners and various other factors. However,
potential investors should note that we currently do not have in place any
definite financing opportunities and there can be no assurance that we will be
able to enter into such financing arrangements or that if we are able to enter
into such arrangements, we will be able to achieve any profitability as a
result of our operations.

We expect that another source of funds in the near future will be from the
sale of our common stock. On October 1, 2001 we entered into a Regulation S
Stock Purchase Agreement (Stock Purchase Agreement) with Citizen Asia Pacific
Limited (CAPL), a Hong Kong company whereby we agreed to offer and sale shares
of our common stock in reliance of an exemption from the registration
requirements of the United States and state securities laws under Regulation S
promulgated under the Securities Act of 1933. The Stock Purchase Agreement
stipulates that CAPL will use its best efforts to purchase from us up to
500,000 restricted shares of common stock at a per share price which shall be
38% of the moving ten day average closing prices of our shares of common stock
as quoted on the OTC Bulletin Board or other public trading market. We have the
right to accept or reject subscriptions for the shares, in whole or in part.
The agreement expired September 30, 2002. On October 3, 2002 the Company
entered into a consulting agreement with Telvest, Inc. Under the terms of the
agreement, Telvest provides advisory services for foreign investments
(Regulation S) for a fee of 3 % of all funds raised. The agreement runs through
January 31, 2003. We expect the principal use of funds generated from the Stock
Purchase Agreement in the foreseeable future will be for developing existing
oil and gas properties and/or the acquisition of new properties.

BUSINESS RISKS

Our company is subject to all of the risks normally associated with the
exploration for and production of oil and gas, including uncontrollable flows
of oil, gas or well fluids into the atmosphere, pollution, and fires, each of
which could result in damage to or destruction of oil and gas wells, producing
formations, or production facilities or damage to persons and other property.
As is common in the industry, we do not fully insure against all these risks
either because insurance is not available or because we elect not to insure

3



---



##### Table of Contents



due to prohibitive premium costs. The occurrence of an event affecting the
Company could have a material adverse effect on the financial position and
results of our operations.

Our exploration activities carry risks that the value of the related
acreage may be decreased by adverse geological studies, unfavorable drilling
results on nearby acreage, or lease expirations. In addition, drilling carries
a significant risk that no commercial oil or gas production will be obtained
and the investment will not be recovered. We prefer to re-complete or rework
producing properties to minimize this risk. The ultimate cost of drilling,
completing, and operating wells is often uncertain. Moreover, drilling
operations may be curtailed or delayed, with the likelihood of increased costs,
as a result of, among other factors, title problems, wellhead prices, weather
conditions, and geologic uncertainty.

Our competitors include major oil companies and numerous independent oil
and gas companies, individuals and drilling and income programs. Many of our
larger competitors possess and employ financial and personnel resources
substantially greater than those available to us. Such companies are able to
pay more for oil and gas properties and to define, evaluate, bid for and
purchase a greater number of properties than our financial or human resources
permit. Our ability to acquire additional properties and to discover reserves
in the future will be dependent upon our ability to evaluate and select
suitable properties and to consummate transactions in a highly competitive
environment.

The availability of a ready market for oil and gas produced from
properties now owned or hereafter acquired by us and the prices for such
production are dependent upon numerous factors, many of which are beyond our
control. These factors include, among other things, the level of domestic
production, the availability of imported oil and gas, actions taken by foreign
oil and gas producing nations, the availability of pipelines with adequate
capacity and other transportation facilities, the availability and marketing of
other competitive fuels, fluctuating demand for oil, gas and refined products,
and the extent of government regulation and taxation (under both present and
future legislation) of the production, refining, transportation, pricing, use
and allocation of oil, natural gas, refined products, and substitute fuels. In
view of the many uncertainties affecting the supply and demand for crude oil,
natural gas, and refined petroleum products, we cannot predict the prices or
marketability of our oil and gas production.

Our oil production is sold at or near our wells under short-term purchase
contracts at prevailing prices in accordance with arrangements, which are
customary in the oil industry. Our gas production is sold on the spot market
and not, therefore, subject to long-term contracts. Although this may prevent
us from being required to dispose of our production at low rates, there can be
no assurance that purchasers will be willing to continue to purchase our
natural gas on the spot market.

The production of oil and gas is subject to extensive federal, state and
city laws, rules, orders and regulations governing a wide variety of matters,
including the drilling and spacing of wells, allowable rates of production,
prevention of waste and pollution and protection of the environment. In
addition to the direct costs borne in complying with such regulations,
operations and revenues may be impacted to the extent that certain regulations
limit oil and gas production to below economic levels. Although the particular
regulations applicable in each state in which operations are conducted vary,
such regulations are generally designed to ensure that oil and gas operations
are carried out in a safe and efficient manner and to ensure that similarly
situated operators are provided with reasonable opportunities to produce their
respective fair share of available oil and gas reserves. However, since these
regulations generally apply to all oil and gas producers, our management
believes that these regulations should not put us at a material disadvantage to
other oil and gas producers.

State initiatives to regulate further the disposal of oil and gas wastes
could have a major impact on us. In addition, we are subject to laws and
regulations concerning occupational health and safety. We do not anticipate
being required in the near future to expend amounts that are material in
relation to our total capital expenditures program by reason of environmental
or occupational health and safety laws and regulations, but insomuch as such
laws and regulations are frequently changed, we are unable to predict the
ultimate cost of compliance with these laws. However, we do not believe that
our environmental risks are materially different from those of comparable gas
and oil companies operating in similar geographic areas.

4



---



##### Table of Contents



OFFICES

We maintain our corporate offices at 12300 Ford Road, Suite 194, Dallas,
Texas, and pay a monthly rental of approximately $2,200.00. Our lease
originally terminated on April 30, 1996, but in January 2000, we entered into
an agreement by which our lease was extended until July 31, 2000. In July 2000,
we began negotiations with our landlord, the result of which was that in
September 2001 we entered into a new annual lease that we recently extended to
August 31, 2003. We currently have no plans to move our offices. Although we
currently do not have any plans to terminate our lease, because of the small
amount of space required for our offices, together with the abundance of office
space available in the Dallas/Ft. Worth metroplex, we do not anticipate any
problems in obtaining suitable office space if our lease was terminated.




ITEM 2. DESCRIPTION OF PROPERTY

GENERAL. Following is information concerning production from our oil and
gas wells, productive well counts and both producing and undeveloped acreage.
Our oil and gas properties are located within the northern part of the east
Texas salt basin. The earliest exploration in this area dates back to the 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 oil and gas fields located in Gregg, Hopkins,
Franklin, Panola, and Wood Counties, Texas. More recently, we acquired several
wells and acreages 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.

PROPERTIES. The following is a breakdown of our properties:

|                             |  |                            |   |                          |  |  |   | 
|---------------------------- |  | -------------------------- | - | ------------------------ |  |  | - | 
|Name of Field                |  | Gross Producing Well Count |   | Net Producing Well Count
|                             |  |                            |   |                         
|East Texas Field             |  |                            | 0 |                          |  |  | 0 | 
|Mitchell Creek & Talco Field |  |                            | 1 |                          |  |  | 1 | 
|Manziel & Quitman Field      |  |                            | 2 |                          |  |  | 2 | 

The following information pertains to our properties as of November 30,
2002 (1):

|               |  |           |         |           |  |           |   |           |  |             |         |                   |  |  |   |  |  |               |       |  |  |     |  |  |      |  |  | 
|-------------- |  | --------- | ------- | --------- |  | --------- | - | --------- |  | ----------- | ------- | ----------------- |  |  | - |  |  | ------------- | ----- |  |  | --- |  |  | ---- |  |  | 
|               |  |           |         |           |  |           |   |           |  | Proved      |         | Proved            |  |  |   |  |  | Percentage of
|               |  | Proved    |         | Proved    |  | Developed |   | Developed |  | Current     |         | Reserves in Field
|               |  | Reserves: |         | Reserves: |  | Reserves: |   | Reserves: |  | Production: |         | to Total Reserves
|Name of        |  | Oil       |         | Gas       |  | Oil       |   | Gas       |  | Oil         |         | Held by the      
|Field          |  | (bbls)    |         | (mcf)     |  | (bbls)    |   | (mcf)     |  | (bbls)(2)   |         | Company          
|               |  |           |         |           |  |           |   |           |  |             |         |                  
|East
Texas     |  |           |         |           |  |           |   |           |  |             |         |                   |  |  |   |  |  |               |       |  |  | oil |  |  | 3.4  | 
|Field          |  |           | 8,332   |           |  |           | 0 |           |  |             | 8,332   |                   |  |  | 0 |  |  |               | 0     |  |  | gas |  |  | 0    | 
|Mitchell Creek |  |           |         |           |  |           |   |           |  |             |         |                   |  |  |   |  |  |               |       |  |  | oil |  |  | 40.8 | 
|& Talco Field  |  |           | 100,449 |           |  |           | 0 |           |  |             | 100,449 |                   |  |  | 0 |  |  |               | 1,029 |  |  | gas |  |  | 0    | 
|Manziel &      |  |           |         |           |  |           |   |           |  |             |         |                   |  |  |   |  |  |               |       |  |  | oil |  |  | 55.8 | 
|Quitman Field  |  |           | 137,609 |           |  |           | 0 |           |  |             | 137,609 |                   |  |  | 0 |  |  |               | 3,315 |  |  | gas |  |  | 0    | 



---

|(1) |  | We sold our working interest in the Bethany Field in the fourth quarter
of the current fiscal year that reduced our proved oil reserves by
approximately 400 thousand barrels and our proved gas reserves by
approximately 1.5 billion cubic feet of gas.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | The current production figure specified above is for the production
for the month of November 2002.                                                                                                                                                      

5



---



##### Table of Contents



PRODUCTIVE WELLS AND ACREAGE

|                  |  |             |    |            |  |             |    |                |  |           |   |           |  |  |   |             |  |     |         |  |  |  |          | 
|----------------- |  | ----------- | -- | ---------- |  | ----------- | -- | -------------- |  | --------- | - | --------- |  |  | - | ----------- |  | --- | ------- |  |  |  | -------- | 
|                  |  |             |    |            |  | Net         |    |                |  |           |   |           |  |  |   | Total Gross |  | Net
|                  |  | Total Gross |    | Productive |  | Total Gross |    | Net Productive |  | Developed |   | Developed
|Geographic Area   |  | Oil Wells   |    | Oil Wells  |  | Gas Wells   |    | Gas Wells      |  | Acres     |   | Acres    
|                  |  |             |    |            |  |             |    |                |  |           |   |          
|East Texas
Region |  |             | 32 |            |  |             | 32 |                |  |           | 0 |           |  |  | 0 |             |  |     | 1,171.2 |  |  |  | 1,166.34 | 

Notes:



|1. |  | Total Gross Oil Wells were calculated by subtracting 8 wells designated
as Injection Wells and 21 wells either sold or plugged and abandoned from
the 69 wells owned and/or operated by TBX Resources, Inc. as of November
30, 1999.
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Net Productive Oil Wells were calculated by multiplying the working
interest held by TBX Resources, Inc. in each of the 32 Gross Oil Wells and
adding the resulting products.                                                       
|  
|3. |  | Total Gross Developed Acres is equal to the total surface acres of the
properties in which TBX Resources, Inc. holds an interest.                                                                                                   
|  
|4. |  | Net Developed Acres is equal to the Total Gross Developed Acres
multiplied by the percentage of 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, 1999
had existing wells located thereon; thus all acreage leased by TBX
Resources, Inc. may be accurately classified as developed.                               

