UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark one)
   
þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended:August 31, 2008February 28, 2009
Or
   
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from:                    to                    
Commission File Number:0-307460-30746
TBX RESOURCES, INC.
(Exact name of registrant as specified in its charter)
   
Texas 75-2592165
   
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification Number)
   
3030 LBJ Freeway, Suite 1320 75234
   
(Address of principal executive offices) (Zip Code)
(972) 234-2610243-2610

 
(Registrant’s telephone number, including area code)
N/A
 
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark 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 preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.o Yesþ No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).o Yeso No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filerAccelerated Filer oAccelerated Filer o Accelerated fileroNon-accelerated filer
Non-Accelerated Filer o
(Do not check if a smaller reporting company)		Smaller reporting companyReporting Company þ
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
o Yesþ No
As of February 12,December 17, 2009, there were 4,027,442 shares of common stock, par value $0.01 per share, outstanding.
 
 

 

 

TBX RESOURCES, INC.
Index
     
  Pg. No. 
PART I — Financial Information
    
Item 1. Financial Statements
    
Condensed Consolidated Balance SheetSheets as of November 30, 20072008 and August 31, 2008February 28, 2009 (Unaudited)
  F-1 
Condensed Consolidated Statements of Operations for the Three Months Ended February 28, 2009 and Nine months Ended August 31,February 29, 2008 and 2007 (Unaudited)
  F-2 
Condensed Consolidated Statements of Cash Flows for the Three Months Ended February 28, 2009 and Nine months Ended August 31,February 29, 2008 and 2007 (Unaudited)
  F-3 
Notes to Condensed Consolidated Financial Statements as of August 31, 2008February 28, 2009 (Unaudited)
  F-4 
Item 2. Management’s Discussion and Analysis
  3 
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
  86 
Item 4.4T. Controls and Procedures
  86 
     
PART II — Other Information
    
Item 1. Legal Proceedings
  97 
Item 2. Unregistered Sales of EquityChanges in Securities and Use of Proceeds
  97 
Item 3. Defaults Upon Senior Securities
  97 
Item 4. Submission of Matters to a Vote of Security Holders
  98 
Item 5. Other Information
  98 
Item 6. Exhibits
  98 
     
SIGNATURES
  108 
 EX-31.1
 EX-32.1

2

PART 1 — FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
TBX RESOURCES. INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS
                
 August 31,    February 28,   
 2008 November 30,  2009 November 30, 
 (Unaudited) 2007  (Unaudited) 2008 
ASSETS
  
Current Assets
  
Cash $3,002 $23,821  $878 $2,506 
Oil and gas revenue receivable 103,172 63,379  190,336 175,812 
Accounts receivable from affiliate — 21,824 
Prepaid expense 10,000 10,000 
Inventory 10,977 2,584  3,200 — 
          
Total current assets 117,151 89,784  204,414 210,142 
 
Oil and gas properties (successful efforts method), net
 123,474 223,638  55,480 57,619 
 
Other
 6,211 6,211  6,211 6,211 
          
Total Assets
 $246,836 $319,633  $266,105 $273,972 
          
  
LIABILITIES AND STOCKHOLDERS’ DEFICIT
  
  
Current Liabilities
  
Trade accounts payable and accrued expenses $77,882 $64,543  $100,933 $90,789 
Accounts payable to and advances from affiliate 89,269 869,192  280,029 173,786 
Asset retirement obligations — current portion — 29,964 
Deferred revenue 10,977 2,584  3,200 — 
          
Total current liabilities 178,128 966,283  384,162 264,575 
          
 
Long-term Liabilities
  
Asset retirement obligations 10,937 153,370  21,236 20,981 
          
 
Non-controlling Interest in Consolidated Subsidiary
 72,000 72,000  72,000 72,000 
          
 
Commitments and Contingencies (Note 8)
  — — 
 
Stockholders’ Deficit
  
Preferred stock- $.01 par value; authorized 10,000,000; no shares outstanding — —  — — 
Common stock- $.01 par value; authorized 100,000,000 shares; 4,027,442 shares issued and outstanding at August 31, 2008, 4,002,442 shares issued and outstanding at November 30, 2007 40,274 40,024 
Common stock- $.01 par value; authorized 100,000,000 shares; 4,027,442 shares issued and outstanding at February 28, 2009, 4,027,442 shares issued and outstanding at November 30, 2008 40,274 40,274 
Additional paid-in capital 10,925,690 10,827,440  10,929,690 10,929,440 
Accumulated deficit  (10,980,193)  (11,739,484)  (11,181,257)  (11,053,298)
          
Total stockholders’ deficit  (14,229)  (872,020)  (211,293)  (83,584)
          
Total Liabilities and Stockholders’ Deficit
 $246,836 $319,633  $266,105 $273,972 
          
The accompanying notes are an integral part of these condensed consolidated financial statements.

F-1

TBX RESOURCES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
                 
  For the Three Months Ended  For the Nine Months Ended 
  Aug. 31, 2008  Aug. 31, 2007  Aug. 31, 2008  Aug. 31, 2007 
Revenues:
                
Oil and gas sales $53,607  $42,359  $210,888  $185,524 
             
Total revenues  53,607   42,359   210,888   185,524 
             
                 
Expenses:
                
Lease operating and taxes  19,789   58,743   220,958   180,995 
General and administrative  74,888   145,075   296,995   629,499 
Depreciation, depletion, amortization and accretion  4,004   18,587   25,684   55,541 
             
Total expenses  98,681   222,405   543,637   866,035 
             
                 
Operating Loss
  (45,074)  (180,046)  (332,749)  (680,511)
                 
Other Income (Expense):
                
Gain on sale of oil and gas properties  —   —   1,092,040   6,250 
             
                 
Income (Loss) Before Provision for Income Taxes
  (45,074)  (180,046)  759,291   (674,261)
Provision for income taxes  —   —   —   — 
             
                 
Net Income (Loss)
 $(45,074) $(180,046) $759,291  $(674,261)
             
                 
Net Income (Loss) per Common Share, Basic
 $(0.01) $(0.05) $0.19  $(0.17)
             
                 
Net Income (Loss) per Common Share, Diluted
 $(0.01) $(0.05) $0.18  $(0.17)
             
     ��           
Weighted Average Common Shares Outstanding:
                
