Texhoma Energy Inc - Annual Report (Small Business Issuers) (10KSB)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-KSB

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

For the fiscal year ended September 30, 2007

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

ACT OF 1934

For the transition period from to

Commission file number: 000-31987

TEXHOMA ENERGY, INC.

(Name of small business issuer in its charter)

Nevada	20-4858058
(State of organization)	(I.R.S. Employer Identification No.)

100 Highland Park Village #200

Dallas, Texas 75205

(Address of principal executive offices)

(214) 295-3380

(Registrant's telephone number)

SECURITIES REGISTERED PURSUANT TO SECTION 12(B)

OF THE EXCHANGE ACT:

None

SECURITIES REGISTERED PURSUANT TO SECTION 12(G)

OF THE EXCHANGE ACT:

Common Stock, $0.001 par value per share

Check whether the issuer (1) 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 periods that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ].

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

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

The issuer's revenues for the fiscal year ended September 30, 2007 were $1,847,647.

The aggregate market value of the issuer's voting and non-voting common equity held by non-affiliates computed by reference to the average bid and ask price of such common equity as of December 26, 2007 was $0, as the issuer’s common stock currently is only traded on a sporadic basis on the Pinksheets.com, which quotes the issuer does not believe provides an accurate and/or useful basis for the aggregate market value of the issuer’s common stock.

At December 26, 2007, there were 231,412,224 shares of the issuer's common stock outstanding, which amount does not include 18,000,000 shares of common stock which were held by Valeska Energy Corp. as of December 26, 2007, which the Registrant and Valeska have since cancelled.

TABLE OF CONTENTS

PART I

ITEM 1.	DESCRIPTION OF BUSINESS	4

ITEM 2.	DESCRIPTION OF PROPERTY	16

ITEM 3.	LEGAL PROCEEDINGS	21

ITEM 4.	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS	21

PART II

ITEM 5.	MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS	22

ITEM 6.	MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION	23

ITEM 7	FINANCIAL STATEMENTS	F-1

ITEM 8.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	35

ITEM 8A.	CONTROLS AND PROCEDURES	36

ITEM 8B.	OTHER INFORMATION	36

PART III

ITEM 9.	DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT	35

ITEM 10	EXECUTIVE COMPENSATION	37

ITEM 11.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS	39

ITEM 12.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS	42

ITEM 13.	EXHIBITS	50

ITEM 14	PRINCIPAL ACCOUNTANT FEES AND SERVICES	53

SIGNATURES		55

PART I

FORWARD-LOOKING STATEMENTS

ALL STATEMENTS IN THIS DISCUSSION THAT ARE NOT HISTORICAL ARE FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. STATEMENTS PRECEDED BY, FOLLOWED BY OR THAT OTHERWISE INCLUDE THE WORDS "BELIEVES", "EXPECTS", "ANTICIPATES", "INTENDS", "PROJECTS", "ESTIMATES", "PLANS", "MAY INCREASE", "MAY FLUCTUATE" AND SIMILAR EXPRESSIONS OR FUTURE OR CONDITIONAL VERBS SUCH AS "SHOULD", "WOULD", "MAY" AND "COULD" ARE GENERALLY FORWARD-LOOKING IN NATURE AND NOT HISTORICAL FACTS. THESE FORWARD-LOOKING STATEMENTS WERE BASED ON VARIOUS FACTORS AND WERE DERIVED UTILIZING NUMEROUS IMPORTANT ASSUMPTIONS AND OTHER IMPORTANT FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE IN THE FORWARD-LOOKING STATEMENTS. FORWARD-LOOKING STATEMENTS INCLUDE THE INFORMATION CONCERNING OUR FUTURE FINANCIAL PERFORMANCE, BUSINESS STRATEGY, PROJECTED PLANS AND OBJECTIVES. THESE FACTORS INCLUDE, AMONG OTHERS, THE FACTORS SET FORTH BELOW UNDER THE HEADING "RISK FACTORS." ALTHOUGH WE BELIEVE THAT THE EXPECTATIONS REFLECTED IN THE FORWARD-LOOKING STATEMENTS ARE REASONABLE, WE CANNOT GUARANTEE FUTURE RESULTS, LEVELS OF ACTIVITY, PERFORMANCE OR ACHIEVEMENTS. MOST OF THESE FACTORS ARE DIFFICULT TO PREDICT ACCURATELY AND ARE GENERALLY BEYOND OUR CONTROL. WE ARE UNDER NO OBLIGATION TO PUBLICLY UPDATE ANY OF THE FORWARD-LOOKING STATEMENTS TO REFLECT EVENTS OR CIRCUMSTANCES AFTER THE DATE HEREOF OR TO REFLECT THE OCCURRENCE OF UNANTICIPATED EVENTS. READERS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON THESE FORWARD-LOOKING STATEMENTS. REFERENCES IN THIS FORM 10-KSB, UNLESS ANOTHER DATE IS STATED, ARE TO SEPTEMBER 30, 2007. AS USED HEREIN, THE “COMPANY,” “TEXHOMA,” “WE,” “US,” “OUR” AND WORDS OF SIMILAR MEANING REFER TO TEXHOMA ENERGY, INC. AND ITS WHOLLY OWNED DELAWARE SUBSIDIARY, TEXAURUS ENERGY, INC., UNLESS OTHERWISE STATED.

ITEM 1. DESCRIPTION OF BUSINESS

Business History

Texhoma Energy, Inc. (“we,” “us,” the “Company”, and “Texhoma”), was originally formed as a Nevada corporation on September 28, 1998 as Pacific Sports Enterprises, Inc. Our business objective was to own and operate a professional basketball team that would be a member of the American Basketball Association. The American Basketball Association was not successful in organizing the league, and consequently the member teams ceased operating activities in 1999. Thereafter, we were dormant without any business operations until October 20, 2000.

In May 2001, we changed our name to Make Your Move, Inc. and on September 20, 2004, we changed our name to Texhoma Energy, Inc. in connection with our change in business focus to oil and gas exploration and production.

Effective May 28, 2004, we affected a 1:150 reverse stock split of our issued and outstanding shares of common stock. Effective November 9, 2004, we affected a 4:1 forward split of our issued and outstanding common stock. Unless otherwise stated all share amounts listed throughout this filing retroactively take into account both the May 28, 2004 reverse stock split and the November 9, 2004 forward stock split.

On November 5, 2004, we entered into a Sale and Purchase Agreement with Capersia Pte. Ltd., a Singapore company (“Capersia”), to acquire 40% of an oil and gas exploration license operated by Black Swan Petroleum Pty. Ltd. (“Black Swan”) and its wholly owned subsidiary Black Swan Petroleum (Thailand) Limited (“Black Swan Thai”). Black Swan Thai owned the license, permits and title to a petroleum concession in the Chumphon Basin in the Gulf of Thailand, referred to as “Block B7/38” (the “Concession”).