|                  |  |             |         |           |  |  |          | 
|----------------- |  | ----------- | ------- | --------- |  |  | -------- | 
|GEOGRAPHIC AREA   |  | GROSS ACRES |         | NET ACRES
|                  |  |             |         |          
|East Texas Region |  |             | 1,171.2 |           |  |  | 1,166.34 | 

Note:



| | 1. |  | Acreage that has existing wells and may be classified as developed
may also have additional development potential based on the number of
producible zones beneath the surface acreage. A more comprehensive
study of all properties currently leased by us would be required to
determine precise developmental potential.
| | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

ANADARKO BASIN-WESTERN OKLAHOMA

No additional acreage was purchased in the current fiscal year. We drilled
three wells and completed one of them in the current fiscal year. In addition,
we sold our working interest in three wells and made a partial sale of our Vice
acreage. Additional details follow.



|1. |  | We sold our entire 20% working interest in the Josephus #1-33 gas well
located in Ellis County.                                                                                                                  
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | We sold our entire 3% working
interest in the Alan #1-11 gas well located
in Beckham County.                                                                                                                     
|  
|3. |  | We sold our entire 3% working
interest in the Lillie #2-11 gas well
located in Beckham County.                                                                                                                   
|  
|4. |  | We sold our entire 7% working interest in the Jenson Farms #1-33
(drilled in the current fiscal year) gas well located on the Union City
prospect.                                                               
|  
|5. |  | We sold 12% of our 37.5% working interest in the 1,505-acre tract in Ellis County.                                                                                                                               
|  
|6. |  | We drilled and completed the Dennett #2-34 gas well that is located on
our Vici prospect in June of this year. The Company has an 18.24% working
interest in the well after selling 1.0% of our working interest.

6



---



##### Table of Contents





|7. |  | We drilled the Hunter #1-27 gas well that is located on our Vici prospect
in October of this year. The well was not completed as of November 30,
2002. The Company has a 13.31% working interest in the well.
|-- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Six of the seven wells are currently producing natural gas. The seventh well
has not been put on line as of November 30, 2002. All of the wells have either
not been working long enough to allow our consulting engineers to estimate the
available provable reserves or the production is minor and therefore would not
justify the expense of an engineering study at this time. Although the wells
are currently producing natural gas there can be no assurance that they will
continue to do so.

In addition to the above described wells we own working interests in two lease
tracts; one located in Ellis County, Oklahoma constituting a 37.5% working
interest in 1,505 acres and the second located in Canadian County, Oklahoma,
constituting a 20% working interest in 240 acres. The leases were purchased for
the sum of $83,700 and $19,200, respectively. During the current fiscal year we
sold 12% of our working interest in the lease track located in Ellis County,
Oklahoma




ITEM 3. LEGAL PROCEEDINGS

There are no material pending legal proceedings, other than ordinary
routine litigation incidental to the business, to which we are a party or of
which our property is the subject.




ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

No matter was submitted during the fourth quarter of the fiscal year ended
November 30, 2002, to a vote of securities holders, through the solicitation of
proxies or otherwise.




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 maintained by the NASD and our ticker symbol is TBXR. Prices for
our stock were approved for quotation on the Bulletin Board on January 27,
2001. The following table shows the high and low bid information for our common
stock for each quarter during which prices for our common stock have been
quoted.

|                                 |  |         |      |          |  |   |      | 
|-------------------------------- |  | ------- | ---- | -------- |  | - | ---- | 
|QUARTER                          |  | LOW BID |      | HIGH BID
|                                 |  |         |      |         
|Quarter ending February 28, 2002 |  | $       | 0.15 |          |  | $ | 0.24 | 
|Quarter ending May 31, 2002      |  | $       | 0.29 |          |  | $ | 0.40 | 
|Quarter ending August 31, 2002   |  | $       | 0.24 |          |  | $ | 0.29 | 
|Quarter ending November 30, 2002 |  | $       | 0.07 |          |  | $ | 0.10 | 

|                                 |  |         |      |          |  |   |      | 
|-------------------------------- |  | ------- | ---- | -------- |  | - | ---- | 
|QUARTER                          |  | LOW BID |      | HIGH BID
|                                 |  |         |      |         
|Quarter ending February 29, 2001 |  | $       | 2.80 |          |  | $ | 2.80 | 
|Quarter ending May 31, 2001      |  | $       | 1.20 |          |  | $ | 1.41 | 
|Quarter ending August 31, 2001   |  | $       | 1.65 |          |  | $ | 1.69 | 
|Quarter ending November 30, 2001 |  | $       | 1.01 |          |  | $ | 1.03 | 

The above information was obtained from the NASD. Because these are
over-the-counter market quotations, these quotations reflect inter-dealer
prices, without retail mark-up, markdown or commissions and may not represent
actual transactions.

We have approximately 810 shareholders of record for our common stock as
of February 28, 2003.

7



---



##### Table of Contents






ITEM 6. MANAGEMENTS DISCUSSION AND ANALYSIS AND PLAN OF OPERATION.

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS FOR THE TWELVE MONTHS ENDED NOVEMBER 30, 2002 AND 2001

CAUTIONARY STATEMENT

Statements in this report which are not purely historical facts, including
statements regarding the Companys anticipations, beliefs, expectations, hopes,
intentions or strategies for the future, may be forward-looking statements
within the meaning of Section 21E of the Securities Act of 1934, as amended.
All forward-looking statements in this report are based upon information
available to us on the date of the report. Any forward-looking statements
involve risks and uncertainties that could cause actual results or events to
differ materially from events or results described in the forward-looking
statements. Readers are cautioned not to place undue reliance on these
forward-looking statements.

RECENT DEVELOPMENTS

We sold our Bethany Field property in the fourth quarter of the current
fiscal year. Management is of the opinion that the estimated costs of $3.8
million to re-work and develop this property will not yield an adequate return
on our investment. Accordingly, in order to cut our losses and avoid a future
drain on the Companys working capital resources, Management elected to sell
all of our interest in the field to an unrelated party for approximately
$60,000. We wrote-off the costs of the acreage, wells and related depreciation,
depletion and amortization and recorded a loss on the transaction of
approximately $1.0 million. Also, the Company let lapse its non-exclusive
option to purchase five prospects covering 3,323 acres in Montague County,
Texas and charged current operations $150,000. Management found new acreage
that it believes would be more prolific than the Montague County prospect.
Accordingly, in September of this year, we obtained an option to purchase 2,800
acres of oil and gas leases in the Barnett Shale play in the Fort Worth Basin
of Wise County, Texas. In October of this year, we formed the Grasslands I,
Limited Partnership in which we are acting as the General Partner for the
purpose of acquiring the Wise County acreage for development drilling. The
Company has a 20% interest in the Partnership and is reimbursed on a turnkey
basis for 100% of the organization and offering costs, lease acquisition costs
and administrative expenses. Our revenue from the Partnership in the current
fiscal year is $88,477 offset by our expenses of $49,233. We recorded a loss of
$140,000 on the sale of our $200,000 investment in Southern Oil & Gas Company,
Inc. (Southern) a privately held company. Because the amounts to be paid us
under the Operations Contract have not materialized along with the lower
production levels for Southerns oil properties, management decided to sell its
20% interest in Southern to avoid future additional losses. The Companys
Regulation S Stock Purchase agreement with Citizen Asia Pacific Limited (CAPL)
expired on September 30, 2002. The Company sold approximately $140,000 in
common stock through CAPL in the current fiscal year. On October 3, 2002, we
entered into a consulting agreement with Telvest, Inc. Under the terms of this
agreement, Telvest provides advisory services for foreign investments
(Regulation S) for a fee of 3 % of all funds raised. The agreement runs through
January 31, 2003.

RESULTS OF OPERATIONS

The Company incurred an operating loss of $2,264,805 for the fiscal year
ended November 30, 2002 as compared to a net loss of $1,179,465 for fiscal year
ended November 30, 2001. The increase in our operating loss of $1,092,009,
93.2%, is discussed below.

REVENUE  Total revenue decreased $15,689, 07.1%, from $221,398 for the
twelve months ended November 30, 2001 to $205,709 for the twelve months ended
November 30, 2002.

During the twelve months ended November 30, 2002, the Company generated
approximately $117,232 in revenue from oil and gas sales as compared to
$170,709 for the twelve months ended November 30, 2001. The $53,477 decrease is
attributable to the loss of production due to the sale of the Companys partial
interest in three wells located in the Anadarko Basin of Oklahoma. Revenue from
the East Texas properties remained approximately the same as the previous year.

8



---



##### Table of Contents



Joint venture income for the twelve months ended November 30, 2002 was
$88,477 while there is none for the year ending November 30, 2001. In September
of this year, the Company formed and is acting as the general partner for The
Grasslands I, Texas Limited Partnership. The purpose of the partnership is to
acquire 2,800 acres of oil and gas leases in the Barnett Shale play in the Fort
Worth Basin for developmental drilling. The Company is to be reimbursed on a
turnkey basis for organization and offering costs, lease acquisition costs and
administrative expenses.

As stated above, the Company sold three of its Oklahoma properties during
the first half of this fiscal year. The money was used to both fund the
drilling of two development wells in Oklahoma and to support current
operations. The Company wrote off the costs of the wells and related
depreciation, depletion and amortization and reported a net gain of
approximately $46,000 on the transactions. The gain was offset by the fourth
quarter loss on the sale of the Bethany Field that is discussed below. Gain on
the sale of oil and gas properties of approximately $50,600 for the prior
fiscal year resulted from the Company selling a partial interest in two
prospects.

EXPENSES  Total expenses increased $1,069,651, 76.4%, from $1,400,863 for
the twelve months ended November 30, 2001 to $2,470,514 for the twelve months
ended November 30, 2002.

Lease operating expenses and taxes decreased $35,810, 23.8% from $150,500
for the twelve months ended November 30, 2001 to $114,690 for the twelve months
ended November 30, 2002. The decrease is primarily the result of the shut-in of
producing wells and a reduction in work over costs.

Joint venture costs and expenses were $49,223 for the twelve months ended
November 30, 2002 that related to the recently formed Grasslands I, Limited
Partnership. There were no joint venture costs in the previous fiscal year. The
Company did not participate in a joint venture partnership last year. See above
discussion of Grasslands I, Limited Partnership.

General and administrative expenses decreased $218,841, 20.7%, from
$1,053,664 for the twelve months ended November 30, 2001 to $834,823 for the
twelve months ended November 30, 2002. The decrease is primarily due to lower
geological and engineering costs, public relations costs, and compensation and
employee related costs offset by increased professional and consulting fees,
property taxes, and office expenses.

During the fourth quarter of the current fiscal year, the Company recorded
a loss of $140,000 on the sale of its $200,000 investment in Southern Oil & Gas
Company, Inc. (Southern) a privately held company. When the Company originally
purchased its interest in Southern, it also entered into an operations and
management contract (the Operations Contract) providing that the Company was
to be paid the profits of Southern that exceeded $40,000 each month. Because
the amounts we were to be paid under the Operations Contract have not
materialized and the lower production levels for Southern oil properties,
management decided to sell its 20% interest in Southern to avoid future
additional losses.