Basic
  4,027,442   3,932,417   4,021,169   3,921,468 
             
                 
Diluted
  4,027,442   3,932,417   4,124,533   3,921,468 
             
         
  For the Three Months Ended
  Feb. 28, 2009 Feb. 29, 2008
         
Revenues:
        
Oil and gas sales $14,525  $90,977 
   
Total revenues  14,525   90,977 
   
         
Expenses:
        
Lease operating and taxes (including $0 for 2009 and $2,400 for 2008 to related party)  11,760   155,235 
General and administrative  128,329   134,309 
Depreciation, depletion, amortization and accretion  2,395   14,060 
   
Total expenses  142,484   303,604 
   
         
Loss Before Provision for Income Taxes
  (127,959)  (212,627)
Provision for income taxes  —   — 
         
   
Net Loss
 $(127,959) $(212,627)
   
         
Net Loss per Common Share, Basic and Diluted
 $(0.03) $(0.05)
   
Weighted average common shares used in calculations:        
Basic and Diluted
  4,027,442   4,008,486 
   
The accompanying notes are an integral part of these condensed consolidated financial statements.

F-2

TBX RESOURCES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
                
 For the Nine Months Ended  For the Three Months Ended 
 Aug. 31, 2008 Aug. 31, 2007  Feb. 28, 2009 Feb. 29, 2008 
Cash Flows From Operating Activities:
  
Net income (loss) $759,291 $(674,261)
Adjustments to reconcile net income (loss) to net cash used for operating activities: 
Gain on sale of oil and gas properties  (1,092,040)  (6,250)
Net loss $(127,959) $(212,627)
Adjustments to reconcile net loss to net cash provided by (used for) operating activities: 
Depreciation, depletion, amortization and accretion 25,684 55,541  2,394 14,060 
Stock based compensation 94,750 218,250  250 50,000 
Changes in operating assets and liabilities other than advances from affiliate:  
Decrease (increase) in:  
Oil and gas revenue receivable  (39,793)  (16,761)  (14,524) 39,279 
Accounts receivable from affiliate 21,824 — 
Inventory  (8,393) 12,710   (3,200)  (20,373)
Increase (decrease) in:  
Trade accounts payable and accrued expenses 13,339  (63,484) 10,144 82,390 
Accounts payable to affiliate 179,790 —  — 58,854 
Asset retirement obligations — current portion  (29,964) — 
Deferred revenue 8,393  (12,710) 3,200 20,373 
          
Net cash used for operating activities  (88,943)  (486,965)
Net cash provided by (used for) operating activities  (107,871) 31,956 
          
  
Cash Flows From Investing Activities:
  
Development of oil and gas properties  (28,461) —  —  (28,461)
Proceeds from sale of oil and gas properties — 6,250 
          
Net cash provided by (used in) investing activities  (28,461) 6,250 
Net cash used in investing activities —  (28,461)
          
  
Cash Flows From Financing Activities:
  
Advances from affiliate 92,835 472,951 
Advances from affiliate-net 106,243 9,235 
Exercise of common stock options 3,750 7,500  — 250 
          
Net cash provided by financing activities 96,585 480,451  106,243 9,485 
          
  
Net Increase (Decrease) in Cash
  (20,819)  (264)
Net Increase (Decrease) In Cash
  (1,628) 12,980 
Cash at beginning of period 23,821 5,250  2,506 23,821 
          
Cash at end of period $3,002 $4,986  $878 $36,801 
          
 
Supplemental Non-Cash Activity:
 
Sale of oil and gas properties $106,430 $— 
     
 
Payables to and advances from affiliate $(1,052,547) $— 
     
 
Asset retirement obligations settled $(145,923) $— 
     
The accompanying notes are an integral part of these condensed consolidated financial statements.

F-3

TBX RESOURCES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
August 31, 2008February 28, 2009
(Unaudited)
1. BASIS OF PRESENTATION:
The condensed consolidated financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been omitted. However, in the opinion of management, all adjustments (which include only normal recurring accruals) necessary to present fairly the financial position and results of operations for the periods presented have been made. The results for interim periods are not necessarily indicative of trends or of results to be expected for the full year. These financial statements should be read in conjunction with the financial statements of the Company for the year ended November 30, 20072008 (including the notes thereto) set forth in Form 10-KSB.10-K.
2. BUSINESS ACTIVITIES:
TBX Resources, Inc., a Texas corporation (“TBX” or the “Company”), was organized on March 24, 1995. Currently, the Company’s primary focus is to secure additional capital through business alliances with third parties or other debt/equity financing arrangements to acquire producing oil and gas leases and wells, acquire additional oil and gas prospect leases and to acquire an exploration company that can also act as an operator of our wells.
The Company’s principal historical business activity has been acquiring and developing oil and gas properties. However, during fiscal year 2004, the Company began providing contract services to an affiliate, Gulftex Operating, Inc. The services continued to August 31, 2006 when the agreement was terminated by mutual agreement. In addition, the Company has sponsored and/or managed joint venture development partnerships for the purpose of developing oil and gas properties for profit.
The Company has an interest in wells in Denton, Parker and Wise Counties, Texas. The Company has a minor interest in three Oklahoma wells which were sold effective March 31, 2009. Effective April 1, 2008, the Company sold its East Texas oil and gas properties. The Company currently has an interest in wells in Denton, Parker and Wise Counties, Texas. Also, the Company has a minor interest in wells in Oklahoma.
3. GOING CONCERN:
The accompanying condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. However, the company has negative stockholders’ equity and working capital at August 31, 2008.capital. In addition, the Company sold its primary source of revenue (East Texas properties) effective April 1, 2008. These factors raise substantial doubt about the ability of the Company to continue as a going concern.
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
     Revenue Recognition
     For direct oil and gas operations, the revenue is recorded when production is sold. The Company accrues revenue for oil and gas production sold but not paid. See Receivables below.
     Principles of Consolidation
     The condensed consolidated financial statements for the quarter ended August 31,February 28, 2009 and February 29, 2008 and 2007 include the accounts of TBX Resources, Inc., and the Grasslands I, L.P. a limited partnership for which TBX serves as the sole general partner. The accounts of Johnson No. A1, Johnson No. A2, Hagansport Unit I and Unit II (through March 31,(sold to its affiliate Gulftex Operating effective April 1, 2008) joint ventures, in which TBX owns interests, are consolidated

F-4

on a proportionate basis, in accordance with Emerging Issues Task Force Issue No. 00-1 “Investor Balance Sheet And Income Statement Display Under The Equity Method For Investments In Certain Partnerships And Other Ventures”. All significant intercompany balances and transactions have been eliminated.