Black Swan recommenced exploration operations of the Concession and Black Swan drilled two exploration wells in February and March 2005, which proved void of commercially viable hydrocarbons. In June 2005 after completion of the exploration activities, the venturers decided to discontinue the exploration efforts in Thailand and relinquished the Concession back to the government of Thailand.

On January 20, 2006 we divested our shareholding in Black Swan and Black Swan Thai.

After the exploration venture in Thailand the Board of Directors of the Company decided to shift its focus to domestic oil and gas exploration and production, with a particular focus on south Louisiana and east Texas, including near-shore Gulf of Mexico.

On February 2, 2006, we executed a Sale and Purchase Agreement (the “Clovelly SPA”) with Sterling Grant Capital, Inc. pursuant to which we acquired a 5% (five percent) working interest in the Clovelly South prospect (bringing our total working interest to 11%) located in Lafourche Parish, Louisiana. As a result, the Company agreed to fund the work program for the Clovelly South project in accordance with the Joint Operating Agreement for the property. The Allain-Lebreton No. 2 well was drilled and plugged and abandoned in September 2006.

On March 15, 2006, our wholly-owned subsidiary, Texaurus Energy, Inc., which was formed in March 2006 as a Delaware corporation ("Texaurus"), entered into a Sales and Purchase Agreement with Structured Capital Corp., a Texas corporation to purchase certain oil and gas leases in Vermillion Parish, Louisiana. The 8% working interest (5.38167% net revenue interest) in the Intracoastal City field was acquired for a) two million five hundred thousand dollars ($2,500,000) and b) the issuance of 37,500,000 shares of our common stock.

On March 28, 2006, Texaurus entered into a Securities Purchase Agreement ("Securities Purchase Agreement") with Laurus Master Fund, Ltd. ("Laurus"); a Registration Rights Agreement with Laurus; issued Laurus a Common Stock Purchase Warrant; entered into a Master Security Agreement with Laurus; sold Laurus a Secured Term Note in the amount of $8,500,000, and entered into various other agreements. Additionally, in connection with the closing, we issued Laurus a Common Stock Purchase Warrant to purchase up to 10,625,000 shares of our common stock at an exercise price of $0.04 per share.

In addition, Laurus can acquire up to 961 shares of Texaurus’ common stock at an exercise price of $0.001 per share, representing 49% of Texaurus’ outstanding common stock. This will be valued at Fair Market Value as of the date of the transaction.

The Securities Purchase Agreement and Laurus March 2006 funding is described in greater detail below under “March 2006 Laurus Master Fund, Ltd. Funding.”

On March 28, 2006, with an effective date of January 1, 2006, Texaurus closed a Sales & Purchase Agreement to purchase certain interests in the Barnes Creek gas field and the Edgerly field from Kilrush Petroleum, Inc. Texaurus paid the $5,225,000 purchase price with proceeds received from its sale of the Secured Term Note with Laurus.

March 2006 Funding with Laurus Master Fund, Ltd.

On March 28, 2006 (the "Closing"), Texaurus entered into a Securities Purchase Agreement ("Securities Purchase Agreement") with Laurus Master Fund, Ltd. ("Laurus"); a Registration Rights Agreement with Laurus ("Registration Rights Agreement"); issued Laurus a Common Stock Purchase Warrant (the "Texaurus Warrant"); entered into a Master Security Agreement with Laurus; sold Laurus a Secured Term Note in the amount of $8,500,000 (the "Note"), and entered into various other agreements described below. Additionally, in connection with the Closing, we issued Laurus a Common Stock Purchase Warrant (the "Texhoma Warrant"), which agreements are described in greater detail below.

SECURED TERM NOTE

The Secured Term Note (the "Note") in the amount of $8,500,000, which was sold by Texaurus to Laurus in connection with the Closing, is due and payable in three years from the Closing on March 27, 2009 (the "Maturity Date"), and bears interest at the Wall Street Journal Prime Rate (the "Prime Rate"), plus two percent (2%) (the "Contract Rate"), based on a 360 day year, payable monthly in arrears, beginning on April 1, 2006, provided however that the Contract Rate shall never be less than eight percent (8%). As of December 26, 2007, the Contract Rate is nine and one-quarter percent (9.25%) per year, with the Prime Rate at seven and one-quarter percent (7.25%).

Additionally, the Note provided for principal payments on the funds to be made each month, beginning on June 1, 2006, and continuing up to and including the Maturity Date. The amount of these monthly principal payments is equal to eighty percent (80%) of the gross production revenue received by Texaurus, relating to all oil and gas properties owned by Texaurus, for the prior calendar month, provided that the payments shall increase to one hundred percent (100%) of such gross production revenue if an Event of Default occurs (as defined in the Note).

If an Event of Default occurs under the Note, the Note shall bear additional interest in the amount of two percent (2%) per month above the then current interest rate of the Note, until such Event of Default is cured or waived. Additionally, upon the occurrence of and during the continuance of any Event of Default, Laurus can at its option, demand repayment in full of all obligations and liabilities owing by Texaurus to Laurus by way of a default payment equal to 130% of the outstanding principal amount of the Note and any accrued but unpaid interest thereon.

Additionally, we agreed to guaranty the Note and other obligations owing to Laurus pursuant to a Guaranty, the entry into a Master Security Agreement (described below) and the entry into a Stock Pledge Agreement, whereby we pledged 100% of the outstanding stock of Texaurus to Laurus to guarantee the payment and performance of all obligations and indebtedness owed to Laurus by Texaurus.

In connection with the Closing, Texaurus paid Laurus Capital Management, LLC, the manager of Laurus, a closing payment equal to 3.5% of the Note, or $297,500; Energy Capital Advisors, LLC, an advisory fee equal to $495,000; certain amounts paid to various other parties, including our law firm, Laurus' law firm and certain of our advisors; and the $5,225,000 paid for the Kilrush, represented the entire $8,500,000 received in connection with the sale of the Note, as well as $300,000 of the funding provided by our former Executive Chairman and Director, Frank Jacobs.

Additionally, in consideration for advisory services rendered in connection with the Closing, we granted Energy Capital Solutions, LLC, warrants to purchase up to 1,062,500 shares of our common stock at an exercise price of $0.04 per share. Energy Capital Solutions, LLC's warrants expire if unexercised at 5:00 P.M. C.S.T. on March 28, 2011.

REGISTRATION RIGHTS AGREEMENT

In connection with the Closing, we entered into a Registration Rights Agreement with Laurus, by which we agreed to file a registration statement covering the shares exercisable in connection with the Texhoma Warrant within sixty (60) days of the date of the Closing, and that such registration statement would be effective within one hundred and eighty (180) days of the Closing date, which registration statement we were unable to file to date, due to the fact that we were not current in our filings with the Commission. In November 2007, we entered into the First Amendment with Laurus (described below), pursuant to which Laurus agreed to amend the date we are required to gain effectiveness of the Registration Statement by, to April 30, 2008.