The Company let lapse its non-exclusive option to purchase five prospects
covering 3,323 acres in Montague County, Texas and charged current operations
$150,000. The Company has found new acreage that it believes will be more
prolific than the Montague County prospect. The Company is the general partner
of the Grasslands I, Limited Partnership that was formed in the current
fiscal year to purchase approximately 2,800 acres in the Barnett Shale of Fort
Worth Basin in Wise County, Texas for development drilling.

The Company sold its Bethany Field property in the fourth quarter of the
current fiscal year. The Company wrote-off the costs of the acreage, wells and
related depreciation, depletion and amortization and recorded a loss on the
transaction of approximately $1,050,000. Management is of the opinion that the
estimated costs of $3.8 million to re-work and develop this property will not
yield an adequate return on its investment. Accordingly, in order to cut its
losses and avoid a significant future drain on the Companys working capital
resources, Management elected to sell all of the Companys interest in the
field to an unrelated party for approximately $60,000.

9



---



##### Table of Contents



Property and equipment impairment charge for the previous fiscal year is
$135,000. The loss is recognized for two properties located in East Texas. The
loss was determined by comparing the future undiscounted cash flows, as shown
in our engineering report, to the Companys net book value. There was no
impairment of oil and gas properties in the current fiscal year.

Depreciation, depletion and amortization increased $110,410, 179.0%, from
$61,699 for the twelve months ended November 30, 2001 to $172,109 for the
twelve months ended November 30, 2002. The increase is due to a change in
estimate. Future charges to depreciation, depletion, and amortization may be
substantially higher as a result of increased production or changes in reserve
prices and/or quantities.

OTHER INCOME  Interest income for the twelve months ended November 30,
2002 was $935 as compared to $7,604 for the same period last fiscal year. The
Companys cash balances have declined during the past year thus the decrease of
$6,669 in interest income.

PROVISION FOR INCOME TAXES  No tax benefits were recorded for the twelve
months ended November 30, 2002 and 2001.

NET LOSS  The Companys net loss increased $1,092,009, 93.2%; from
$1,171,861 for the twelve months ended November 30, 2001 to $2,263,870 for the
twelve months ended November 30, 2002. The increase in the loss is attributable
to a decrease in operating income of $15,689, plus the loss on the sale of oil
and gas properties of $1,009,669, the write-off of Southern Oil & Gas Co.
investment in the amount of $140,000, the write-off the Companys non-exclusive
option to purchase five prospects in Montague County, Texas in the amount of
$150,000, and depreciation depletion and amortization of $110,410 offset by a
decrease in lease operations of $35,810, general and administrative of $218,841
and reduction in loss from impairment of properties totaling $135,000.

Effective December 1, 1999, our president, Mr. Tim Burroughs received
stock options good for five years from the date of issuance to purchase up to
500,000 shares of the Companys common stock a year at a price which shall not
be greater than 50% of the average bid price for the shares during the previous
quarter in which they are exercised. The fair value of the options will be
recorded as compensation expense when a reasonable estimate of such costs are
available or the amount Mr. Burroughs has to pay is known. Based on the formula
for calculating the purchase price, material charges to compensation expense
may be recorded in future years. As of November 30, 2002, Mr. Burroughs has the
option to purchase 1,500,000 shares of the Companys common stock.

TBX RESOURCES, INC.
LIQUIDITY AND CAPITAL RESOURCES

As of November 30, 2002, we have total assets of $2,472,517 of which net
oil and gas properties amount to $1,931,229 or 78.1% of the total assets. The
Companys accumulated losses through November 30, 2002 totaled $6,668,137. At
November 30, 2002, we have $34,317 in cash and money market accounts. Our ratio
of current assets to current liabilities is 0.4:1 and we have no long-term debt. As of November 30, 2002, our shareholders equity was
a positive $2,073,173.

We have funded operations from cash generated from the sale of common
stock, the sale of oil and gas properties and loans from affiliates. The
Companys cash used for operating activities totaled $214,146 and $690,690 for
the twelve months ended November 30 2002 and November 30, 2001 respectively.
This, represents an improvement of $401,544 in cash used for operating
activities. Cash provided by the disposal of oil and gas properties totaled
$340,3590 in the current year while in the previous year the amount was
$91,400. The Company received $60,000 in the current fiscal year for its 20%
interest in Southern Oil & Gas Company, Inc. a non-public company with no
market for its shares. The Companys capital investments totaled $556,499 and
$380,916 for the twelve months ended November 30, 2002 and November 30, 2001,
respectively. Cash used for other assets totaled $150,000 for the twelve months
ended November 30, 2002. Cash provided by the sale of common stock totaled
$139,152 during the twelve months ended November 30, 2002 while cash provided
by the sale of common stock totaled $852,811 for the same period last year.

10



---



##### Table of Contents



In June 2002, TBX Resources completed the Dennett #2-34 gas well and
drilled but has yet to complete the Hunter #1-27 gas well. Both wells are on
our existing Vici prospect in Ellis County, Oklahoma. The Companys business
plan provides for the development of approximately 10 wells in the next two
years in the Anadarko Basin of Oklahoma. At this time, there are inadequate
production figures from the most recently completed well to opine on the future
impact on the Companys revenue. We estimate that this one well may generate
net income of approximately $10,000 per month however, there can be no
assurance that such level of production will continue now or in the future, as
the well is a new well and current data may prove to be unreliable.

Our principal source of funds in the near future will be from the
continued sale of our common stock, increased production from re-working
existing wells and sponsoring joint venture partnerships for profit. On October
1, 2001 the Company renewed its Regulation S Stock Purchase agreement with
Citizen Asia Pacific Limited (CAPL), a Hong Kong company. The shares are being
offered and sold in reliance upon an exemption from registration requirements
of the United States federal and state securities laws under Regulation S
promulgated under the Securities Act. The agreement stipulates that CAPL will
use its best efforts to purchase from the Company 500,000 restricted shares of
common stock (renewable for additional amounts) at a per share price which
shall be 38% of the moving ten day average closing prices of the Companys
shares of common stock as quoted on the OTC Bulletin Board or other public
trading market. We have the right to accept or reject subscriptions for the
shares, in whole or in part. The agreement expired on September 30, 2002. On
October 3, 2002, we entered into a consulting agreement with Telvest, Inc.
Under the terms of this agreement, Telvest provides advisory services for
foreign investments (Regulation S) for a fee of 3 % of all funds raised. The
agreement runs through January 31, 2003.

In September of this year, we obtained an option to purchase 2,800 acres
of oil and gas leases in the Barnett Shale play in the Fort Worth Basin of Wise
County, Texas. In October of this year, we formed The Grasslands I, Limited Partnership in which we are acting as the General Partner for the
purpose of acquiring the Wise County acreage for development drilling. The
Company has a 20% interest in the Partnership and is reimbursed on a turnkey
basis for 100% of the organization and offering costs, lease acquisition costs
and administrative expenses. We prepared a plan for development in the Barnett
Shale including the installation of an integrated pipeline system covering our
proposed acreage and additional acreage of other independent operators in the
area. The plan also includes drilling a least 30 gas wells in 24 months. If
successful, the properties could generate substantial cash flows to the Company
based on our projected 20% interest in the entire project. In addition, we plan
to re-work 8 of our East Texas wells in the coming year which may increase
revenue by approximately $300,000 to $360,000 a year. However, there can be no
assurance that our planned and projected level of production will materialize
in the future. We also want to sponsor more joint venture limited partnerships
to drill and produce oil and gas for profit. As sponsor of the programs, we
should receive an overriding royalty interest as well as being carried to the
tanks by the limited partners for from 10% to 25%. We expect that the principal
use of funds in the foreseeable future will be for operations and developing
existing oil and gas properties and/or the acquisition of new properties. Based
on the aforementioned plans management expects to reduces its losses and
generate positive cash flows from operations. However, there can be no
assurance that such plans will materialize. In addition, actual results may
vary from managements plans and the amount may be material.

11



---



##### Table of Contents






ITEM 7. FINANCIAL STATEMENTS.

TBX RESOURCES, INC.
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES

|                                                                                           |  |      |     | 
|------------------------------------------------------------------------------------------ |  | ---- | --- | 
|                                                                                           |  | PAGE
|                                                                                           |  |     
|Independent Accountants Audit Report Dated February 26, 2003                              |  |      | F-2 | 
|Balance Sheet  November 30, 2002                                                          |  |      | F-3 | 
|Statements of Operations-
For The Twelve Months Ended November 30, 2002 and 2001           |  |      | F-4 | 
|Statements of Cash Flows-
For The Twelve Months Ended November 30, 2002 and 2001           |  |      | F-5 | 
|Statements of Stockholders Equity-
For The Twelve Months Ended November 30, 2002 and 2001 |  |      | F-6 | 
|Notes to Audited Financial Statements                                                      |  |      | F-7 | 

F-1



---



##### Table of Contents



JAMES A. MOYERS, CPA
10300 North Central Expressway, Suite 530
Dallas, Texas 75231
(214) 987-4687 FAX (214) 987-4693

The Board of Directors and Stockholders
TBX Resources, Inc.
Dallas, Texas




INDEPENDENT ACCOUNTANTS AUDIT REPORT

I have audited the accompanying balance sheet of TBX Resources, Inc. as of
November 30, 2002 and the related statements of operations, stockholders
equity and cash flows for each of the two years in the period ended November
30, 2002, as required by Item 310 (a) of Regulation S-B. All information
included in these financial statements is the responsibility of the management.
My responsibility is to express an opinion on these financial statements based
on my audit.

I have conducted my audit in accordance with auditing standards generally
accepted in the United States of America. Those standards require that I 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 disclosed 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. I believe that my
audit provides a reasonable basis for my opinion.

In my opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of TBX Resources, Inc. as of
November 30, 2002, and the results of its operations and cash flows for each of
the two years in the period ended November 30, 2002, in conformity with
accounting principles generally accepted in the United States of America.