F-4

     Concentration of Credit Risk
     The Company received advances from Gulftex totaling $92,835$106,243 during the ninethree months ended August 31, 2008February 28, 2009 and $472,951$9,235 during the ninethree months ended August 31, 2007.February 29, 2008.
     Receivables
Receivables consist of accrued oil and gas receivables due from either purchasers of oil and gas or operators in oil and natural gas wells for which the Company owns an interest. Oil and natural gas sales are generally unsecured and such amounts are generally due within 30 days after the month of sale. The operator for the Wise, Denton and Parker Counties, Texas is Earthwise Energy, Inc. which has not paid the Company for its share of the oil and gas production since March of 2008. Accordingly, the Company is accruing the revenue and expenses associated with the wells in Denton and Parker Counties (see Note 9, Subsequent Event).
     Inventory
     Inventory consists of crude oil held in storage tanks. Inventory is stated at market based on anticipated selling prices.prices
     Property and Equipment
     Property and equipment are stated at the Company’s cost and are depreciated on a straight-line 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.
     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 abandonment 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. 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.
     Oil and gas properties at August 31, 2008February 28, 2009 consist of the following:
        
Proved oil and gas properties $809,659  $747,573 
Accumulated depreciation, depletion and amortization  (686,185)  (692,093)
      
 $123,474  $55,480 
      
     Long-lived Assets
     In accordance with SFAS No., 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” (“SFAS 144”), the Company reviews its long-lived assets to be held and used, including proved oil and gas properties accounted for under the successful efforts method of accounting, whenever events or circumstances indicate that the carrying value of those assets may not be recoverable. An impairment loss is indicated if the sum of the expected future cash flows is less than the carrying amount of the assets. In this circumstance, the Company recognizes an impairment loss for the amount by which the carrying amount of the asset exceeds the estimated fair value of the asset.

F-5

     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.

F-5

     Asset Retirement Obligations
     The Company accounts for asset retirement obligations in accordance with SFAS No. 143, “Accounting for Asset Retirement Obligations” (“SFAS 143”). SFAS 143 requires that the fair value of a liability for an asset retirement obligation (“ARO”) be recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. Under the provisions of SFAS 143, asset retirement obligations are capitalized as part of the carrying value of the long-lived asset. SFAS 143 also requires the write down of capitalized ARO assets if they are impaired.
The following table describes changes to the asset retirement liability for the nine monthsquarter ended August 31, 2008.February 28, 2009.
        
ARO at November 30, 2007 $183,334 
ARO at November 30, 2008 $20,981 
Accretion expense 3,490  255 
Liabilities incurred —  — 
Liabilities settled  (175,887) — 
Changes in estimates —  — 
      
  
ARO at August 31, 2008 $10,937 
ARO at February 28, 2009 $21,236 
      
     Equity Instruments Issued for Goods and Services
     In December, 2004, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 123 (R) (revised 2004), “Share-Based Payments” (hereinafter “SFAS No. 123 (R)”). This statement replaces SFAS No. 123, “Accounting for Stock-Based Compensation”, and supersedes APB Statement Opinion No. 25, “Accounting for Stock Issued to Employees”. SFAS No. 123 (R) establishes standards for the accounting of share-based payment transactions in which an entity exchanges its equity instruments for goods or services. The Company adopted SFAS No. 123 (R) for years beginning after November 30, 2006.
     Income Taxes
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Income tax expense is the tax payable for the year plus or minus the change during the period in deferred tax assets and liabilities.
     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.

F-6

     Use of 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. Significant estimates include: estimates of proved reserves as key components of the Company’s depletion rate for oil properties; accruals of operating costs; estimates of production revenues; and calculating asset retirement obligations. Because there are numerous uncertainties inherent in the estimation process, actual results could differ materially from these estimates.
Fair Value Measurements
     The Company adopted fair value accounting for certain financial assets and liabilities that have been evaluated at least annually. The standard defines fair value as the price at which an asset could be exchanged in a current transaction between knowledgeable, willing parties. A liability’s fair value is defined as the amount that would be paid to transfer the liability to a new obligor, not the amount that would be paid to settle the liability with the creditor. Management has determined that it will not, at this time, adopt fair value accounting for nonfinancial assets or liabilities currently recorded in the consolidated financial statements, which includes property and equipment, investments carried at cost, deposits and other assets. Impairment analyses will be made of all assets using fair value measurements.
Assets and liabilities measured at fair value are categorized based upon the level of judgment associated with the inputs used to measure their fair value. Hierarchical levels, defined by generally accepted accounting principles and directly related to the amount of subjectivity associated with the inputs to fair valuation of these assets and liabilities, are as follows:
Level 1Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Plan has the ability to access.
Level 2Inputs to the valuation methodology include:
- quoted prices for similar assets or liabilities in active markets;
- quoted prices for identical or similar assets or liabilities in inactive markets;
- inputs other than quoted prices that are observable for the asset or liability;
- inputs that are derived principally from or corroborated by observable market data by correlation or other means.
If the asset or liability has a specified (contractual) term, the Level 2 input must be observable for substantially the full term of the asset or liability.
Level 3Inputs to the valuation methodology are unobservable and significant to the fair value measurement.
Cash, receivable and payable amounts, accrued expenses and other current liabilities are carried at book value amounts which approximate fair value due to the short-term maturity of these instruments.
5. RECENT ACCOUNTING PRONOUNCEMENTS:
In December 2007,During the three months ended February 28, 2009 there were no new accounting pronouncements issued by the Financial Accounting Standards Board (FASB). During the year ended November 30, 2008, there were several new accounting pronouncements issued by FASB issuedone of which was SFAS No. 160,Noncontrolling Interests in Consolidated Financial Statements, which amends168, The FASB Accounting Research Bulletin (ARB)Standards Codification and the Hierarchy of Generally Accepted Accounting Principles-a replacement of FASB Statement No. 51 and (1) establishes standards162. Each of these pronouncements, as applicable, has been or will be adopted by the Company. Management does not believe the adoption of any of these accounting and reportingpronouncements has had or will have a material impact on noncontrolling interests in consolidated statements, (2) provides guidance on accounting for changes in the parent’s ownership interest in a subsidiary, and (3) establishes standards of accounting of the deconsolidation of a subsidiary due to the loss of control. The amendments to ARB No. 51 made by SFAS No. 160 are effective for fiscal years (and interim period within those years) beginning onCompany’s financial position or after December 15, 2008.operating results. The Company is currently assessing thewill monitor these emerging issues to assess any potential future impact of this statement on its consolidated financial statements.