TEXAURUS WARRANT

In connection with the Closing, Texaurus issued Laurus the Texaurus Warrant, which provides Laurus the right to purchase up to 961 shares of Texaurus common stock, representing 49% of Texaurus' outstanding common stock at an exercise price of $0.001 per share. The Texaurus Warrant is exercisable by Laurus at any time after the payment by Texaurus in full of the Note. The Texaurus Warrant will be subject to identical rights to registration as described above in connection with the Texhoma Registration Rights Agreement, when and if Texaurus completes an initial public offering and/or otherwise becomes publicly traded.

TEXHOMA WARRANT

In addition to the Texaurus Warrant granted to Laurus by Texaurus, at the Closing, we granted Laurus a Common Stock Purchase Warrant (the "Texhoma Warrant"), to purchase up to 10,625,000 shares of our common stock at an exercise price of $0.04 per share, which if exercised in full would provide us aggregate consideration of $425,000. The Texhoma Warrant expires if unexercised at 5:00 P.M. on March 28, 2011. The Texhoma Warrant contains a provision whereby Laurus is not able to exercise any portion of the Warrant, which exercise would cause it to hold more than 4.99% of our issued and outstanding common stock, unless an Event of Default under the Note has occurred (as described above) and/or if Laurus provides us 75 days prior written notice of their intent to hold greater than 4.99% of our issued and outstanding common stock.

MASTER SECURITY AGREEMENT

To secure the payment of the obligations of Texaurus incurred in connection with the Closing, Texaurus and we entered into a Master Security Agreement with Laurus, whereby Texaurus and we agreed to grant Laurus a continuing security interest in all of our cash, cash equivalents, accounts, accounts receivable, deposit accounts (including the amount in the Restricted Account, as described above), inventory, equipment, goods, fixtures, documents, instruments, contract rights, general intangibles, chattel paper, investment property, letter-of-credit rights, trademarks and applications, patents and applications, copyrights and applications and other intellectual property which Texaurus has or hereafter acquires; the Kilrush Property and any additional properties or interests acquired by Texaurus, as well as certain other interests associated with such properties.

SIDE LETTER AGREEMENT

In connection with the issuance of the Texaurus Warrant, we and Texaurus entered into a "Side Letter Agreement," whereby we and Texaurus agreed that following the exercise of the Texaurus Warrant by Laurus, we and Laurus would negotiate in good faith the terms of a shareholders agreement in connection with Texaurus, which among other things would provide for Laurus' consent to certain actions to be taken by Texaurus or us, including, declaring or paying any dividends, selling or disposing of any assets, entering into any transactions outside of the normal course of business, creating any mortgage, lien, charge or other form of encumbrance with respect to any assets, entering into any agreements with third parties, issuing or selling any capital stock, warrants or convertible securities, or appointing or replacing any outside accountants or auditors.

Significant Transactions Affected During 2006 and 2007:

Lucayan Oil and Gas Investments, Ltd. Transactions

On April 10, 2006, we entered into a Debt Conversion Agreement with Lucayan Oil and Gas Investments, Ltd., a Bahamas corporation, formerly Devon Energy Thai Holdings, Ltd. ("LOGI"). We had owed $895,000 to LOGI as of the date of the Debt Conversion Agreement in connection with money received by the Company for the drilling in Thailand in February and March 2005. Pursuant to the Debt Conversion Agreement, the Company and LOGI agreed to convert $160,000 of the $895,000 which LOGI was owed into an aggregate of 4,000,000 shares (or one (1) share for each $0.04 of debt converted) of newly issued shares of the Company's restricted common stock. The conversion price used in the Debt Conversion Agreement is based on 80% of the average market price of the shares for the 30 days preceding the conversion agreement. This was considered to be the Fair Market Value at the time of the transaction. The Director and 50% owner of LOGI is Max Maxwell, who became a Director of the Company on April 10, 2006, and President of the Company on April 12, 2006, and resigned as President and Director on May 1, 2007. Mr. Maxwell obtained his 50% ownership in LOGI on April 10, 2006 in consideration for joining LOGI as an officer and director and introducing Texhoma to various oil and gas opportunities.

On April 10, 2006, the Company entered into a convertible note with LOGI evidencing the $735,000 of debt which was still owed to LOGI after the Debt Conversion Agreement. The terms of the convertible note provided for the same conversion price as the previously mentioned Debt Conversion Agreement. On May 15, 2006, LOGI provided the Company notice of its desire to convert its $735,000 Promissory Note into 18,375,000 shares of the Company's common stock which the Company issued in consideration for the debt conversion. This conversion rate was considered Fair Market Value at the date of conversion.

On May 31, 2006, Texhoma entered into six (6) participation agreements to purchase various oil and gas leases from Sunray Operating Company LLC.

We also gave Polaris an Option to participate in our Clovelly Field interests in connection with the Promissory Note (described below). We agreed pursuant to the Promissory Note to repay the amounts owed to Polaris by way of (a) two-thirds of the net proceeds we receive from any stock sales while the Promissory Note is outstanding, and (b) one-third of our share of the production income we receive from our oil and gas interests in Vermillion Parish, Louisiana, which represents a 10% working interest (7.3% net revenue interest) in such leases and our oil and gas interests in the Barnes Creek Field, located in Allen Parish, Louisiana and the Edgerly Field located in Calcasieu Parish, Louisiana from Kilrush Petroleum, Inc., which constitutes a 7.42% working interest (a 5.38% net revenue interest) in the Barnes Creek gas field, and an 11.76% working interest (8.47% net revenue interest) in the Edgerly oil field (the "Texaurus Interests").

We used the proceeds from the Promissory Note to pay for the cost of drilling the Allain-LeBreton No. 2 well in the Clovelly prospect of which we own an 11% working interest. The prospect is located in Lafourche Parish, Louisiana and operated by ORX Resources, Inc. ("ORX"). Our former Director, President and Chief Executive Officer was a Director of ORX at the time of the Company’s entry into the Promissory Note.

In consideration for Polaris agreeing to loan us the money pursuant to and in connection with the Promissory Note, we agreed to provide Polaris an option to participate in Clovelly field for a three percent (3%) working interest, which option Polaris can elect after reviewing the logs of the Allain-LeBreton No. 2 well at target depth, but before the completion of the well (the "Option"). In the event that Polaris elects to exercise its Option and participate in the Allain-LeBreton No. 2 well, we will surrender 3/11ths of our 11% working interest in the well and Polaris will reimburse Texhoma for the drilling costs incurred by us for the three percent (3%) working interest from the commencement of the drilling operations.

In the event that we are unable to repay the Promissory Note to Polaris when due, we agreed pursuant to the Promissory Note to assign one hundred percent (100%) of the cash flow from our portion of the Texaurus Interests to Polaris or its nominee until the Promissory Note is paid in full. They did not declare an event of default and the note has been repaid in full.

On October 10, 2006, ORX Resources, Inc., operator of the Clovelly Prospect well, notified Texhoma that the jointly owned well had been plugged and abandoned on September 23, 2006.