February 26, 2003

James A. Moyers, CPA

F-2



---



##### Table of Contents






TBX RESOURCES, INC.
BALANCE SHEET
NOVEMBER 30, 2002

ASSETS

|                                     |                                                                                                     |                              |                                            |            |           |           |  | 
|------------------------------------ | --------------------------------------------------------------------------------------------------- | ---------------------------- | ------------------------------------------ | ---------- | --------- | --------- |  | 
|Current Assets                       |                                                                                                     |                              |                                            |           
|                                     | Cash and equivalents                                                                                |                              | $                                          | 34,317     |          
|                                     | Trade accounts receivable                                                                           |                              |                                            | 7,224      |          
|                                     | Loan to affiliate                                                                                   |                              |                                            | 25,000     |          
|                                     | Prepaid consulting fees- current portion                                                            |                              |                                            | 105,662    |          
|                                     |                                                                                                     |                              |                                            |            |          
|                                     |                                                                                                     | Total current assets         |                                            |            | 172,203   |          
|                                     |                                                                                                     |                              |                                            |            |          
|Equipment and Property               |                                                                                                     |                              |                                            |           
|                                     | Office furniture, fixtures and equipment                                                            |                              |                                            | 117,086    |          
|                                     | Oil and gas properties, using successful efforts accounting
Proved properties and related equipment |                              |                                            | 2,263,212  |          
|                                     |                                                                                                     |                              |                                            |            |          
|                                     |                                                                                                     |                              | 2,380,298                                  |           
|                                     | Less accumulated depreciation, depletion and amortization                                           |                              |                                            | 407,739    |          
|                                     |                                                                                                     |                              |                                            |            |          
|                                     |                                                                                                     | Total equipment and property |                                            |            | 1,972,559 |          
|                                     |                                                                                                     |                              |                                            |            |          
|Prepaid Consulting and Other         |                                                                                                     |                              | 327,755                                    |           
|                                     |                                                                                                     |                              |                                            |            |          
|                                     |                                                                                                     | Total Assets                 |                                            | $          | 2,472,517 |          
|                                     |                                                                                                     |                              |                                            |            |          
|LIABILITIES AND STOCKHOLDERS EQUITY
|Current Liabilities                  |                                                                                                     |                              |                                            |           
|                                     | Trade accounts payable                                                                              |                              | $                                          | 105,589    |          
|                                     | Loans from affiliates                                                                               |                              |                                            | 160,000    |          
|                                     | Taxes payable                                                                                       |                              |                                            | 15,232     |          
|                                     | Deferred income                                                                                     |                              |                                            | 118,523    |          
|                                     |                                                                                                     |                              |                                            |            |          
|                                     |                                                                                                     | Total current liabilities    |                                            |            | 399,344   |          
|                                     |                                                                                                     |                              |                                            |            |          
|Commitments and Contingencies        |                                                                                                     |                              |                                           |           
|Stockholders Equity                 |                                                                                                     |                              |                                            |           
|                                     | Preferred stock- $.01 par value; authorized 10,000,000 shares;
no shares outstanding                |                              |                                            |           |          
|                                     | Common stock- $.01 par value; authorized 100,000,000 shares;                                        |                              |                                            |            |          
|                                     | 26,692,373 shares outstanding at November 30, 2002                                                  |                              |                                            | 266,924    |          
|                                     | Additional paid-in capital                                                                          |                              |                                            | 8,474,386  |          
|                                     | Accumulated deficit                                                                                 |                              |                                            | (6,668,137 | )        
|                                     |                                                                                                     |                              |                                            |            |          
|                                     |                                                                                                     | Total stockholders equity   |                                            |            | 2,073,173 |          
|                                     |                                                                                                     |                              |                                            |            |          
|                                     |                                                                                                     |                              | Total Liabilities and Stockholders Equity |            | $         | 2,472,517 | 
|                                     |                                                                                                     |                              |                                            |            |          

The accompanying notes are an integral part of these financial statements.

F-3



---



##### Table of Contents






TBX RESOURCES, INC.
STATEMENTS OF OPERATIONS

|                                             |                                                                                  |                |            |                             |           |      |            |            |           | 
|-------------------------------------------- | -------------------------------------------------------------------------------- | -------------- | ---------- | --------------------------- | --------- | ---- | ---------- | ---------- | --------- | 
|                                             |                                                                                  |                |            | For the Twelve Months Ended
|                                             |                                                                                  |                |            | November 30,               
|                                             |                                                                                  |                |            |                            
|                                             |                                                                                  |                |            | 2002                        |           | 2001
|                                             |                                                                                  |                |            |                             |           |     
|Revenues:                                    |                                                                                  |                |            |                             |           |      |            |           
|                                             | Oil and gas sales                                                                |                | $          | 117,232                     |           |      | $          | 170,709    |          
|                                             | Joint venture income                                                             |                |            | 88,477                      |           |      |            |           |          
|                                             | Gain on sale of oil and gas properties                                           |                |            |                            |           |      |            | 50,689     |          
|                                             |                                                                                  |                |            |                             |           |      |            |            |          
|                                             |                                                                                  | Total revenues |            |                             | 205,709   |      |            |            | 221,398   | 
|                                             |                                                                                  |                |            |                             |           |      |            |            |          
|Expenses:                                    |                                                                                  |                |            |                             |           |      |            |           
|                                             | Lease operating and taxes                                                        |                |            | 114,690                     |           |      |            | 150,500    |          
|                                             | Joint venture costs and expenses                                                 |                |            | 49,223                      |           |      |            |           |          
|                                             | General and administrative                                                       |                |            | 834,823                     |           |      |            | 1,053,664  |          
|                                             | Loss on sale of investment in Southern Oil & Gas Co.                             |                |            | 140,000                     |           |      |            |           |          
|                                             | Loss on oil & gas lease option                                                   |                |            | 150,000                     |           |      |            |           |          
|                                             | Loss on sale of oil and gas properties                                           |                |            | 1,009,669                   |           |      |            |           |          
|                                             | Oil and gas properties impairment                                                |                |            |                            |           |      |            | 135,000    |          
|                                             | Depreciation, depletion and amortization                                         |                |            | 172,109                     |           |      |            | 61,699     |          
|                                             |                                                                                  |                |            |                             |           |      |            |            |          
|                                             |                                                                                  | Total expenses |            |                             | 2,470,514 |      |            |            | 1,400,863 | 
|                                             |                                                                                  |                |            |                             |           |      |            |            |          
|Operating Loss                               |                                                                                  |                | (2,264,805 | )                           |           |      | (1,179,465 | )         
|Other Income (Expense):                      |                                                                                  |                |            |                             |           |      |            |           
|                                             | Interest and other                                                               |                |            | 935                         |           |      |            | 7,604      |          
|                                             |                                                                                  |                |            |                             |           |      |            |            |          
|Loss Before Provision for Income Taxes       |                                                                                  |                | (2,263,870 | )                           |           |      | (1,171,861 | )         
|                                             | Provision for income taxes                                                       |                |            |                            |           |      |            |           |          
|                                             |                                                                                  |                |            |                             |           |      |            |            |          
|Net Loss                                     |                                                                                  | $              | (2,263,870 | )                           |           | $    | (1,171,861 | )         
|                                             |                                                                                  |                |            |                             |           |      |            |            |          
|Net Loss Per Common Share, Basic and Diluted |                                                                                  | $              | (0.09      | )                           |           | $    | (0.07      | )         
|                                             |                                                                                  |                |            |                             |           |      |            |            |          
|                                             | Weighted average common shares used in per share
calculations: Basic and Diluted |                |            | 24,341,704                  |           |      |            | 17,719,962 |          
|                                             |                                                                                  |                |            |                             |           |      |            |            |          

The accompanying notes are an integral part of these financial statements.

F-4



---



##### Table of Contents






TBX RESOURCES, INC.
STATEMENTS OF CASH FLOWS

|                                                                                       |                                                              |                             |                                              |                                     |         |                             |            |          |         |  |          |  
|-------------------------------------------------------------------------------------- | ------------------------------------------------------------ | --------------------------- | -------------------------------------------- | ----------------------------------- | ------- | --------------------------- | ---------- | -------- | ------- |  | -------- | -
|                                                                                       |                                                              |                             |                                              |                                     |         | For the Twelve Months Ended
|                                                                                       |                                                              |                             |                                              |                                     |         | November 30,               
|                                                                                       |                                                              |                             |                                              |                                     |         |                            
|                                                                                       |                                                              |                             |                                              |                                     |         | 2002                        |            | 2001    
|                                                                                       |                                                              |                             |                                              |                                     |         |                             |            |         
|Cash Flows From Operating Activities:                                                  |                                                              |                             |                                              |                                     |         |                             |            |         
|Net loss                                                                               |                                                              | $                           | (2,263,870                                   | )                                   |         | $                           | (1,171,861 | )       
|Adjustments to reconcile net loss to net cash
provided (used) by operating activities: |                                                              |                             |                                              |                                     |         |                             |            |         
|Depreciation, depletion and amortization                                               |                                                              |                             | 172,109                                      |                                     |         |                             | 61,699     |         
|Impairment of oil and gas properties                                                   |                                                              |                             |                                             |                                     |         |                             | 135,000    |         
|Allowance for doubtful accounts                                                        |                                                              |                             |                                             |                                     |         |                             | 27,557     |         
|Prepaid consulting fees                                                                |                                                              |                             | 100,000                                      |                                     |         |                             |           |         
|Issuance of common stock for consulting services                                       |                                                              |                             | 237,187                                      |                                     |         |                             | 383,347    |         
|Issuance of common stock to employees                                                  |                                                              |                             |                                             |                                     |         |                             | 55,700     |         
|Loss on sale of interest in Southern Oil & Gas Co.                                     |                                                              |                             | 140,000                                      |                                     |         |                             |           |         
|Loss on option to purchase Barnett Shale leases                                        |                                                              |                             |                                              |                                     |         |                             | 150,000    |         
|Loss (gain) on disposal of oil & gas properties                                        |                                                              |                             | 1,009,669                                    |                                     |         |                             | (50,689    | )       
|                                                                                       |                                                              |                             | Changes in operating assets and liabilities: |                                     |         |                             |            |          |         |  |         
|                                                                                       |                                                              |                             |                                              | Decrease (increase) in:             |         |                             |            |          |         |  |          |  
|                                                                                       |                                                              |                             |                                              | Receivables                         |         |                             | (20,129    | )        |         |  | 63,370   |  
|                                                                                       |                                                              |                             |                                              | Prepaid consulting and other        |         |                             | 63,370     |          |         |  | (135,288 | )
|                                                                                       |                                                              |                             |                                              | Increase (decrease) in:             |         |                             |            |          |         |  |          |  
|                                                                                       |                                                              |                             |                                              | Trade payables and accrued expenses |         |                             | (77,005    | )        |         |  | (13,824  | )
|                                                                                       |                                                              |                             |                                              | Loans from Affiliates               |         |                             | 160,000    |          |         |  |         |  
|                                                                                       |                                                              |                             |                                              | Deferred income from joint venture  |         |                             | 118,523    |          |         |  |         |  
|                                                                                       |                                                              |                             |                                              |                                     |         |                             |            |         
|Net cash provided by (used) for operating activities                                   |                                                              |                             | (210,146                                     | )                                   |         |                             | (644,989   | )       
|                                                                                       |                                                              |                             |                                              |                                     |         |                             |            |         
|Cash Flows From Investing Activities:                                                  |                                                              |                             |                                              |                                     |         |                             |            |         
|                                                                                       | Cash provided by the sale of stock of Southern Oil & Gas Co. |                             |                                              | 60,000                              |         |                             |            |         |        
|                                                                                       | Cash provided by the disposal of oil and gas properties      |                             |                                              | 340,359                             |         |                             |            | 91,400   |        
|                                                                                       | Cash used for the option to purchases oil and gas leases     |                             |                                              |                                    |         |                             |            | (165,070 | )      
|                                                                                       | Cash used to acquire and develop oil & gas properties        |                             |                                              | (556,499                            | )       |                             |            | (380,916 | )      
|                                                                                       |                                                              |                             |                                              |                                     |         |                             |            |         
|                                                                                       |                                                              |                             | (156,140                                     | )                                   |         |                             | (454,586   | )       
|                                                                                       |                                                              |                             |                                              |                                     |         |                             |            |         
|Cash Flows From Financing Activities:                                                  |                                                              |                             |                                              |                                     |         |                             |            |         
|                                                                                       | Cash provided by the change in other assets                  |                             |                                              | 150,000                             |         |                             |            |         |        
|                                                                                       | Cash provided by the issuance of common stock                |                             |                                              | 139,152                             |         |                             |            | 852,811  |        
|                                                                                       |                                                              |                             |                                              |                                     |         |                             |            |         
|                                                                                       |                                                              |                             | 289,152                                      |                                     |         |                             | 852,811    |         
|                                                                                       |                                                              |                             |                                              |                                     |         |                             |            |         
|Net Increase (Decrease) In Cash                                                        |                                                              |                             | (77,134                                      | )                                   |         |                             | (246,764   | )       
|                                                                                       |                                                              | Cash at beginning of period |                                              |                                     | 111,451 |                             |            |          | 324,916 | 
|                                                                                       |                                                              |                             |                                              |                                     |         |                             |            |         
|                                                                                       |                                                              | Cash at end of period       |                                              | $                                   | 34,317  |                             |            | $        | 78,152  | 
|                                                                                       |                                                              |                             |                                              |                                     |         |                             |            |         
|SUPPLEMENTAL SCHEDULE OF NONCASH                                                       |                                                              |                             |                                              |                                     |         |                             |            |         
|FINANCING ACTIVITIES                                                                   |                                                              |                             |                                              |                                     |         |                             |            |         
|Fair value of consulting services acquired for common stock                            |                                                              | $                           | 666,468                                      |                                     |         | $                           | 528,013    |         
|                                                                                       |                                                              |                             |                                              |                                     |         |                             |            |         

The accompanying notes are an integral part of these financial statements.