F-7

In December 2007, the FASB issued SFAS No. 141(R), Business Combinations, which expands the information that a reporting entity provides in its financial reports about a business combination and its effects. This Statement establishes principles and requirements for how the acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree, recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase, and determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. This Statement applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. An entity may not apply it before that date. We may experience a financial statement impact depending on the nature and extent of any new business combinations entered into after the effective date of SFAS No. 141(R).
6. RELATED PARTY TRANSACTIONS:
The Company conducts substantial transactions with Gulftex. These related party transactions have a significant impact on the financial condition and operations of the Company. If these transactions were conducted with third parties, the financial condition and operations of the Company could be materially different from reported results.
 a. The operator of the East Texas oil and gas leases, Gulftex is an affiliate of TBX. Mr. Burroughs is a 50% stockholder and president of the Company. TBX paidsold its interest in East Texas properties to Gulftex $3,200 during the nine months ended August 31, 2008 and $7,200 for the nine months ended August 31, 2007 for activitieson April 1, 2008; accordingly, there are no fees associated with operating certain wells.these wells for the three months ended February 28, 2009. Fees paid Gulftex for operating these wells for the three months ended February 29, 2008 are $2,400.
 
 b. Gulftex operatesoperated certain oil and gas properties on behalf of the Company. TBX sold its interest in East Texas properties to Gulftex on April 1, 2008; accordingly, there are no operating expenses associated with these wells for the three months ended February 28, 2009. At August 31,February 28, 2009 and February 29, 2008 the Company hashad a $696 liability to Gulftex related to wells operated by them in the operationamount of these wells.$0 and $169,028, respectively.
 
 c. During the ninethree months ended August 31,February 28, 2009 and February 29, 2008, the Company received net advances from Gulftex totaling $92,835.$106,243 and $9,235, respectively. The balance due Gulftex as of August 31, 2008February 28, 2009 is $88,573.$280,029.
 
 d. Effective June 1, 2007, theThe Company is charging Gulftex rent for a portion of the Company’s office space plus administrative expenses paid by the Company that relates to Gulftex’s operations. The Company billed Gulftex $72,146 for the nine months ended August 31, 2008 and $24,047was paid $11,407 for the three months ended August 31, 2007.

F-7

e.On June 4, 2008, the Company executed a sales agreement (effective April 1, 2008) with Gulftex. Under the agreement, the Company transferred all of its East Texas oilFebruary 28, 2009 and gas properties with a net book value of $106,430 to Gulftex. In consideration$24,049 for the transfer of the properties, Gulftex is forgiving the Company’s trade payables and advances totaling $1,052,547. In addition, Gulftex is assuming the Company’s asset retirement obligations with a book value of $145,923. The Company recorded a gain of $1,092,040 on the sale. Gulftex did not charge interest for its advances to the Company. The amount of interest that could have been charged is immaterial.three months ended February 28, 2009.
7. STOCK BASED COMPENSATION:
The Company executed an amended Employment Agreement effective August 4, 2005 with our president Mr. Tim Burroughs for three years. Among other items, the agreement provides that Mr. Burroughs has the contractual right to require TBX to issue, upon his request, up to 250,000 common share options subject to certain conditions. The conditions are that the options will not be issued unless Mr. Burroughs makes a demand for their issuance and the number of shares so demanded have vested (the agreement provides that 50,000 potential options vest at the beginning of each employment year for the five year term of the agreement and are cumulative.) The amendment also changed how the options are to be priced. The options are to be priced at a maximum exercise price of one-half the bid price for TBX common stock as of August 4, 2005 or $0.70 per share (one-half $1.40 the closing bid price on August 4, 2005.) In the event the closing bid price of TBX’s common stock is below $0.70 on the date of a call by Mr. Burroughs, the exercise price would be reduced to the lower actual bid price. Mr. Burroughs’ Employment Agreement was further amended in April 2007. In exchange for TBX dropping the three year service requirement, Mr. Burroughs agreed to forgo his eligibility to call for stock options for fiscal years 2005 and 2006. Mr. Burroughs did not call any of his potential stock options as of August 31, 2008.February 28, 2009. In accordance with the terms of April l, 2007 Amended Employment Agreement, no compensation expense is recognized as of August 31, 2008February 28, 2009 related to Mr. Burroughs’ potential common stock options.
The Company executed an amended Employment Agreement effective April 1, 2006 with our Vice President of Investor Relations, Dick O’Donnell, having a term of one year, which automatically renews unless otherwise terminated as provided in said agreement. Under the terms of the agreement the Company agreed to issue Mr. O’Donnell options to acquire 25,000 shares of common stock per quarter beginning April 1, 2006 for a period of up to three years at an exercise price of $0.15 per share. The option exercise period is one year from its date. The Company recorded stock based compensation expense in the current quarter totaling $14,250$250 with a corresponding credit to paid-in capital.
A summary of the status of the Company’s equity awards as of August 31, 2008February 28, 2009 and the changes during the nine month period then ended is presented below:
         
      Weighted-Average 
  Shares  Exercise Price 
Outstanding December 1, 2007
  100,000  $0.15 
         
Granted  75,000  $0.15 
Exercised  (25,000) $0.15 
Forfeited  (50,000) $0.15 
         
       
Outstanding August 31, 2008
  100,000  $0.15 
       
         
Options exercisable at August 31, 2008
  100,000  $0.15 
       
     
Weighted-average fair value of options granted during this quarter
 $14,250 
    
     
Weighted-average fair value of options granted during this year to date
 $94,750 
    

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      Weighted-Average 
  Shares  Exercise Price 
         
Outstanding December 1, 2008
  100,000  $0.15 
         
Granted  25,000  $0.15 
Exercised  —  $0.15 
Forfeited  (25,000) $0.15 
       
         
Outstanding February 28, 2009
  100,000  $0.15 
       
         
Options exercisable at February 28, 2009
  100,000  $0.15 
       
         
Weighted-average fair value of options granted during this quarter
 $250     
        
The weighted average fair value at date of grant for options during the nine monthsthree month period ended August 31, 2008February 28, 2009 was estimated using the Black-Scholes option valuation model with the following assumptions:following:
     