In June and August 2006, Texhoma closed the purchase of three (3) of the participation agreements, entering into Assignments and Bill of Sales for purchase from Sunray Operating Company LLC (“Sunray”) of the following Leases:

	·	Leases covering approximately 196 acres of land in Brazoria County, Texas. In the purchase, Texhoma acquired an undivided 37.5% interest, subject to existing overriding royalty interests equal to 25% of 8/8. Additionally, Sunray is entitled to a five-eighths of eight-eighths (62.5% of 8/8) working interest, proportionally reduced at payout; and
	·	Leases covering approximately 20 acres of land in Brazoria County, Texas. In the purchase, Texhoma acquired an undivided 35% interest in the leases, subject to existing overriding royalty interests equal to 25% of 8/8.
	·	Leases covering approximately 280 acres of land in Brazoria County, Texas. In the purchase, Texhoma acquired an undivided 72.5% interest in the leases, subject to existing overriding royalty interests equal to 28% of 8/8. Texhoma simultaneously sold a 42.5% interest leaving a 30% interest.
	·	Texhoma declined to participate in the purchase of the leases covering approximately 80 acres in Brazoria County. In September 2006, this well was a dry hole and participation in subsequent wells was declined. However, Texhoma continues to hold a 12.5% back in Working Interest.

Two leases for another 160 acre site and a 60 acre site which were declined by Texhoma and in which we retained a 12.5% back in Working Interest.

We purchased the Leases from Sunray for aggregate consideration of $143,161, of which $113,161 was paid in cash and $30,000 was paid in the form of shares of our common stock, by the issuance of an aggregate of 375,000 units (each a "Unit"), which each include one (1) share of common stock and one (1) warrant, which entitles the holder of such warrant to purchase one (1) share of our common stock at an exercise price of $0.15 per share, prior to the one (1) year anniversary of such warrant grant, which Units were valued at $0.08 per Unit. Approximately $50,000 remains due to Sunray as of the date of this filing, in connection with the purchase of the Leases.

Upon the closing of the Purchases we and Sunray agreed to enter into an operating agreement in connection with the development of the leases. Additionally, both we and Sunray agreed that should either party be unable or unwilling, for any reason, to participate in the drilling of the initial well on any of the leases described above, the non-participating party shall, at least 90 days prior to any expiration or any rental date under the leases, assign the participating party all of its right, title and interest in such lease.

Amendment to Certificate of Incorporation

On September 20, 2006, with an effective date of filing of September 21, 2006, we filed a Certificate of Amendment to our Articles of Incorporation to increase our authorized shares of common stock to three hundred million (300,000,000) shares of common stock, $0.001 par value per share, and to re-authorize one million (1,000,000) shares of preferred stock, $0.001 par value per share (the "Amendment").

Additionally, the Amendment provided that shares of our preferred stock may be issued from time to time in one or more series, with distinctive designation or title as shall be determined by our Board of Directors prior to the issuance of any shares thereof. The preferred stock shall have such voting powers, full or limited, or no voting powers, and such preferences and relative, participating, optional or other special rights and such qualifications, limitations or restrictions thereof, as shall be stated in such resolution or resolutions providing for the issue of such class or series of preferred stock as may be adopted from time to time by our Board of Directors prior to the issuance of any shares thereof. The number of authorized shares of preferred stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority of the voting power of all the then outstanding shares of the capital stock of the corporation entitled to vote generally in the election of directors, voting together as a single class, without a separate vote of the holders of the preferred stock, or any series thereof, unless a vote of any such holders is required pursuant to any preferred stock designation.

Promissory Note

On or about October 19, 2006, the Company issued a Promissory Note to Jacobs Oil & Gas Limited, an entity controlled by Mr. Frank Jacobs, our former Director, in the amount of $493,643.77, which amount represented funds advanced to the Company by Mr. Jacobs and management fees owed to Mr. Jacobs (the “Jacobs' Note”). The Jacobs' Note bears interest at the rate of 6% per annum until paid, and is payable by the Company at any time on demand. The Jacobs' Note may be pre-paid at any time without penalty. Any amounts not paid on the Jacobs' Note when due shall bear interest at the rate of 15% per annum. The Company also entered into a Security Agreement with Mr. Jacobs under which Agreement the Board of Directors ratified the transfer of 200,000 shares of the common stock of Morgan Creek Energy Corp., which shares were held by the Company, to Mr. Frank Jacobs as security for the money that is owed pursuant to the Jacobs' Note.

On or about June 5, 2007, we entered into an Agreement with Jacobs Oil & Gas Limited (“Jacobs”), pursuant to which Jacobs agreed that no interest would be due from us and/or accrue on the principal or accrued interest to date on his outstanding Promissory Note for the period of one (1) year from the date of the Agreement and that he would not try to collect the principal and/or accrued interest on such note for a period of one (1) year. The Jacobs’s Note was subsequently forgiven in connection with the Jacobs Settlement, described below.

Letter Agreement

On or about May 15, 2007, we entered into a Letter Agreement with Matrixx Resource Holdings Inc. (“Matrixx”) to sell our 11% working interest in the property known as the Clovelly Prospect (the “Clovelly Prospect”) for $150,000. In connection with and pursuant to the Letter Agreement, we expected to receive an earnest money deposit of $25,000 on or about May 25, 2007, with the remainder of the purchase price to be paid on or before June 30, 2007; however, we did not receive any funds or any deposit from Matrixx and the Letter Agreement has been terminated.

Management Services Agreement

On or about May 15, 2007, we entered into a Management Services Agreement with Valeska Energy Corp. (“Valeska”), whose President is William M. Simmons, who became an officer and Director of us on or about June 4, 2007, as described below, which was subsequently amended on or about June 1, 2007 (collectively the “Management Agreement”).

Pursuant to the Management Agreement, we agreed to enter into a Joint Venture agreement with Valeska (the “Joint Venture”), described below; Valeska agreed to provide us management services and act as a Management Consultant to us, for a monthly fee of $10,000 (plus expenses), or 15% of any revenue we generate, whichever is greater (excluded from this definition however are asset sales and/or income of a capital nature, and included in the definition are 20% of the revenues we receive from our Joint Venture with Laurus Master Fund, Ltd.); and we also agreed to issue Valeska 15,200,000 restricted shares of our common stock. We also agreed pursuant to the Management Agreement, as amended, that we would issue Valeska an additional 18,200,000 shares of our common stock upon such time as we are able to bring our public reporting requirements current with the Commission and seek reinstatement on the Over-The-Counter Bulletin Board. These shares will be valued at Fair Market Value using the most appropriate valuation method. The Management Agreement had a minimum term of three months, beginning on May 1, 2007. The Management Services Agreement was later amended and extended by the parties’ entry into the Second Amendment to Management Services Agreement with Valeska Energy Corp. in August, 2007, as described below.