F-5



---



##### Table of Contents






TBX RESOURCES, INC.
STATEMENTS OF STOCKHOLDERS EQUITY

|                                      |  |              |            |            |  |         |          |          |  |        |            |  |  |   |             |   |  |       |            |  
|------------------------------------- |  | ------------ | ---------- | ---------- |  | ------- | -------- | -------- |  | ------ | ---------- |  |  | - | ----------- | - |  | ----- | ---------- | -
|                                      |  |              |            |            |  |         |          |          |  |        |            |  |  |   |             |   |  | Total
|                                      |  | Common Stock |            | Additional |  | Accum-  |          | Stock-  
|                                      |  |              |            | Paid-In    |  | ulated  |          | holders'
|                                      |  | Shares       |            | Par Value  |  | Capital |          | Deficit  |  | Equity
|                                      |  |              |            |            |  |         |          |          |  |       
|Balance November 30, 2000             |  |              | 16,478,350 |            |  |         | $164,783 |          |  |        | $6,390,082 |  |  |   | $(3,232,406 | ) |  |       | $3,322,459 |  
|Issuance of common stock for cash     |  |              | 1,445,104  |            |  |         | 14,451   |          |  |        | 838,360    |  |  |   |            |   |  |       | 852,811    |  
|Issuance of common stock for services |  |              | 1,950,935  |            |  |         | 19,510   |          |  |        | 508,503    |  |  |   |            |   |  |       | 528,013    |  
|Net loss for period                   |  |              |           |            |  |         |         |          |  |        |           |  |  |   | (1,171,861  | ) |  |       | (1,171,861 | )
|                                      |  |              |            |            |  |         |          |          |  |        |            |  |  |   |             |   |  |       |            |  
|Balance November 30, 2001             |  |              | 19,874,389 |            |  |         | 198,744  |          |  |        | 7,736,945  |  |  |   | (4,404,267  | ) |  |       | 3,531,422  |  
|Issuance of common stock for cash     |  |              | 640,639    |            |  |         | 6,407    |          |  |        | 132,746    |  |  |   |            |   |  |       | 139,153    |  
|Issuance of common stock for services |  |              | 6,177,345  |            |  |         | 61,773   |          |  |        | 604,695    |  |  |   |            |   |  |       | 666,468    |  
|Net loss for period                   |  |              |           |            |  |         |         |          |  |        |           |  |  |   | (2,263,870  | ) |  |       | (2,263,870 | )
|                                      |  |              |            |            |  |         |          |          |  |        |            |  |  |   |             |   |  |       |            |  
|Balance November 30, 2002             |  |              | 26,692,373 |            |  | $       | 266,924  |          |  | $      | 8,474,386  |  |  | $ | (6,668,137  | ) |  | $     | 2,073,173  |  
|                                      |  |              |            |            |  |         |          |          |  |        |            |  |  |   |             |   |  |       |            |  

The accompanying notes are an integral part of these financial statements.

F-6



---



##### Table of Contents






TBX RESOURCES, INC.
NOTES TO FINANCIAL STATEMENTS

1. BUSINESS ACTIVITIES:

TBX Resources, Inc., a Texas Corporation, was organized on March 24, 1995. The
Companys principal business activity is acquiring and developing oil and gas
properties. The Company owns 40 wells and operates another 7 wells located in
East Texas. Of the 40 wells located in East Texas, 3 wells are currently
producing oil and 8 wells have been designated as injection wells. The
remaining 29 wells are either currently shut-in, scheduled to be brought back
into production or are designated as injection wells. Also, the Company has an
interest in 7 production wells in Oklahoma. In addition, TBX Resources has the
opportunity to drill and exploit 76,800 acres (120 sections) of increased density development leases in the Anadarko Basin in Oklahoma. The
Companys philosophy is to acquire properties with the purpose of reworking
existing wells and/or drilling development wells to make a profit. In addition,
the Company sponsors joint venture partnerships for the purpose of acquiring
and developing oil and gas properties for profit.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Cash Equivalents

The Company considers all highly liquid investments purchased with an original
maturity of three months or less to be cash equivalents.

Oil and Gas Revenue

Oil and gas revenue is reported when production is sold. The Company accrues
revenue for oil and gas production sold but not paid.

Joint Venture Income and Expenses

The Company sponsors joint venture partnerships. Income from the ventures is
generally recorded as funds are transferred from the partnership to the
Company. Payments made to the Company in excess of amounts earned are recorded
as deferred income. The programs are undertaken on a turnkey basis.
Accordingly, all monies raised are recorded as joint venture income and all
expenses to acquire, rework and operate the wells are charged to joint venture
costs and expenses. Profit is recorded as earned. A provision for loss is
reported in the period program costs are estimated to exceed turnkey revenue.

Office Furniture, Fixtures and Equipment

These assets are stated at the Companys cost and depreciated on an accelerated
basis over five to seven years. Maintenance and repair costs are expensed when
incurred, while major improvements are capitalized.

Oil and Gas Properties

The Company follows the successful efforts method of accounting for oil and gas
exploration and development expenditures. Under this method, costs of
successful exploratory wells and all development wells are capitalized. Costs
to drill exploratory wells that do not find proved reserves are expensed. In
the absence of a determination as to whether the reserves that have been found
can be classified as proved, TBX Resources carries the costs of drilling such
an exploratory well as an asset for no more than one year following completion
of drilling. If, after that year has passed, a determination that proved
reserves have not been found, TBX Resources assumes that the well is impaired,
and charges its costs to expense. Significant costs associated with the
acquisition of oil and gas properties are capitalized. Upon sale or abandonment
of units of property or the disposition of miscellaneous equipment, the cost is
removed from the asset account, the related reserves relieved of the
accumulated depreciation or depletion and the gain or loss is credited to or
charged against operations. Both proved and unproved oil and gas properties
that are individually significant are periodically assessed for impairment of
value, and a loss is recognized at the time of impairment by providing an
impairment allowance. Other unproved properties are amortized based on the Companys experience
and average holding

F-7



---



##### Table of Contents



2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued):

Oil and Gas Properties (continued):

period. Capitalized costs of
producing oil and gas, properties, after considering estimated dismantlement and abandonment costs and
estimated salvage values are depreciated and depleted by the unit-of-production method. Support equipment
and other property and equipment are depreciated over their estimated useful
lives. On the sale or retirement of a complete unit of a proved property, the
cost and related accumulated depreciation, depletion, and amortization are
eliminated from the property accounts, and the resultant gain or loss is
recognized. On the retirement or sale of a partial unit of proved property, the
cost is charged to accumulated depreciation, depletion, and amortization with a
resulting gain or loss recognized in income.

On the sale of an entire interest in an unproved property for cash or cash
equivalent, gain or loss on the sale is recognized, taking into consideration
the amount of any recorded impairment if the property had been assessed
individually. If a partial interest in an unproved property is sold, the amount
received is treated as a reduction of the cost of the interest retained.

Maintenance and repairs are charged to expense; betterments of property are
capitalized and depreciated as described below.

Depreciation, Depletion and Amortization

The Company provides for depreciation, depletion and amortization of its
investment in producing oil and gas properties on the unit-of-production
method, based upon independent reserve engineers estimates of recoverable oil
and gas reserves from the property.

Investment In Southern Oil & Gas Company, Inc.

The Companys investment in Southern Oil & Gas Company, Inc. is accounted for
by the cost method. The impact of the cost versus equity method (the preferred
method) of accounting for the investment is not considered material.

Income Taxes

The Company computes income tax expense using Statement of Financial Accounting
Standards (SFAS) No. 109, Accounting for Income Taxes. SFAS 109 requires the
measurement of deferred tax assets for deductible temporary differences and
operating loss carry forwards and of deferred tax liabilities for taxable
temporary differences. Measurement of current and deferred tax liabilities and
assets is based on provisions of enacted law. The effects of future changes in
tax laws and rates are not anticipated.

Earnings Per Share (EPS)

The Company computes earnings per share using Statement of Financial Accounting
Standards (SFAS) No. 128,  Earnings Per Share. Basic earnings per common
share is calculated by dividing net income or loss by the average number of
shares outstanding during the year. Diluted earnings per common share is
calculated by adjusting outstanding shares, assuming conversion of all
potentially dilutive stock options. The computation of diluted EPS does not
assume conversion, exercise, or contingent issuance of shares that would have
an antidilutive effect on earnings per common share. Antidilution results from
an increase in earnings per share or reduction in loss per share from the
inclusion of potentially dilutive shares in EPS calculations.

Stock-Based Compensation

The Company recognizes compensation expense for options granted to employees
using the intrinsic value method under Accounting Principles Board (APB) No.
25, Accounting for Stock Issued to Employees. Under this method,
compensation to be recognized by the Company for stock options issued is
measured by the difference between the quoted market price of the stock at the
measurement date less the amount the employee is required to pay. This is an
acceptable method of accounting for employee stock options under the more
recent Statement of Financial Accounting Standards (SFAS) No. 123, Accounting
for Stock-Based Compensation.

F-8



---



##### Table of Contents



2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued):

Estimates

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from these
estimates.

New Accounting Pronouncements

On June 29, 2001, the FASB issued SFAS No. 141 Business Combinations. SFAS
No. 141 supersedes Accounting Principles Board (APB) No. 16 and requires that
any business combinations initiated after June 30, 2001 be accounted for as a
purchase, therefore, eliminating the pooling-of-interest method defined in APB
16. The statement is effective for any business combination initiated after
June 30, 2001, and shall apply to all business combinations accounted for by
the purchase method for which the date of acquisition is July 1, 2001 or later.
The Company has implemented the provisions of SFAS No. 141 and has concluded
that the adoption does not have a material impact on the Companys financial
statements.