Average expected life in years  1 
Average interest rate  4.504.00%
Average volatility  84147%
Dividend yield  0%
A summary of the status of the Company’s vested and nonvested shares at August 31, 2008February 28, 2009 and the weighted average grant date fair value is presented below:
                        
 Weighted Average Weighted Average  Weighted Average Weighted Average 
 Grant Date Grant Date  Grant Date Grant Date 
 Shares Fair Value per Share Fair Value  Shares Fair Value per Share Fair Value 
Vested
 100,000 $1.24 $124,000  100,000 $.5475 $54,750 
Nonvested
 — — —  — — — 
              
Total
 100,000 $1.24 $124,000  100,000 $.5475 $54,750 
              
As of August 31, 2008,February 28, 2009, the Company has no unrecognized compensation expense.
8. COMMITMENTS AND CONTINGENCIES:
The Company is currently obligated for $177,883$142,991 under an operating lease agreement for rent of its office space in Dallas, Texas. The term of the lease is from February 1, 2004 through February 28, 2011. The average monthly base lease payment over the remaining term of the lease is approximately $5,390. Rent$5,958.Rent expense for the ninethree months ended August 31,February 28, 2009 and February 29, 2008 is $17,579 and 2007 is $53,393 and $40,135,$21,433, respectively.
GulftexTrio Operating, Inc. is the bonded operator for TBX Resourcesthe Company’s Denton and Wise County, Texas wells 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.

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9. SUBSEQUENT EVENTS:
On May 28, 2009 the Company, along with Grasslands I, L.P., intervened as third party plaintiffs in a lawsuit originally captioned as Clay Bain, et. al. v. Earthwise Energy, Inc. (EEI) which was filed in April 2009 in the 14th Judicial District, Dallas County Texas, Cause No. 095253. Our petition requests that we be given certain injunctive relief and be awarded unspecified damages for certain alleged causes of action including, but not limited to, fraud, conversion and violation of fiduciary duty against defendant Earthwise Energy, Inc. but also as against two individuals, Jeffery C. Reynolds and Steven C. Howard who were added to the lawsuit as third party defendants. Mr. Reynolds is a former member of our Board of Directors who resigned in July 2008. Included in our claim for damages is an oil and gas accounts receivable totaling $60,342 of February 28, 2009. Pursuant to Statements of Financial Accounting Standards (SFAS) No. 5,Loss Contingencies, we have assessed the likelihood of prevailing in this lawsuit and thus collecting these accounts receivable as reasonably possible. Accordingly, as provided by this professional standard, a loss contingency related to the non-collection of these accounts receivable has not been provided for in the accompanying consolidated financial statements.
The Company sold its working interest in oil and gas leases located in Ellis County, Oklahoma effective March 31, 2009 for approximately $1,700 and wrote off the fully depleted property values totaling $229,074.
10. INCOME TAXES:
The Company computes income taxes using the asset and liability approach as defined in SFAS No. 109. The Company currently has no issue that creates timing differences that would mandate deferred tax expense. Due to the uncertainty as to the utilization of net operating loss carryforwards, an evaluation allowance has been made to the extent of any tax benefit that net operating losses may generate. No provision for income taxes has been recorded for the ninethree months ended August 31,February 28, 2009 and February 29, 2008 due to the Company’s net operating loss carryforward of approximately $10.5 million at November 30, 2007.losses.

F-9F-10

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS AND RESULTS OF OPERATIONS
     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.
     DESCRIPTION OF PROPERTIES
     GENERAL: The following is information concerning our oil and gas wells, our productive wells and acreage and undeveloped acreage. We currently have wells in Denton Parker and Wise Counties, in Texas. We also have several wells and acreage in Oklahoma.
     Effective April 1, 2008, we sold our East Texas oil and gas properties to Gulftex Operating, Inc. (a company in which Mr. Burroughs is a 50% shareholder) in exchange for our payables and advances owed to Gulftex. As additional consideration, Gulftex assumed our asset retirement obligations. Effective March 31, 2009 we sold our minor interest in the Camargo NW and Harmon SE fields located in Oklahoma.
     PROPERTIES
     The following is a breakdown of our properties by field as of August 31, 2008:February 28, 2009:
                
 Gross Net Gross Net
 Producing Producing Producing Producing
Name of Field or Well Well Count Well Count Well Count Well Count
Newark East, Working Interest 2 0.65  2 0.74 
Newark East, Override Interest 8 0.03  8 0.03 
Camargo NW Field 2 0.03  2 0.42 
Harmon SE Field 1 0.01  1 0.01 
     PRODUCTIVE WELLS AND ACREAGE:
     The following is a breakdown of our productive wells and acreage as of August 31, 2008:February 28, 2009:
                        
                         Total Net Total   
 Net Net Total Gross Total Net  Net Gross Productive Gross Total Net 
 Total Gross Productive Total Gross Productive Developed Developed  Total Gross Productive Gass Gass Developed Developed 
Geographic Area Oil Wells Oil Wells Gass Wells Gass Wells Acres Acres  Oil Wells Oil Wells Wells Wells Acres Acres 
Wise County — — 2 .65 224 73.18  — — 4 .74 224 83.14 
Denton County — — 6 .02 566 2.26  — — 6 .03 566 18.11 
Anadarko Basin 3 .05 — — 480 7.70  3 .44 — — 480 69.75 
Notes:
 
1. Total Gross Wells are those wells in which the Company holds a working or overriding interest in as of August 31, 2008.February 28, 2009.
 
2. Net Productive Wells was calculated by multiplying the working or overriding interest held by the Company in each of the 1113 Gross Wells and adding the resulting products.
 
3. Total Gross Developed Acres is equal to the total surface acres of the properties in which the Company holds a working or overriding interest.
 
4. Net Developed Acres is equal to the Total Gross Developed Acres multiplied by the percentage of the total working or overriding interest held by the Company in the respective properties.

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5. All acreage in which we hold a working interest as of August 31, 2008February 28, 2009 have or had existing wells located thereon; thus all acreage leased by the Company may be accurately classified as developed.
 