Joint Venture Agreement

On or about May 15, 2007, we entered into a Joint Venture Relationship Agreement with Valeska (the “Joint Venture Agreement”), pursuant to which we and Valeska agreed to form a new Texas limited partnership (the “Joint Venture”), of which Valeska will serve as general partner. The Joint Venture Agreement contemplates that Valeska will cause funds to be invested, arrange financial and strategic partnerships, and that both parties would bring investment opportunities to the Joint Venture. Pursuant to the Joint Venture Agreement, Valeska has co-investment rights in the Joint Venture. Any distributions from the Joint Venture will be paid first to Valeska and the Company, in an amount equal to 8% to Valeska and 2% to the Company, subject to investor approval; then to any investors as negotiated therewith; and finally Valeska and the Company will share any remaining distributions, with Valeska receiving 80% of such distributions and the Company receiving 20% of such distributions.

The Joint Venture Agreement also provides that Valeska has the right to require us to purchase its interest in the Joint Venture at any time, in exchange for shares of our common stock. In the event that Valeska exercises this right, the valuation of the Joint Venture will be valued in a negotiated manner or at 30% greater than the gross acquisition cost of any property acquired by the Joint Venture, and the number of shares exchangeable for such interest will be equal to the market price of our shares of common stock on the date that such right is exercised by Valeska.

Additionally, we have the right, pursuant to the Joint Venture Agreement, to veto any deal which Valeska proposes to include in the Joint Venture.

Voting Agreement

On or about June 5, 2007, certain of our largest shareholders, including Capersia Pte. Ltd.; Frank A. Jacobs, our former officer and Director; and Valeska Energy Corp., which is controlled by William M. Simmons, the President and Director of the Company, and is majority owned by Daniel Vesco, the Company’s Chief Executive Officer and a Director of the Company, through an entity which he controls (“Valeska” and collectively the “Shareholders”) entered into a Voting Agreement (the “Voting Agreement”). Pursuant to the terms of the Voting Agreement the Shareholders agreed that for the Term of the Voting Agreement, as defined below, no Shareholder would vote any of the shares of common stock (the “Shares”) which they hold for (i.e. in favor of) the removal of William M. Simmons or Daniel Vesco, our Directors (the “New Directors”). The Shareholders also agreed that in the event of any shareholder vote of the Company (either by Board Meeting, a Consent to Action with Meeting, or otherwise) relating to the removal of the New Directors; the re-election of the New Directors; and/or the increase in the number of directors of the Company during the Term of the Voting Agreement, that such Shareholders would vote their Shares against the removal of the New Directors; for the re-election of such New Directors; and/or vote against the increase in the number of directors of the Company, without the unanimous consent of the New Directors, respectively.

The Voting Agreement further provided that in the event that either of the New Directors breaches his fiduciary duty to the Company, including, but not limited to such Director’s conviction of an act or acts constituting a felony or other crime involving moral turpitude, dishonesty, theft or fraud; such Director’s gross negligence in connection with his service to the Company as a Director and/or in any executive capacity which he may hold; and/or if any Shareholder becomes aware of information which would lead a reasonable person to believe that such Director has committed fraud or theft from the Company, or a violation of the Securities laws, the Voting Agreement shall not apply, and the Shareholders may vote their shares as they see fit.

The Term of the Voting Agreement is until June 5, 2009 (the “Term”). The Shareholders agreed to enter into the Voting Agreement in consideration for the New Directors agreeing to serve the Company as Directors of the Company.

On or about July 12, 2007, another one of our significant shareholders, Lucayan Oil and Gas Investments, Ltd. (“LOGI”), which is 50% owned by Max Maxwell, our former President and Director, entered into a Voting Agreement with us, which was amended by a First Amendment to Voting Agreement, which provided that the shares of common stock held by LOGI would be subject to the identical terms of our June 5, 2007 Voting Agreement with the Shareholders.

Cooperation Agreement and Mutual Release

On or about July 12, 2007, LOGI; Mr. Maxwell; Meredith Maxwell, Mr. Maxwell’s daughter and our former consultant; and A.E. Buzz Jehle, our former consultant (collectively the “Former Interested Parties”) entered into a Cooperation Agreement and Mutual Release (the “Release”) with us and Texaurus Energy, Inc. (“Texaurus”), our wholly owned Delaware subsidiary (for the purposes of the description of the Release, all references to “we,” “us,” the “Company” or similar words include Texaurus). In connection with the Release, we and the Former Interested Parties agreed to release each other (including employees, officers, directors, representatives, employees and assigns) from any and all claims, rights, causes of action and obligations which were known or unknown at the time of the entry into the Release, subject only to the Assignment by the Former Interested Parties of their rights, causes of actions or demands against any former officers or Directors of us to the Company and the New Directors (the “Assignment”) and the Extension. The release we provided to the Former Interested Parties was against any and all claims, rights, causes of action and obligations which were known at the time of the entry into the Release, or which are not brought to the attention of the New Directors or the Company by 5:00 P.M. Central Standard Time, on September 30, 2007 (the “Extension”).

Additionally, in connection with the Release, Mr. Maxwell personally agreed, to the best of his ability, to cooperate with us in connection with an audit of us and Texaurus; to provide a list of the known liabilities of the Company which Mr. Maxwell was aware of; and to personally certify the accuracy and completeness of any financial statements which the Company prepared covering the time period during which Mr. Maxwell was President of the Company, in a form similar to the Certification Of Chief Executive Officer and Chief Financial Officer Pursuant To Section 302 of The Sarbanes-Oxley Act Of 2002 and Certification of Chief Executive Officer; and (ii) Certification of Chief Financial Officer Pursuant To 18 U.S.C. Section 1350, as Adopted Pursuant To Section 906 Of The Sarbanes-Oxley Act Of 2002, which reporting companies are required to file as attachments to each periodic filing with the Commission, which certification Mr. Maxwell later made, for the periods from June 30, 2006 to March 31, 2007.

Mr. Maxwell also agreed pursuant to the terms of the Release that any options which he vested pursuant to the June 2006 options which he was granted by us would expire if unexercised on August 1, 2007; and that we owe him no rights to contribution or indemnification in connection with his service to the Company. Mr. Maxwell also certified that the shares of common stock granted to LOGI were issued for valid consideration and fully paid and non-assessable (the “Certification”). Additionally, pursuant to the terms of the Release, we agreed to indemnify Mr. Maxwell and Mr. Jehle against any dispute regarding the shares issued to LOGI, provided that such Certification is valid and correct.

Consulting Agreement

Effective July 1, 2007, we entered into a Consulting Agreement with Ibrahim Nafi Onat, our Director (the “Consulting Agreement”), pursuant to which Mr. Onat agreed to serve as our Director and Vice President of Operations for an initial term of twelve (12) months, which term is renewable month to month thereafter with the mutual consent of the parties. Pursuant to the Consulting Agreement we agreed to pay Mr. Onat $2,500 per month during the term of the Consulting Agreement, to issue him 500,000 restricted shares of common stock valued at the market price on the date of issuance, in connection with his entry into the Consulting Agreement and 500,000 restricted shares of common stock assuming he is still employed under the Consulting Agreement at the expiration of six (6) months from the effective date of the Consulting Agreement (the “Six Month Issuance”). The Consulting Agreement is described in greater detail below under “Directors, Executive Officers, Promoters and Control Persons; Compliance With Section 16(A) Of The Exchange Act.”