On June 29, 2001, the FASB issued SFAS No. 142, Goodwill and Other
Intangibles. SFAS No. 142 addresses the initial recognition, measurement and
amortization of intangible assets acquired individually or with a group of
other assets (but not those acquired in a business combination), and addresses
the amortization provisions for excess cost over fair value of net assets
acquired or intangibles acquired in a business combination. The statement is
effective for fiscal years beginning after December 15, 2001, and is effective
July 1, 2001 for any intangibles acquired in a business combination initiated
after June 30, 2001. The Company has implemented the provisions of SFAS No. 142
and has concluded that the adoption does not have a material impact on the
Companys financial statements.

On August 15, 2001, the FASB issued Statement No. 143, Accounting for Asset
Retirement Obligations. Initiated in 1994 as a project to account for the
costs of nuclear decommissioning, the FASB expanded the scope to include
similar closure or removal-type costs in other industries that are incurred at
any time during the life of an asset. That standard requires entities to record
the fair value of a liability for an asset retirement obligation in the period
in which it is incurred. When the liability is initially recorded, the entity
capitalizes a cost by increasing the carrying amount of the related long-lived
asset. Over time, the liability is accreted to its present value each period,
and the capitalized cost is depreciated over the useful life of the related
asset. Upon settlement of the liability, an entity either settles the
obligation for its recorded amount or incurs a gain or loss upon settlement.
The standard is effective for fiscal years beginning after June 15, 2002. The
Company has implemented the provisions of SFAS No. 143 and has concluded that
the adoption does not have a material impact on the Companys financial
statements.

During August 2001, the FASB issued SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets, which addresses the accounting
and reporting for the impairment or disposal of long-lived assets. The
statement provides a single accounting model for long-lived assets to be
disposed of. New criteria must be met to classify the asset as an asset
held-for-sale. This statement also focuses on reporting the effects of a
disposal, of a segment of a business. This statement is effective for fiscal
years beginning after December 15, 2001. The Company has implemented the
provisions of SFAS No. 144 and has concluded that the adoption does not have a
material impact on the Companys financial statements.

In April 2002, the FASB issued Statement NO. 145, Rescission of FASB
Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical
Corrections. This Statement rescinds FASB Statement No. 4, Reporting Gains
and Losses from Extinguishment of Debt and amendment of that Statement, FASB
Statement No. 64, Extinguishment of Debt Made to Satisfy Sinking-Fund
Requirements and FASB Statement No. 44, Accounting for Intangible Assets of
Motor Carriers. This Statement amends FASB Statement No. 13, Accounting for Leases, to eliminate
an inconsistency between the required accounting for sale-lease back
transactions and the required accounting for certain

F-9



---



##### Table of Contents



2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued):

New Accounting Pronouncements (continued)

lease specifications that have economic effects that are similar to
sale-leaseback transactions. The Company does not expect the adoption to have a
material impact to the Companys financial position or results of operations.

In June 2002, the FASB issued Statement No. 146, Accounting for Costs
Associated with Exit or Disposal Activities. This Statement addresses
financial accounting and reporting for costs associated with exit or disposal
activities and nullifies Emerging Issues Task Force (EITF) Issue No. 94-3,
Liability Recognition for Certain Employee Termination Benefits and Other
Costs to Exit an Activity (including Certain Costs Incurred in a
Restructuring). The provisions of this Statement are effective for exit or
disposal activities that are initiated after December 31, 2002, with early
application encouraged. The Company does not expect the adoption to have a
material impact to the Companys financial position or results of operations.

3. ACCUMULATED OPERATING LOSSES:

At November 30, 2002, the Company had accumulated losses of $6.7 million. The
Companys ability to continue is based on future plans and past successes of
its officers. The Company is attempting to raise additional equity funds and
to sponsor joint venture partnerships that will be used to develop existing oil
and gas properties and/or purchase additional properties. The ability of the
Company to attain profitable operations is dependent on the Company operating
in an environment of stable prices and increasing production over current
levels. These financial statements have been prepared on the basis that the
Company will realize its assets and discharge its liabilities in the normal
course of business.

4. AFFILIATED PARTY TRANSACTIONS:



| | a. |  | The operator of the East Texas oil and gas leases, Gulftex Operating,
Inc. is an affiliate of TBX Resources. Mr. Burroughs, a major
stockholder and president of the Company, is the sole shareholder of
Gulftex. TBX Resources paid Gulftex $9,600 for both this year and last
year for activities associated with operating TBX wells. Included in
trade accounts payable at November 30, 2002 is $10,963 due Gulftex
Operating for lease operating expenses.
| | -- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b. |  | During the current fiscal year, the Company borrowed $100,000 and
repaid $60,000 from two of its shareholders. In addition the Company
borrowed and additional $120,000 from a company in which Mr. Burroughs
is a shareholder. The funds were used to develop its Oklahoma
properties. The Company expects to repay the loans within the next
twelve months.                                                                                                  
|
| | c. |  | Included in loan to affiliate is $25,000 due from Gulftex Operating,
Inc. a company owned by Mr. Burroughs, President of the Company.                                                                                                                                                                                                                                                                                                                          

5. INVESTMENT IN SOUTHERN OIL & GAS COMPANY, INC:

On January 6, 1999 the Company purchased a 20% interest in Southern Oil & Gas
Companys (Southern) stock for $200,000. Southern is an oil and gas company
that owns oil wells, primarily in northeast Louisiana. When the Company
originally purchased its interest in Southern, it also entered into an
operations and management contract (the Operations Contract) providing that
the Company was to be paid the profits of Southern that exceeded $40,000 each
month. Because the amounts we were to be paid under the Operations Contract
have not materialized and the lower production levels for Southern oil properties,
management decided to sell its 20% interest in Southern to avoid a
further erosion of its investment amount. The Company sold its interest to the principal shareholder of Southern
during in the fourth quarter of the current fiscal year for $60,000 and
recorded a loss on the transaction of $140,000.

F-10



---



##### Table of Contents



6. PREPAID CONSULTING AND OTHER:



| | a. |  | On March 7, 2002 the Company executed a professional services
agreement with Mr. Samuel Warren, President of both Warren Drilling,
Inc. and Drill Pipe Industries, Inc. Under the terms of the agreement,
which is to run for five years, the Company is receiving assistance in
developing new business opportunities and strategies, expanding existing
operations, and facilitating any other normal business transactions
requested by the Company. The Company compensated Mr. Warren by issuing
him 4,271,089 shares of the Companys common stock valued for the
purpose of this transaction at $500,000. The amount is included in
prepaid consulting. The Company is amortizing the cost of Mr. Warrens
services over the term of the agreement (5 years). To date, the company
has amortized $75,000 of the contracts value.
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b. |  | The Company let lapse its non-exclusive option to purchase five
prospects covering 3,323 acres in Montague County, Texas and charged
$150,000 to current operations. The Company has found new acreage that
it believes will be more prolific than the Montague County prospect. See
discussion of Grasslands I, Limited Partnership below.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

7. COMMITMENTS AND CONTINGENCIES:



| | a. |  | The Company executed an Employment Agreement effective December 1,
1999 with Mr. Tim Burroughs, President, for three years. Under the terms
of the agreement, Mr. Burroughs is entitled to receive an annual
compensation of $150,000, and other items enumerated in the agreement,
plus bonuses of up to 10% for material changes to the Company; for
example, when the Company completes a major acquisition, funding or
financing. For the twelve months ended November 30, 2001 the Company
accrued a bonus of approximately $55,200. No bonuses were paid or
accrued for the twelve months ended November 30, 2002. In addition,
under the terms of the employment agreement, Mr. Burroughs received
stock options good for five years from the date of issuance to purchase
up to 500,000 shares per year of the Companys common stock for five
years at a price which shall not be greater than 50% of the average bid
price for the shares during the previous quarter in which the options
are exercised. The options are cumulative and allow Mr. Burroughs to
exercise his options through November 30, 2004 for a total of 2,500,000
shares. As of November 30, 2002, Mr. Burroughs has the option to
purchase 1,500,000 shares of the Companys common stock. The fair value
of the options will be recorded as compensation expense when a
reasonable estimate of such costs are available or the amount Mr.
Burroughs has to pay is known. Based on the formula for calculating the
purchase price, material charges to compensation expense may be recorded
in future years.
| | -- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b. |  | During the current fiscal year, Mr. Burroughs was issued 600,000
shares of common stock in lieu of receiving $60,000 in compensation owed
him from the previous fiscal year. The $60,000 was charged to accrued
liabilities with an offsetting credit to capital.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|
| | c. |  | The Company is obligated for $30,000 under a new lease agreement for
rent of its current office space that terminates on August 31, 2003.
Office rent expense for the year ended November 30, 2002 is
approximately $29,000.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|
| | d. |  | Gulftex Operating is the bonded operator for TBX Resources and is
responsible for compliance with the laws and regulations relating to the
protection of the environment. While it is not possible to quantify with
certainty the potential impact of actions regarding environmental
matters, particularly any future remediation and other compliance
efforts, in the opinion of management, compliance with the present
environmental protection laws will not have a material adverse affect on
the financial condition, competitive position or capital expenditures of
TBX Resources. However, the Companys cost to comply with increasingly
stringent environmental regulations may have an adverse effect on the
Companys future earnings.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

F-11



---



##### Table of Contents



8. AFFILIATED OIL AND GAS JOINT VENTURE PARTNERSHIP:

In September of 2002, the Company formed and is acting as the general partner
for the Grasslands I, Limited Partnership. The purpose of the partnership is
to acquire 2,800 acres for oil and gas development in the Barnett Shale play in
the Fort Worth Basin of Wise County, Texas. The Company is to be reimbursed on
a turnkey basis for organization and offering cost, lease acquisition costs and
administrative expenses. Revenue earned in the current fiscal year is $88,477
offset by expenses of $49,233.

9. SALE OF OIL AND GAS PROPERTIES:

The Company sold its Bethany Field property in the fourth quarter of the
current fiscal year. Management is of the opinion that the costs of re-working,
developing and producing this property will not yield an adequate return on its
investment. Accordingly, in order to avoid a future drain on the Companys
working capital resources, Management elected to sell all of the Companys
interest in the field to an unrelated party for approximately $60,000. The
Company wrote-off the costs of the acreage, wells and related depreciation,
depletion and amortization and recorded a loss on the transaction of
approximately $1,050,000.The Company also sold three of its Oklahoma properties
during the first half of this fiscal year. The money was used to both fund the
drilling of two development wells in Oklahoma and to support current
operations. The Company wrote off the costs of the wells and related
depreciation, depletion and amortization and reported a net gain of
approximately $46,000 on the transactions.

10. IMPAIRMENT OF OIL AND GAS PROPERTIES:

As of November 30, 2001 impairment loss of $135,000 was recognized for two
properties located in East Texas and included as a component of operating
expenses. The impairment loss was determined by comparing the future
undiscounted net cash flows, as shown in the most recent engineering report, to
the Companys net book value pursuant to FASB Statement No. 121.There was no
impairment loss in the current fiscal year.