6. 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
     We currently hold a minor interest in three producing natural gas wells. 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 with a gross acreage interest of 27.5% in 1,505 acres and the second located in Canadian County, Oklahoma, constituting a gross acreage interest of 20% in 240 acres. The Company also has a 3% interest in 640 acres in Beckham County, Oklahoma. The Company sold its interest in the Ellis County properties effective March 31, 2009.
     OIL AND GAS PARTNERSHIP INTERESTS
     We currently own a 57.50% partnership interestsinterest in the Johnson No. 1-H, Johnson No. 2-H2-H. We sold our 58.66% partnership interest in the Hagansport #1 and #2 Unit Joint Ventures of 57.55% and 58.66%, respectively.to Gulftex effective April 1, 2008. We did not acquire any additional partnership interests in the current fiscal year. Effective April 1, 2008, the Company sold its partnership interests in the Hagansport No. 1 (32.89%) and No. 2 (66.67%) units to Gulftex.quarter.
CRITICAL ACCOUNTING POLICIES
A summary of significant accounting policies is included in Note 2 to the audited financial statements included on Form 10-KSB10-K for the year ended November 30, 20072008 as filed with the United States Securities and Exchange Commission. Management believes that the application of these policies on a consistent basis enables the Company to provide useful and reliable financial information about our operating results and financial condition.
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 may differ from those estimates.
OVERVIEW
Going Concern and Liquidity Problems
     Our auditors have included an explanatory paragraph in their audit opinion with respect to our consolidated financial statements at November 30, 2007.2008. The paragraph states that our recurring losses from operations and resulting continued dependence on access to external financing raise substantial doubts about our ability to continue as a going concern. Furthermore, the factors leading to and the existence of the explanatory paragraph may adversely affect our relationship with customers and suppliers and have an adverse effect on our ability to obtain financing.
     Our company has experienced operating losses over the past several years. We do not have sufficient working capital to sustain our operations. We have been unable to generate sufficient revenues to sustain our operations. If no additional funds are received, we will be forced to rely on existing oil and gas revenue and upon additional funds which may or may not be loaned by an affiliate to preserve the integrity of the corporate entity. No formal commitments or arrangements currently exist with the affiliate to advance or loan funds to the Company. In the event we are unable to acquire sufficient funds, the Company’s ongoing operations will be negatively impacted and we may not be able to continue as a going concern and we may have to curtail or terminate our operations and liquidate our business.

4

Sale of Assets to Related Party
On June 4, 2008, we executed a sales agreement (effective April 1, 2008) with Gulftex. Under the agreement, we transferred all of our East Texas oil and gas properties with a net book value of $106,430 to Gulftex. In consideration for the transfer of the properties, Gulftex is forgiving our trade payables and advances totaling $1,052,547. In addition, Gulftex is assuming our asset retirement obligations with a book value of $145,923. We recorded a gain of $1,092,040 on the sale.
RESULTS OF OPERATIONS
For the third quarter ended August 31, 2008February 28, 2009 we reportedhad a net loss of $45,074$127,959 as compared to a net loss of $180,046$212,627 for the same quarter last year. For the nine months ended August 31, 2008 we reported net income of $759,291 as compared to a net loss of $674,261 for the same period last year. The components of these results are explained below.in the following revenue and expenses explanations.
Revenues-Revenue-The components of our revenues for the three and nine months ended August 31, 2008 and 2007 are as follows:
     Oil and gasTotal revenue decreased $76,452, 84.0%, from $90,977 for the three months ended August 31,February 29, 2008 was $53,607, an increase of 1.4%, as compared to $52,892$14,525 for the three months ended August 31, 2007. The increase is attributable to higher production and prices for our Johnson No. 1-H and No. 2-H wells offset by the reduction in production resulting from the April 1, 2008 sale of our East Texas properties to Gulftex. Oil and gas revenue for the nine months ended August 31, 2008 was $212,732, an increased of 9.1%, as compared to $194,973 for the nine months ended August 31, 2007. The increase is attributable to higher production and prices on the Johnson #1 and #2 wells offset by the decrease in production on our East Texas properties.
     Following are the changes in oil and gas sales, barrels and volumes of natural gas sold and the price received for those sales for the quarter.February 28, 2009.
     The average price per MBTU increased $1.48decreased $3.28 and the MBTU sold increased 797decreased 3,132 from the quarter ended August 31, 2007.February 29, 2008. The average price per barrel increased $25.41 whiledecreased $41.66 and the quantity sold decreased by 186555.51 barrels from the quarter ended August 31, 2007.February 29, 2008. The decrease in the barrels sold is attributable to the sales of our East Texas properties in 2008. The decrease in the quantity of gas sold is primarily attributable to the Johnson No. 2-H being off-line for repairs in January and February 2009.
                                                
 Sales Sold MBTU Sales Sold Bbl  Gas MBTU Price/ Oil Bbls Price/ 
August 31, 2008
 $39,856 4,866 $8.19 $13,750 129 $106.59 
              Sales Sold MBTU Sales Sold Bbl 
  
August 31, 2007
 $27,320 4,069 $6.71 $25,572 315 $81.18 
February 28, 2009
 $12,927 2,848 $4.54 $1,598 45.65 $35.01 
             
 
February 29, 2008
 $46,734 5,980 $7.82 $46,087 601.16 $76.66 
                          
  
3 Month Change  
2008 vs 2007
 
2009 vs 2008
 
Amount $12,536 797 $1.48 $(11,822)  (186) $25.41  $(33,807)  (3,132) $(3.28) $(44,489)  (555.51) $(41.66)
                          
Percentage  45.89%  19.59%  22.00%  -46.23%  -59.05%  31.30%  -72.34%  -52.37%  -41.94%  -96.53%  -92.41%  -54.34%
     As the above table shows, gas revenue increased 45.9% whiledecreased 72.3% and oil revenue decreased 46.2%96.5% from fiscal year 2007.2008.
     Following are the changes in oil and gas sales, barrels and volumes of natural gas sold and the price received for those sales for the fiscal year to date.
     The average price per MBTU increased $2.05 and the MBTU sold increased 2,996 from the nine months ended August 31, 2007. The average price per barrel increased $32.73 while the quantity sold decreased by 1,382 barrels from the nine months ended August 31, 2007.