Material Corporate Events

On July 17, 2007, the Company's Board of Directors unanimously agreed by a written consent to action without a meeting, to adopt a Certificate of Designations for the creation of a Series A preferred stock (the "Series A Preferred Stock").

The Series A Preferred Stock has a par value of $0.001 per share. The Series A Preferred Stock consists of one thousand (1,000) shares, each having no dividend rights, no liquidation preference, and no conversion or redemption rights. However, the one thousand (1,000) shares of Series A Preferred Stock have the right, voting in aggregate, to vote on all shareholder matters equal to fifty-one percent (51%) of the total vote. For example, if there are 10,000,000 shares of the Company's common stock issued and outstanding at the time of a shareholder vote, the holders of Series A Preferred Stock, voting separately as a class, will have the right to vote an aggregate of 10,408,163 shares, out of a total number of 20,408,163 shares.

Additionally, the Company shall not adopt any amendments to the Company's Bylaws, Articles of Incorporation, as amended, make any changes to the Certificate of Designations, or effect any reclassification of the Series A Preferred Stock, without the affirmative vote of at least 66-2/3% of the outstanding shares of Series A Preferred Stock. However, the Company may, by any means authorized by law and without any vote of the holders of shares of Series A Preferred Stock, make technical, corrective, administrative or similar changes to the Certificate of Designations that do not, individually or in the aggregate, adversely affect the rights or preferences of the holders of shares of Series A Preferred Stock.

On or about July 26, 2007, with an effective date of July 31, 2007, we entered into a Termination of Lease Agreement (the “Termination Agreement”) with our landlord at 2200 Post Oak Blvd., Suite 340, Houston, Texas 77056 (the “Post Oak Office”). Pursuant to the terms of the Termination Agreement, we and the landlord agreed to terminate the lease on the Post Oak Office space, and we agreed to pay the landlord approximately $4,090 as a termination fee, $3,331 as payment of past due rental fees; and we also agreed to forfeit any right to our security deposit of approximately $1,578 held by the landlord pursuant to the terms of our lease in connection with such Termination Agreement.

On or about August 13, 2007, we entered into a Second Amendment to Management Services Agreement with Valeska Energy Corp. (“Valeska” and the “Second Amendment”).

Pursuant to the Second Amendment, we and Valeska agreed to extend the term of the Management Services Agreement until September 30, 2008, and to pay Valeska the following consideration in connection with agreeing to perform the services required by the original Management Services Agreement, and in consideration for allowing Daniel Vesco and William M. Simmons to serve as Directors of the Company, bringing on personnel to assist the Company with the day to day operations of the Company, and help bring the Company current in its filings (the “Services”):

	·	1,000 shares of the Company’s Series A Preferred Stock;
	·	A monthly fee of $20,000 per month during the extended term of the Second Amendment, plus reasonable and actual costs incurred by Valeska (or individuals or designees brought on by Valeska, including lodging, car rental and telephone expenses therewith) in connection with such Services;
	·	10,000,000 restricted shares of the Company’s common stock; and
	·	60,000,000 options to purchase shares of the Company’s common stock, which have a cashless exercise provision, are valid for a period of three years from their grant date, and have an exercise price of greater than 110% of the trading price of the Company’s common stock on the Pinksheets on the day of such grant, which exercise price is equal to $0.02 per share.

On or about October 30, 2007, we entered into a Cooperation Agreement and Mutual Release with our former consultant Terje Reiersen (“Reiersen” and the “Reiersen Release”). Pursuant to the Reiersen Release, Reiersen agreed to release us, our current and former officers, agents, directors, servants, attorneys, representatives, successors, employees and assigns from any and all rights, obligations, claims, demands and causes of action in contract or tort, under any federal or state law, whether known or unknown, relating to his services with the Company or the Company in general for any matter whatsoever other than in connection with any claims against any former officers or Directors of the Company, which claims Reiersen assigned to the Company. Reiersen also agreed to cooperate fully with us in connection with any reasonable requests from us for a period of sixty (60) days from the date of the Reiersen Release, that we would not owe him any rights of contribution or indemnification in connection with any services he rendered on our behalf and that we would not owe him any other consideration other than what we agreed to provide him in connection with the Reiersen Release (as described in greater detail below).

In connection with the Reiersen Release, we paid Reiersen $2,500 and issued Reiersen 250,000 restricted shares of our common stock.

On or about November 2, 2007, we entered into a First Amendment to Securities Purchase Agreement, Secured Term Note and Registration Rights Agreement with Laurus (the “First Amendment”). Pursuant to the First Amendment, Laurus agreed to:

(a)	waive any default which may have occurred as a result of our failure to become current in our filings with the Commission, assuming that we become current in our filings prior to December 15, 2007;

(b)	amend the terms of the Laurus Note to provide that a “Change of Control” of Texaurus under the Note, which requires approval of Laurus, includes any change in Directors such that Daniel Vesco and William M. Simmons are no longer Directors of Texaurus; and

(c)

amend the terms of the Registration Rights Agreement with Laurus to provide that the date we are required to gain effectiveness of a registration statement registering the shares of common stock issuable in connection with the exercise of the Laurus Warrant in the Company is amended to no later than April 30, 2008, and that the effective date of any additional registration statements required to be filed by us in connection with the Registration Rights Agreement, shall be thirty (30) days from such filing date.

In connection with the Reiersen Release, we agreed to pay Reiersen $2,500 within ten (10) business days of the parties entry into the Reiersen Release (which funds have been paid to date), and issue Reiersen 250,000 restricted shares of our common stock, which shares have been issued to date within ten (10) days of the parties entry into the Reiersen Release.

(a)	waive any default which may have occurred as a result of our failure to become current in our filings with the Commission, assuming that we become current in our filings prior to December 15, 2007, which date we were able to become current by;

(b)	amend the terms of the Laurus Note to provide that a “Change of Control” of Texaurus under the Note, which requires approval of Laurus, includes any change in Directors such that Daniel Vesco and William M. Simmons are no longer Directors of Texaurus; and

(c)

On or about November 28, 2007, we entered into a Settlement Agreement and Mutual Release (the “Jacobs Agreement”) by and between the Company, Frank A. Jacobs, our former officer and Director (“Jacobs”), and Jacobs Oil & Gas Limited, a British Columbia corporation (“JOGL” and collectively with Jacobs, the “Jacobs Parties”), Clover Capital, a creditor of the Company (“Clover”), Capersia Pte. Ltd., a Singapore company and a significant stockholder of the Company (“Capersia”), Peter Wilson, an individual and a former Director of the Company (“Wilson”), and Sterling Grant Capital, Inc., a British Columbia corporation, controlled by Mr. Wilson (“SGC” and collectively with Clover, Capersia and Wilson, the “Non-Jacobs Parties,” and with the Jacobs Parties, the “Interested Parties”). We had various disputes with the Interested Parties relating to the issuances of and transfers of various shares of our common stock and various of the Interested Parties had alleged that we owed them consideration (the “Disputes”). We entered into the Jacobs Agreement to settle the Disputes with the Interested Parties.