11. STOCKHOLDERS EQUITY:



| | a. |  | The Company amended its Articles of Incorporation on July 11, 2001 to
grant the Company the authority to issue 10,000,000 shares with a par
value of $0.01 (one cent) each all of which shares shall be known as
preferred stock. The shares of preferred stock have no preemptive or
other subscription rights, have no conversion rights and are not subject
to redemption. No personal liability should attach to the ownership of
TBX preferred stock. In the event of a liquidation of TBX Resources, the
preferred shareholders, if any, would be entitled to their proportionate
part of the assets of TBX Resources, but only after the satisfaction of
all secured and unsecured creditors. No shares of preferred stock are
outstanding at November 30, 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | -- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b. |  | On October 1, 2001 the Company renewed its Regulation S Stock Purchase
agreement with Citizen Asia Pacific Limited (CAPL), a Hong Kong company.
The shares are being offered and sold on reliance of an exemption from
registration requirements of the United States Federal and State
securities laws under Regulation S promulgated under the Securities Act.
The agreement stipulates that CAPL will use its best efforts to purchase
from the Company 500,000 restricted shares of common stock (renewable for
additional amounts) at a per share price which shall be 38% of the
average closing prices of the Companys shares of common stock as quoted
on the OTC Bulletin Board or other public trading market. The Company has
the right to accept or reject subscriptions for the shares, in whole or
in part. The agreement expired September 30, 2002. The Company sold
approximately $140,000 in common stock through CAPL in the current fiscal
year. On October 3, 2002 the Company entered into a consulting agreement
with Telvest, Inc. Under the terms of the agreement, Telvest provides
advisory services for foreign investments (Regulation S) for a fee of 3%
of all funds raised. The agreement runs through January 31, 2003.
|
| | c. |  | During the current fiscal year, the Company used the services of
consultants who received 6,177,345                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

F-12



---



##### Table of Contents



11. STOCKHOLDERS EQUITY (continued):



| |    |  | shares of common stock. The Company recorded the transactions as a $237,187
charge to expense with an offsetting credit to capital.                   
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | d. |  | Options to purchase shares of common stock are not included in the
computation of diluted earnings per share because the effect would be
antidilutive.

12. INCOME TAXES:

The components of federal income taxes for the current and previous fiscal year
are as follows:

|                       |  |      |          |      |  |   |          |  
|---------------------- |  | ---- | -------- | ---- |  | - | -------- | -
|                       |  | 2002 |          | 2001
|                       |  |      |          |     
|Current tax benefit    |  | $    | 788,200  |      |  | $ | 473,900  |  
|Valuation allowance    |  |      | (788,200 | )    |  |   | (473,900 | )
|                       |  |      |          |      |  |   |          |  
|Net income tax benefit |  | $    | -0-      |      |  | $ | -0-      |  
|                       |  |      |          |      |  |   |          |  

At November 30, 2002, the Company has Federal tax loss carry forwards of
approximately $7.6 million available to offset future taxable income. The
Federal tax loss carry forwards expire in varying amounts from 2011 to 2021.

13. SUPPLEMENTARY OIL AND GAS INFORMATION -UNAUDITED:

|                                                                                                 |  |              |            |      |  |   |           |  
|------------------------------------------------------------------------------------------------ |  | ------------ | ---------- | ---- |  | - | --------- | -
|                                                                                                 |  | November 30,
|                                                                                                 |  |             
|                                                                                                 |  | 2002         |            | 2001
|                                                                                                 |  |              |            |     
|Capitalized Costs Relating to Oil and Gas                                                        |  |              |            |      |  |   |           |  
|Producing Activities:                                                                            |  |              |            |      |  |   |           |  
|Property (acreage costs)- Proved                                                                 |  | $            | 705,428    |      |  | $ | 939,751   |  
|Producing assets                                                                                 |  |              | 1,557,784  |      |  |   | 2,367,227 |  
|                                                                                                 |  |              |            |      |  |   |           |  
|                                                                                                 |  |              | 2,263,212  |      |  |   | 3,306,978 |  
|Less: accumulated depreciation and depletion                                                     |  |              | 331,983    |      |  |   | 254,848   |  
|                                                                                                 |  |              |            |      |  |   |           |  
|Net Capitalized Costs                                                                            |  | $            | 1,931,229  |      |  | $ | 3,052,130 |  
|                                                                                                 |  |              |            |      |  |   |           |  
|Costs Incurred in Property Acquisition,
Exploration and Development Activities:                  |  |              |            |      |  |   |           |  
|Property acquisition costs                                                                       |  | $            | 40,429     |      |  | $ | 939,751   |  
|Exploration costs                                                                                |  |              |           |      |  |   | 281,172   |  
|Development costs                                                                                |  |              | 516,070    |      |  |   |          |  
|                                                                                                 |  |              |            |      |  |   |           |  
|Total                                                                                            |  | $            | 556,499    |      |  |   | 1,220,923 |  
|                                                                                                 |  |              |            |      |  |   |           |  
|Results of Operations for Producing Activities:                                                  |  |              |            |      |  |   |           |  
|Oil and gas sales                                                                                |  | $            | 117,232    |      |  | $ | 170,709   |  
|Gain (loss) on sale of properties                                                                |  |              | (1,009,669 | )    |  |   | 50,689    |  
|Production costs                                                                                 |  |              | (114,690   | )    |  |   | (150,500  | )
|Depreciation, depletion and amortization                                                         |  |              | (161,654   | )    |  |   | (53,034   | )
|Impairment of oil and gas properties from changing prices                                        |  |              |           |      |  |   | (135,000  | )
|                                                                                                 |  |              |            |      |  |   |           |  
|                                                                                                 |  |              | (1,168,781 | )    |  |   | (117,136  | )
|Income tax benefit                                                                               |  |              |           |      |  |   |          |  
|                                                                                                 |  |              |            |      |  |   |           |  
|Results of Operations Excluding Selling, General and
Administrative and Joint Venture Activities |  | $            | (1,168,781 | )    |  | $ | (117,136  | )
|                                                                                                 |  |              |            |      |  |   |           |  

F-13



---



##### Table of Contents



13. SUPPLEMENTARY OIL AND GAS INFORMATION UNAUDITED (continued):

Oil and Gas Reserve Quantities

An independent petroleum engineer determined estimated reserves and related
valuations for the East Texas properties. Estimates of proved reserves are
inherently imprecise and are subject to revisions based on production history,
results of additional exploration and development and other factors. Proved
reserves are reserves judged to be economically producible in future years from
known reservoirs under existing economic and operating conditions. Proven
developed reserves are expected to be recovered through existing wells,
equipment and operating methods. Sufficient production information is not
available to prepare an adequate reserve report for seven production wells in
Oklahoma. The Company has varying interests in the wells and the reserve
quantities would not materially affect the Companys total estimated reserves
and valuations at this time.

Following is a summary of the changes in estimated proved developed and
undeveloped oil and gas reserves of the Company, which are located in East
Texas, for the years ended November 30, 2002 and 2001:

|                                  |                                   |  |          |         |       |  |            |           | 
|--------------------------------- | --------------------------------- |  | -------- | ------- | ----- |  | ---------- | --------- | 
|                                  |                                   |  | Oil      |         | Gas  
|                                  |                                   |  | (BBL)    |         | (MCF)
|                                  |                                   |  |          |         |      
|Proved reserves November 30, 2000 |                                   |  | 825,862  |         |       |  | 1,455,915  |          
|Revisions to previous estimates   |                                   |  | (66,624  | )       |       |  | (37,911    | )        
|Production                        |                                   |  | (4,381   | )       |       |  |           |          
|Sales, transfers and retirements  |                                   |  | (21,000  | )       |       |  |           |          
|                                  |                                   |  |          |         |       |  |            |          
|                                  | Proved reserves November 30, 2001 |  |          | 733,857 |       |  |            | 1,418,004 | 
|Revisions to previous estimates   |                                   |  | (6,451   | )       |       |  |           |          
|Production                        |                                   |  | (3,661   | )       |       |  |           |          
|Sales, transfers and retirements  |                                   |  | (477,355 | )       |       |  | (1,418,004 | )        
|                                  |                                   |  |          |         |       |  |            |          
|                                  | Proved reserves November 30, 2002 |  |          | 246,390 |       |  |            |          | 
|                                  |                                   |  |          |         |       |  |            |          
|Proved developed reserves:        |                                   |  |          |         |       |  |            |          
|                                  | November 30, 2000                 |  |          | 311,735 |       |  |            |          | 
|                                  | November 30, 2001                 |  |          | 254,875 |       |  |            |          | 
|                                  | November 30, 2002                 |  |          | 246,390 |       |  |            |          | 

Standardized Measure of Discounted Cash Flows Relating to Proved Oil and Gas Reserves

Statement of Financial Accounting Standards No. 69 prescribes guidelines for
computing a standardized measure of future net cash flows relating to estimated
proven reserves. The Company has followed these guidelines, which are briefly
discussed in the following paragraph.

Future cash inflows and future production and development costs are determined
by applying year-end prices for 2002 of $21.00/bbl and for 2001, $20.00/bbl and
$2.50/MCF and costs to the estimated quantities of oil and gas to be produced.
Estimated future income taxes are computed by using statutory rates including
consideration for previously legislated future statutory depletion rates. The
resulting future net cash flows are reduced to present value amount by applying
a 10% annual discount factor. The assumptions used to compute the standardized
measure are those prescribed by the Financial Accounting Standards Board and,
as such, do not necessarily reflect the Companys expectations of actual
revenues to be derived from those reserves or their present worth. The
limitations inherent in the reserve quantity estimation process, as discussed
previously are equally applicable to the standardized measure computations
since these estimates are the basis for the valuation process. Presented below
is the standardized measure of discounted future net cash flows relating to
proved oil reserves as of November 30, 2002 and 2001.

F-14



---



##### Table of Contents



13. SUPPLEMENTARY OIL AND GAS INFORMATION-UNAUDITED (continued):

|                                                                                     |                       |   |            |           |      |   |            |           | 
|------------------------------------------------------------------------------------ | --------------------- | - | ---------- | --------- | ---- | - | ---------- | --------- | 
|                                                                                     |                       |   | 2002       |           | 2001
|                                                                                     |                       |   |            |           |     
|Future cash inflows                                                                  |                       | $ | 5,174,180  |           |      | $ | 18,222,160 |          
|Future production costs                                                              |                       |   | (2,631,338 | )         |      |   | (8,368,225 | )        
|Future development costs                                                             |                       |   | (232,083   | )         |      |   | (3,835,412 | )        
|Future income tax expense                                                            |                       |   | (785,658   | )         |      |   | (2,046,298 | )        
|                                                                                     |                       |   |            |           |      |   |            |          
|                                                                                     | Future net cash flows |   |            | 1,525,101 |      |   |            | 3,972,225 | 
|10% annual discount for estimated
timing of cash flows                               |                       |   | (734,641   | )         |      |   | (1,913,421 | )        
|                                                                                     |                       |   |            |           |      |   |            |          
|Standardized measure of discounted future
net cash flows relating to proved reserves |                       | $ | 790,460    |           |      | $ | 2,058,804  |          
|                                                                                     |                       |   |            |           |      |   |            |          

Following reconciles the change in the standardized measure of discounted future net cash flow:

|                                                           |                   |   |            |           | 
|---------------------------------------------------------- | ----------------- | - | ---------- | --------- | 
|December 1, 2000                                           |                   | $ | 6,110,426  |          
|Increase (decrease) due to:                                |                   |   |            |          
|Sales of oil and gas produced, net of production costs     |                   |   | (20,209    | )        
|Net changes in prices and production costs                 |                   |   | (5,007,659 | )        
|Net change in future development costs                     |                   |   | 6,965      |          
|Revisions to previous quantity estimates                   |                   |   | (962,783   | )        
|Net change from sales, transfers and disposals of minerals |                   |   | (10,116    | )        
|Accretion of discount                                      |                   |   | (191,342   | )        
|Net change in income taxes                                 |                   |   | 2,217,559  |          
|Other                                                      |                   |   | (84,036    | )        
|                                                           |                   |   |            |          
|                                                           | November 30, 2001 |   |            | 2,058,805 | 
|Sales of oil and gas produced, net of production costs     |                   |   | (7,205     | )        
|Net changes in prices and production costs                 |                   |   | 300,765    |          
|Net change in future development costs                     |                   |   | 110,414    |          
|Revisions to previous quantity estimates                   |                   |   | 114,250    |          
|Net change from sales, transfers and disposals of minerals |                   |   | (1,883,551 | )        
|Accretion of discount                                      |                   |   | (601,852   | )        
|Net change in income taxes                                 |                   |   | 607,250    |          
|Other                                                      |                   |   | 91,584     |          
|                                                           |                   |   |            |          
|                                                           | November 30, 2002 |   | $          | 790,460   | 
|                                                           |                   |   |            |          

F-15



---



##### Table of Contents






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

Not applicable.




ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS:
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.

Our current executive officers and directors, their ages and present
positions with TBX Resources are identified below. Our directors hold office
until the annual meeting of the shareholders following their election or appointment and until their successors have been duly elected
and qualified. Our officers are elected by and serve at the pleasure of our
Board of Directors.

|                                             |  |     |          |          |  |                                                    
|-------------------------------------------- |  | --- | -------- | -------- |  | ---------------------------------------------------
|NAME                                         |  | AGE |          | POSITION
|                                             |  |     |          |         
|Tim Burroughs
John O. Clayton
Sherri Cecotti |  |     | 43
72
38 |          |  | President and
Director
Director
Secretary/Treasurer

TIM BURROUGHS is the President, Chief Financial Officer and founder of TBX
Resources, Inc. Mr. Burroughs has been our President and Chief Financial
Officer since our companys inception in 1995. Prior to founding our company,
Mr. Burroughs worked for several Dallas/Ft. Worth area based energy companies.
Mr. Burroughs also studied business administration at Texas Christian
University in Ft. Worth, Texas.

In addition to serving as the President and Chief Financial Officer of our
Company, Mr. Burroughs is also the President of Marketing Research Group, Inc.
and Sweetwater Land & Oil Co. These companies were all organized by Mr.
Burroughs in 1997 to participate in various opportunities in the oil and gas
industry. However, since the organization of these companies, Mr. Burroughs has
decided to not aggressively pursue through these companies the business he
originally intended and has instead spent the majority of his professional time
devoted to our business. In the future, Mr. Burroughs expects to spend little
or no time on the business of these other companies. Mr. Burroughs is also the
sole shareholder of Gulftex Operating, Inc. oil and gas operating company that
performs services on behalf of TBX and from which Mr. Burroughs benefits
financially. See Certain Relationships and Related Transactions.

JOHN O. CLAYTON, who was elected to be a Director of our company in August
2000, has served as president and director or Economy Supply Company, Economy
Supply Company of Austin, Economy Supply Company of Irving, Economy Supply
Company of Dallas, Economy Supply Company of San Antonio and Economy Supply
Company of Waco for the period from 1965 to 1991. All of these companies are
generally involved in the construction and plumbing supply business. Since
1991, Mr. Clayton has served as the secretary, treasurer and director of all of
the above named companies. Mr. Clayton received BSC and MBA degrees from Texas
Christian University

SHERRI CECOTTI is the Secretary-Treasurer and recently joined our company
in February 2002. Prior to joining our company Ms. Cecotti was employed by the
Expo Design Center/Home Depot, from 1999 to 2002 as an assistant store manager
in their central installation office. From 1992-1998 Ms. Cecotti was operations
manager for Marshall Fields in Dallas, Texas.




ITEM 10. EXECUTIVE COMPENSATION

The following table sets forth the compensation awarded to, earned by, or
paid to the executive officers named:

|                    |                 |      |  |               |  |       |   |            |     |  |   |        | 
|------------------- | --------------- | ---- |  | ------------- |  | ----- | - | ---------- | --- |  | - | ------ | 
|NAME AND POSITION   |                 | YEAR |  | ANNUAL SALARY |  | BONUS
|                    |                 |      |  |               |  |      
|                    | Tim Burroughs   |      |  | 2001          |  |       | $ | 150,000.00 |     |  | $ | 55,200 | 
|                    | President       |      |  | 2002          |  |       | $ | 150,000.00 |     |  | $ | -0-    | 
|                   
|                    | Christine Coley |      |  | 2001          |  |       | $ | 42,000.00  |     |  |   |        | 
|                    | Christine Coley |      |  | 2002          |  |       | $ | 7,200.00   | (1) |  |   |        | 
|                    | Sherri Cerotti  |      |  | 2002          |  |       | $ | 36,500.00  |     |  |   |        | 
|Secretary/Treasurer |                 |      |  |               |  |       |   |            |     |  |   |       



---

|(1) |  | - Resigned position to pursue other opportunities.
|--- |  | --------------------------------------------------

Effective December 1, 1999, we entered into an employment agreement with
our President, Mr. Burroughs, whereby Mr. Burroughs shall receive stock options
good for five years from the date of issuance to purchase up to 500,000 of our
common stock each year at a price which shall not be greater than 50% of the
average bid price for our common stock during the previous quarter.

12



---



##### Table of Contents






ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN SECURITY HOLDERS

The following table sets forth the stock ownership of the officers,
directors and shareholders holding more than 5% of the common stock of TBX
Resources as of February 28, 2003:

|                                                       |  |                                                                        |  |              |           |                  |   |  |       |  
|------------------------------------------------------ |  | ---------------------------------------------------------------------- |  | ------------ | --------- | ---------------- | - |  | ----- | -
|                                                       |  | NAME AND ADDRESS OF                                                    |  |              |           |                  |   |  |       |  
|TITLE OF CLASS                                         |  | OWNER                                                                  |  | AMOUNT OWNED |           | PERCENT OF CLASS
|                                                       |  |                                                                        |  |              |           |                 
|Common Stock                                           |  | Tim Burroughs(1)
12300 Ford Road
Suite 194
Dallas, TX 75234            |  |              | 1,565,896 |                  |   |  | 5.16  | %
|                                                      
|Common Stock                                           |  | John O. Clayton(2)
12300 Ford Road
Suite 194
Dallas, Texas 75234       |  |              | 93,200    |                  |   |  | 0.31  | %
|                                                      
|Common Stock                                           |  | Tim Burroughs Family Tr.
12300 Ford Road
Suite 194
Dallas, Texas 75234 |  |              | 5,000,000 |                  |   |  | 16.49 | %
|                                                      
|Common Stock                                           |  | Samuel Warren
5 Cindywood Street
Texarkana, TX 75503                   |  |              | 3,378,316 |                  |   |  | 11.14 | %
|                                                      
|Total Officers, Directors and Affiliates as a group(4) |  | 10,037,417                                                             |  |              |           | 33.10            | %

(1)  Effective December 1, 1999, we entered into an employment agreement
with our President, Mr. Burroughs, whereby Mr. Burroughs shall receive stock
options good for five years from the date of issuance to purchase up to 500,000
shares of our common stock each year at a price which shall not be greater than
50% of the average bid price for our common stock during the previous year.
This right to purchase accumulates so that if Mr. Burroughs does not purchase
the shares to which he is entitled from a year, that amount of shares that are
not purchased is added to the previous number of shares that Mr. Burroughs may
purchase. The result is that Mr. Burroughs shall have the right to acquire an
additional 2,500,000 shares of our common stock over a five-year period. Mr.
Burroughs currently owns 1,565,896 shares of our common stock and is also
currently entitled to purchase 1,500,000 additional shares pursuant to his
employment agreement, which results in Mr. Burroughs owning or being currently
entitled to purchase a total of 2,500,000 shares of our common stock.

(2)  John O. Clayton currently owns 93,200 shares of our common stock and is
also currently entitled to purchase 10,000 additional shares pursuant to an
agreement with our company, which results in Mr. Clayton owning or being
currently entitled to purchase a total of 109,000 shares of our common stock. .
Mr. Claytons options to purchase are exercisable for the period commencing
August 4, 2000, and terminating August 4, 2005, and provide that these
additional shares may be acquired on the basis of $2.50 per share of common
stock, if exercised.

(3)  The beneficiary of the Burroughs Family Trust is Becca Burroughs, the
daughter of Tim Burroughs, our President.

13



---



##### Table of Contents






ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

All of the operations conducted in the field on behalf of our company are
conducted by Gulftex Operating, Inc. Our president, Tim Burroughs, owns all of
the common stock of Gulftex Operating, Inc. In the past, no compensation was
paid to Gulftex Operating, Inc. or Tim Burroughs for the ownership of Gulftex
Operating, Inc. or for the management activities conducted by Gulftex
Operating, Inc. However, we pay Gulftex Operating, Inc., $800.00 per month for
the activities conducted by Gulftex Operating, Inc., in operating our wells.




ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

Exhibits:

|       |  |                                               
|------ |  | ----------------------------------------------
|NUMBER |  | EXHIBIT                                       
|       |  |                                               
|10.1   |  | Letter Agreement for Bethany Northeast Unit #3
|99.1   |  | Certification of Officers                     

We did not file reports on Form 8-K during the current fiscal year ending
November 30, 2002.




SIGNATURES

Pursuant to the requirements of Section 13 of 15(a) 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.

|                          |  |                                                                                
|------------------------- |  | -------------------------------------------------------------------------------
|Date: March 5, 2003       |  |                                                                                
|                         
|(Registrant)              |  | TBX Resources, Inc.                                                            
|                         
|By (Signature and Title): |  | /s/ Tim BurroughsTim Burroughs, President,
Chief Financial Officer and Director
|                         
|                          |  |                                                                                
|                         
|                          |  | /s/ John O. ClaytonJohn O. Clayton, Director                                   

14



---



##### Table of Contents






CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER AND FINANCIAL OFFICER

UNDER SECURITIES AND EXCHANGE ACT RULES 13a-14 AND 15d-14


I, Tim Burroughs, certify that:



|    |                                                                                                                                                                                                                                                                                                                                             
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | I have reviewed this Annual Report on Form 10-KSB of
    TBX Resources, Inc.;                                                                                                                                                                                                                                                               
|   
|(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 of this annual report (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 the
    Registrants Board of Directors (or persons performing the
    equivalent function):



| |     |                                                                                                                                                                                                                                                                                                                   
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (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 the most recent evaluation, including any corrective
    actions with regard to significant deficiencies and material
    weaknesses.

Dated this 5th day of March 2003.



| |                               
| | ------------------------------
| | /s/ TIM BURROUGHSTim Burroughs
| | Chief Executive Officer and   
| | Chief Financial Officer       





---



##### Table of Contents






INDEX TO EXHIBITS

|        |  |                                                |  | 
|------- |  | ---------------------------------------------- |  | 
|EXHIBIT |  |                                                |  | 
|NUMBER  |  | DESCRIPTION                                   
|        |  |                                               
|10.1    |  | Letter Agreement
for Bethany Northeast Unit #3
|       
|99.1    |  | Certification of
Officers