5

                         
  Gas  MBTU  Price/  Oil  Bbls  Price/ 
  Sales  Sold  MBTU  Sales  Sold  Bbl 
August 31, 2008
 $128,790   16,190  $7.95  $83,942   1,034  $81.18 
                   
                         
August 31, 2007
 $77,902   13,194  $5.90  $117,071   2,416  $48.46 
                   
                         
9 Month Change                        
2008 vs 2007
                        
Amount $50,888   2,996  $2.05  $(33,129)  (1,382) $32.72 
                   
Percentage  65.32%  22.71%  34.73%  -28.30%  -57.20%  67.52%
     As the above table shows, gas revenue increased 65.3% while oil revenue decreased 28.3% from fiscal year 2007.
     There was no joint venture income as component of revenue for the three months ended August 31, 2008.     Joint venture losslosses as a component of revenueincome decreased $1,884, 100.0%, from $1,884 for the three monthsquarter ended August 31, 2007 was $10,533. Joint venture loss as a component of revenue decreased $7,605, 270.0%, from a loss of $9,449February 29, 2008 to $0 for the nine monthsquarter ended August 31, 2007 to a loss of $1,844 for the nine months ended August 31, 2008.February 28, 2009.
Expenses-The components of our expenses for the threefirst quarter ended February 28, 2009 and nine months ended August 31,February 29, 2008 and 2007 are as follows:
                                    
 % %  % 
 Three Months Ended Increase Nine Months Ended Increase  Increase 
 Aug. 31, 2008 Aug. 31, 2007 (Decrease) Aug. 31, 2008 Aug. 31, 2007 (Decrease)  2009 2008 (Decrease) 
Expenses:
 
Lease operating and taxes $19,789 $58,743  -66.31% $220,958 $180,995  22.08% 11,760 155,235  -92.42%
General and administrative 74,888 145,075  -48.38% 296,995 629,499  -52.82% 128,329 134,309  -4.45%
Depreciation, depl, amort., & accretion 4,004 18,587  -78.46% 25,684 55,541  -53.76%
             
Depreciation, depletion, amortization., & accretion 2,395 14,060  -82.97%
       
Total expenses $98,681 $222,405  -55.63% $543,637 $866,035  -37.23% $142,484 $303,604  -53.07%
                    
     Lease operating expenses decreased $38,954 for the quarter ended August 31, 2008 and increased $39,963 for the nine months ended August 31, 2008 over the same periods last year. The decrease in quarterly operating expenses$143,475 which is primarily attributable to the sale of our East Texas properties effectiveto Gulftex on April 1, 2008. The increase in operating expenses for the nine months ended August 31, 2008 is primarily attributable increased workover and gas marketing fees totaling $118,127 offset by a decrease in other components of operating expenses of $78,164 due to the sale ofGulftex Operating billed our East Texas properties. TBX paid Gulftex $0Company $2,400 for contract operating services for the three months ended August 31,February 28, 2008 and $2,400$0 for the three months ended August 31, 2007. TBX paid Gulftex $3,200 for contract operating services for the nine months ended August 31, 2008 and $7,200 for the nine months ended August 31, 2007.February 29, 2008.
     General and administrative expenses decreased $70,187 for the three months ended August 31, 2008 as compared to the same period last year.$5,980. The decrease in general and administrative expenses is attributable to lower compensation cost related to stock options based compensation of $49,750, lower$46,250 offset by higher professional fees of $19,773,$38,875 and lowerhigher expenses in all other categories totaling $664. For the nine months ended August 31, 2008, General and administrative expenses decreased $332,504 as compared to the same period last year. The decrease in general and administrative expenses is attributable to lower compensation cost related to stock options based compensation of $123,500, lower professional fees of $146,037, costs allocated to Gulftex Operating of $48,097 and lower expenses in all other categories totaling $14,870.$1,395.
     Depreciation, depletion, amortization and depletion expense totaled $3,848 for the three months ended August 31, 2008 and $13,687 for the three months ended August 31, 2007. Depreciation and depletion expense totaled $22,194 for the nine months ended August 31, 2008 and $40,841 for the nine months ended August 31, 2007.accretion decreased $11,665. The decrease in depreciation, depletion and amortization expense of $9,498 is attributable to the lower oil and gas property values fromdue to the same period last year and the salesales of our East Texas properties.properties and the write down of the Johnson No. 1 to its undiscounted net cash flow value. Accretion expense totaled $156 fordecreased $2,167. The decrease is attributable to a change in the three months ended August 31, 2008 and $4,900 forestimated asset retirement liability primarily due to the three months ended August 31, 2007. Accretion expense totaled $3,490 for the ninesales of our East Texas properties in 2008.