In consideration for the Company agreeing to enter into the Jacobs Agreement, the Jacobs Parties agreed to the following terms: the Jacobs Parties would return to the Company for cancellation 5,000,000 of the 7,500,000 shares purchased by Jacobs in March 2006 (the “Jacobs Shares”), which shares have not been cancelled to date, and are therefore included in the number of issued and outstanding shares disclosed throughout this report; all debt owed by Texhoma to the Jacobs Parties, known or unknown, was discharged and forgiven, including the total outstanding amount of the approximately $500,000 Promissory Note owed to Frank A. Jacobs by the Company (the “Jacobs Note”); the Company owes Jacobs no rights to contribution and/or indemnification in connection with Jacobs employment with the Company; Jacobs also certified the accuracy and correctness of the Company’s previously prepared annual and interim financial statements and periodic reports, relating to the time period of his employment from the period ending September 30, 2005 to the period ending March 31, 2007; the Jacobs Parties agreed they have no interest in and will not interfere with the issuance of or any subsequent transfers of shares to or from Lucayan Oil and Gas Investments, Ltd. (the “LOGI Shares”), a Bahamas corporation; Jacobs agreed to use his best efforts to answer the Company’s questions and produce documents in the future regarding operations and financials of the Company; Jacobs agreed that he no longer holds any exercisable options of the Company; the Voting Agreement entered into between various parties in June 2007, including Jacobs, remains in full affect and force against Jacobs; and Jacobs has no interest in any shares other than the aforementioned 2,500,000 shares.

Additionally, in consideration for the Company agreeing to enter into the Jacobs Agreement, the Non-Jacobs Parties agreed to the following terms: any and all debts owed by Texhoma to Clover, which purportedly totaled approximately $60,000, Capersia, which purportedly totaled $60,000 or any of the Non-Jacobs Parties (including approximately $20,000 purportedly owed to Wilson) was discharged and forgiven; the Non-Jacobs Parties agreed that they have no interest in and will not interfere with the issuance of the LOGI Shares; the Voting Agreement remains in full force and effect against Capersia; and in connection with the 30,000,000 shares of Company stock in Capersia’s possession received through Texhoma’s previous purchase of a 40% interest in Black Swan Petroleum Pty. Ltd. (the “Capersia Shares”), Capersia will not transfer shares in excess of 2% of Texhoma’s then outstanding shares in any three (3) month period, until the second anniversary of the Jacobs Agreement.

Lastly, in consideration for the Jacobs Parties and the Non-Jacobs Parties agreeing to the terms of the agreement, Texhoma agreed to the following terms: Jacobs will retain the remaining 2,500,000 shares of Company stock and Capersia will retain the aforementioned 30,000,000 shares of Company stock free and clear of any claims to such shares by the Company; and JOGL shall retain all rights to the 200,000 shares of Morgan Creek Energy Corp. (“Morgan Creek”) shares held in trust by JOGL as collateral for a promissory note issued to JOGL by the Company (the “Jacobs Note” and “Morgan Creek Shares”), the Company will release all claims to said shares or any additional shares of Morgan Creek that the Company may be due as a result of stock splits or share distributions.

Further, pursuant to the Jacobs Agreement, the Interested Parties agreed to release the Company from any and all rights, obligations, claims, demands and causes of action, known or unknown, asserted or unasserted relating to the Disputes or the Company or its current or former Directors, and the Company agreed to release the Jacobs Parties and the Non-Jacobs Parties from any and all rights, obligations, claims, demands, and causes of action arising from or relating to the Capersia Shares, Jacobs’ employment with the Company, the Jacobs Note, the Jacobs Shares, the Morgan Creek shares, and the LOGI Shares.

As a result of the Jacobs Agreement, the Company was able to settle approximately $640,000 in debt which it purportedly owed to the various Interested Parties and to settle any and all other claims which such parties, in return for the consideration discussed above, which mainly consisted of assigning the rights to the 200,000 shares of Morgan Creek Energy Corp. stock to Frank A. Jacobs, which shares had an approximate value of $92,000 based on the trading price of Morgan Creek Energy Corp.’s common stock on the date of the Jacobs Agreement of $0.46.

ITEM 2. DESCRIPTION OF PROPERTY

Office Space Lease

Effective June 11, 2007, we entered into a lease for office space at 100 Highland Park Village - Suite 200, Dallas, Texas. Pursuant to the office space lease, we agreed to rent approximately 80 square feet of office space for total monthly rent of $586 per month from the effective date of the agreement until June 30, 2008, and to rent another approximately 80 square feet of office space for total monthly rent of $1,675 starting September 1, 2007. Therefore, the total monthly rent due under the agreement was $586 from June 11, 2007 until September 1, 2007, and $1,675 thereafter for the term of the agreement. The lease also includes approximately $500 of additional monthly expenses associated with internet access, telephone and fax costs and answering services per month.

Oil and Gas Properties

Texaurus Energy, Inc. currently owns interests in three oil and natural gas producing fields, and an exploration project:

The Barnes Creek field is located in Allen Ph, Louisiana and operated by Zachry Exploration, Ltd. The 320-acre unit is produced by one well, which is L&H Partnership # 1. Oil and gas production is obtained from 10,200 ft deep Yegua sand formation. Texaurus interests in this field are 7.42299% working interest(“WI”) and 5.38167% net revenue interest (“NRI”). Geological and engineering data demonstrate that one well can adequately drain 320 acres in this formation, therefore no future well is planned in this unit.

Edgerly field is located in Calcasieu Ph, Louisiana and operated by Peoples Energy Prod. The field has four producing wells and a potential to drill two additional offset wells. Producing wells are North American Land No 1, No. 2, No. 3 and No. 4. These wells are producing from Marg Tex 1 & 2 sands. Texaurus interests in this field are 11.75625% WI and 8.51919% NRI.

Intracoastal field, which is also called Little White Lake field, is located in Vermillion Ph, Louisiana and operated by Key Operating. The field has three producing wells, which are Lease S/L 16995# 1, #2, and # 3. The wells demonstrate additional hydrocarbon production potential behind pipe for future recompletion. Texaurus interests in this field are 8.0% WI, and 5.84% NRI.

Texhoma separately holds an interest in the Clovelly project, located in LaFourche, Louisiana, which consists of two drilling locations. One of these locations is classified as proved undeveloped (“PUD”), and the other one is an exploratory drill site. Texhoma’s interests in the lease are approximately an 11% working interest and a 7.7% NRI before payout and 8.8% WI and 6.61% NRI after payout.