65

months ended August 31, 2008 and $14,700 for the nine months ended August 31, 2007. The decrease in accretion expense is primarily attributable to the transfer of our East Texas asset retirement obligations to Gulftex and the change in our estimated liability from last fiscal year.
     Other income and expense for the three months ended August 31, 2008 and 2007 was $0. Other income increased $1,085,790 for the nine months ended August 31, 2008 over the same periods last year. Effective April 1, 2008 we sold our East Texas properties to Gulftex for the cancellation of payables and advances due them as well as their assumption of our East Texas asset retirement obligations. We recorded a gain on the sale of $1,092,040. The Company sold its working interest in a well located in Caddo County, Oklahoma on March 1, 2007 for $6,250 and wrote off the fully depleted property value of $49,147.
     We have not recorded any income taxes for the ninethree months ended August 31, 2008February 28, 2009 because of our accumulatedcontinued operating losses. Also, since there is continued uncertainty as to the realization of a tax asset, we have not recorded any tax benefit.
LIQUIDITY AND CAPITAL RESOURCES
The Company had a cash balance of $3,002$878 as of August 31, 2008.February 28, 2009. Our current ratio at August 31, 2008February 28, 2009 was .09:.53:1, and we hadhave no long-term debt other than our asset retirement obligationsobligation of $10,937.$21,236. As of August 31, 2008,February 28, 2009, our stockholders’ equitydeficit was negative $14,229. Net$211,293. Our cash used for operations totaled $88,943$107,871 for the nine monthsquarter ended August 31, 2008 and $486,965February 28, 2009 while cash provided by operations totaled $31,956 for the nine monthsquarter ended August 31, 2007.February 29, 2008. This represents a decrease of $398,022$139,827 in cash usedprovided by operating activities. There were no investment activities for operating activities.
For the nine monthsquarter ended August 31, 2008 net cash usedFebruary 28, 2009.We invested $28,461 in investing activities totaled $28,461 as a result of our rework of a salt water disposal well. Forwell during the nine monthsquarter ended August 31, 2007February 29, 2008. We received net cash used in investing activities was $0. For the nine months ended August 31, 2008 net cash provided by investing activities was $0. For the nine months ended August 31, 2007 net cash provided by investing activities totaled $6,250. On March 1, 2007 we sold our working interest in a well located in Caddo County, Oklahoma for $6,250. Non-cash investing activity for the nine months ended August 31, 2008 was $106,430. Effective April 1, 2008, we sold our East Texas oil and gas properties with a net book value of $106,430 to Gulftex. Non-cash investing activity for the nine months ended August 31, 2007 was $0.
Net cash provided by financing activities totaled $96,585 for the nine months ended August 31, 2008 and $480,451 for the same period last year. For the nine months ended August 31, 2008 and 2007 we received advances from Gulftex totaling $92,835$106,243 during the quarter ended February 28, 2009 and $472,951, respectively. Cash received$9,235 during the quarter ended February 29, 2008. Also, proceeds from the exerciseissuance of stock options totaled $3,750 for the nine monthsquarter ended August 31,February 28, 2009 and February 29, 2008 totaled $0 and $7,500 for the nine months ended August 31, 2007. Non-cash financing activities for the nine months ended August 31, 2008 was $1,194,480. As a result of the sale of our East Texas properties to Gulftex we wrote-off payables to and advances form affiliate totaling $1,052,547 and reduced our asset retirement obligations by $145,924. We also increased our asset retirement obligations by $3,490 during the same period. Non-cash financing activity for the nine months ended August 31, 2007 was $0. We increased our retirement obligations by $14,700 for the nine months ended August 31, 2007.$3,750, respectively.
PLAN OF OPERATION FOR THE FUTURE
In the past we have primarily acquired producing oil and gas properties with opportunities for future development and contracted well operations to contractors. Currently, our primary focus is to secure additional capital through business alliances with third parties or other debt/equity financing arrangements to acquire producing oil and gas leases and wells, acquire additional oil and gas prospect leases and to acquire an exploration company that can also act as an operator of our wells. However, we cannot assure you that we will be able to raise sufficient funds to execute our plans or that if successful in securing the funds our actual results will improve.
We expect that the principal source of funds in the near future will be from oil and gas revenues and advances from an affiliate. We have not yet established an ongoing source of revenue sufficient to cover our operating costs and continue as a going concern. Management’s plan is to obtain operating loans from an affiliate to meet its minimal operating expenses (no formal commitments or arrangements currently exist

7

with the affiliate to advance or loan funds to the Company) and seek equity and/or debt financing. Any such additional funding will be done on an “as needed” basis and will only be done in those instances in which we believe such additional expenditures will increase our profitability. However, actual results may differ from management’s plan and the amount may be material.
Our ability to acquire additional properties or equipment is strictly contingent upon our ability to locate adequate financing or equity to pay for these additional properties or equipment. There can be no assurance that we will be able to obtain the opportunity to buy properties or equipment that are suitable for our investment or that we may be able to obtain financing or equity to pay for the costs of these additional properties or equipment at terms that are acceptable to us.. Additionally, if economic conditions justify the same, we may hire additional employees although we do not currently have any definite plans to make additional hires.
The oil and gas industry is subject to various trends. In particular, at times crude oil prices increase in the summer, during the heavy travel months, and are relatively less expensive in the winter. Of course, the prices obtained for crude oil are dependent upon numerous other factors, including the availability of other sources of crude oil, interest rates, and the overall health of the economy. We are not aware of any specific trends that are unusual to our company, as compared to the rest of the oil and gas industry.
ITEM 3. QUANTITATIVE AND QUALATIVE DISCLOSURES ABOUT MARKET RISK.
Not required for smaller reporting companies.
ITEM 4.4T. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures

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Our management evaluated, with the participation of Tim Burroughs our Chief Executive Officer (CEO)/Chief Financial Officer (CFO), the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) as of the end of the quarter covered by this quarterly report on Form 10-Q. Based on this evaluation, management has concluded that, as of August 31, 2008February 28, 2009 our disclosure controls and procedures were effective to ensure that the information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported. Management is currently looking for a professional accounting person to become part of its management team in an effort to provide not only complete but timely reports to the Securities and Exchange Commission as required by its rules and forms.
Internal Control Over Financial Reporting
There have not been any changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. As a result, no corrective actions were required or undertaken.
Limitations on the Effectiveness of Controls.The Company’s management, including the CEO/CFO, does not expect that it’s Disclosure Controls or its Internal Controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures

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may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
     None.On May 28, 2009 the Company, along with Grasslands I, L.P., intervened as third party plaintiffs in a lawsuit originally captioned as Clay Bain, et. al. v. Earthwise Energy, Inc. (EEI) which was filed in April 2009 in the 14th Judicial District, Dallas County Texas, Cause No. 095253. Our petition requests that we be given certain injunctive relief and be awarded unspecified damages for certain alleged causes of action including, but not limited to, fraud, conversion and violation of fiduciary duty against defendant Earthwise Energy, Inc. but also as against two individuals, Jeffery C. Reynolds and Steven C. Howard who were added to the lawsuit as third party defendants. Mr. Reynolds is a former member of our Board of Directors who resigned in July 2008. Included in our claim for damages is an oil and gas accounts receivable totaling $60,342 of February 28, 2009.
Item 2. CHANGES IN SECURITIES
     None.
Item 3. DEFAULTS UPON SENIOR SECURITIES
     None.

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Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS:
     None.
Item 5. OTHER INFORMATION
     None.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
     (a) EXHIBITS:
     31.1 Certification of Chief Executive Officer/Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
     32.1 Certification of Chief Executive Officer/Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
     (b) REPORTS ON FORM 8-K8-K:
     Form 8-K Current Report, Items 5.02 and 9.01 filed on July 23, 2008.None

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SIGNATURES
     In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed by the undersigned, hereunto duly authorized.
TBX RESOURCES, INC.
DATE: December 18, 2009
     
DATE: February 26, 2009
SIGNATURE:  /s/ Tim Burroughs    
   
SIGNATURE:/s/ Tim Burroughs
TIM BURROUGHS, PRESIDENT/  
CHIEF FINANCIAL OFFICER  

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