Below is an estimate of the reserves and future production and income attributable to certain leasehold interests held by us as of January 1, 2007, as prepared by R.A. Lenser and Associates, Inc., of Houston, Texas. The subject properties are located in the Barnes Creek, Edgerly, and Intracoastal City Fields, Allen, Calcasieu, and Vermilion Parishes, Louisiana. The results of this study are summarized below:

Texhoma Energy, Inc.

Estimated Net Reserves and Income Data

Attributable to Certain Leasehold Interests

As of January 1, 2008

	Proved Developed		Total
	Producing	Behind Pipe	Undeveloped	Proved
Remaining Reserves
Oil/Condensate - MBbls	66	4	-	70
Gas-MMCF	259	21	-	280

Liquid Hydrocarbon Volumes are expressed in thousands of barrels (MBbls). A barrel is equivalent to 42 United States gallons. Gas Volumes are expressed in millions of standard cubic feet (MMCF) at the contract temperature and pressure base of the state of Louisiana.

Reserve Definitions

The proved reserves disclosed above conform to the definitions as set forth in the Securities and Exchange Commission's Regulation S-X Part 210.4-10 (a) as clarified by various Commission Staff Accounting Bulletins and to the definitions endorsed by the Society of Petroleum Engineers (SPE), the Society of Petroleum Evaluation Engineers (SPEE) and the World Petroleum Congresses (WPC).

Estimate of Reserves

Estimates of reserves were prepared by the use of geological and engineering methods generally accepted by the petroleum industry. The method or combination of methods utilized in the analysis of each reservoir was tempered by experience in the area, stage of development, quality and completeness of basic data, and production history.

Where applicable, the volumetric method was employed for determining the original quantities of hydrocarbons in place. Where sufficient geological data was available, structural maps were prepared to delineate each reservoir and isopachous maps were constructed to determine reservoir volumes. Electrical logs, core analysis, and other available data were used to prepare these maps as well as to determine representative values for porosity and interstitial water saturation. Reserves based upon volumetric calculations or other methods such as analogy with offset wells are usually subject to greater revision than those based upon production and/or pressure performance data. Therefore, it may be necessary to revise these estimates up or down in the future as more reliable engineering data becomes available.

Reserves of depletion-type reservoirs or those whose performance disclosed reliable decline in production-rate trends or other diagnostic characteristics were estimated by the application of appropriate decline curves or other performance relationships. In the analysis of production decline curves, reserves were established only to a calculated economic limit.

Estimate of Future Producing Rates

Initial production rates were based on the current rates for those reservoirs now on production. If no production decline was established, a decline profile analogous to similar wells was used. If a decline trend was established, this trend was used as the basis for estimating future rates.

General

The reserves above are estimates only and should not be construed as being exact quantities. They may or may not be actually recovered and, if recovered, the revenues there from and the actual costs related thereto could be more or less than the currently estimated amounts. Also, estimates of reserves may increase or decrease as a result of future operations.

Reserves Reported to Other Agencies

The Company has not filed or reported reserve information to any federal authority or agency other than the Securities and Exchange Commission.

Productive Wells and Acreage

The total gross and net wells, expressed separately for oil and gas, and the total gross and net developed acres as of January 1, 2008, were as follows:

	Productive Wells		Developed Acres
Geographic Area Louisiana	Gross Oil Gas 8 0	Net Oil Gas 1 0	Gross Oil Gas 1,498 0	Net Oil Gas 141.4 0

Wells that produce both oil and gas are treated as oil wells herein. Of the 8 gross wells, all are producing oil and gas.

Undeveloped Acreage

At January 1, 2008, the Company held interests in 160 gross (18.8 net) undeveloped acres in the United States, as summarized below:

Geographic Area

Louisiana

Gross Acres

160

Net Acres

18.8

All the acreage shown is held by production from the Company’s wells that were producing as of January 1, 2008.

Production

The following table sets forth, by geographic area, for the fiscal years 2007 and 2006: 1) the Company’s portion of the net quantities of oil in barrels, and gas in thousands of cubic feet (“MCF”), produced from properties in which the Company had an interest; 2) the average sales price per barrel of oil and MCF of gas shown separately; and 3) the average lifting cost per unit of production of oil and gas shown together on an equivalent basis. The unit of production for purposes of averaging costs is barrels (“Bbls”) for oil, or barrels-of-oil equivalent (“BOE”) for gas. One BOE equals 6 MCF of gas.

	2007	2006
	Oil Gas	Oil Gas
1) Net Quantities: (Bbls or MCF) Louisiana	14,460 92,853	14,240 81,054
2) Average Sales Price/Bbl or MCF: Louisiana	$65.88 $8.63	$67.86 $8.52
3) Average Lifting Cost/Bbl or BOE: Louisiana	$14.85	$14.45

Drilling Activity

Drilling activity for 2007 included work over of the Little White Lakes’ field, Intracoastal SL #3, but resulted in a shut in well due to excessive water production. The Barnes Creek property well was successfully worked over and is currently producing at full potential. Peoples’ Energy, who operated the Edgerly Field, was acquired by El Paso during the year. As a result their future drilling activities have not been determined, resulting in two wells that were included in our production last year not being included in the current year, namely North American Land #5 and 6.

In fiscal 2006, the Company participated in drilling activity in the Allain Lebreton #2 well on a prospect close to the existing Clovelly oil and gas field in Louisiana. This drilling program was unsuccessful and the well was abandoned. The Company has not participated in any further exploratory drilling during the two years ended September 30, 2007.

Plan of Operations

Since the Company does not own the majority interests in the producing wells and in the leases, it is difficult to project future development and exploration activities. Based on previous reports and correspondence, a well is not expected to be drilled in the Clovelly Prospect in 2008.

Texhoma is aggressively pursuing new acquisitions in order to increase its production, oil and gas reserves.

ITEM 3. LEGAL PROCEEDINGS

Management of the Company is not aware of any legal proceedings contemplated by any governmental authority or other party involving the Company or its subsidiaries or its properties other than those described below. No director, officer or affiliate of the Company is (i) a party adverse to the Company in any legal proceedings; or (ii) has an adverse interest to the Company in any legal proceedings. Management is not aware of any other legal proceedings pending or that have been threatened against the Company, its subsidiaries or its properties, other than those described below.

The Company has been threatened with arbitration by ORX Resources, Inc. in connection with funds which ORX believes it is due in connection with fees and expenses owed by the Company in connection with the Clovelly Joint Venture. Our former President and Director, Max Maxwell, formerly served as Vice President and Director of ORX. ORX has not filed any formal proceeding against the Company, and the Company hopes to work with ORX to settle this matter and avoid any formal legal proceedings.

Matrixx Resource Holdings Inc. (“Matrixx”) claims the Company owes it approximately $60,000 in connection with funds that it paid for a backend interest in two of the Company’s wells on its Manville property, which wells were eventually found to be dry. The Company believes however, that it does not owe Matrixx the return of any funds in connection with such payments, as the wells were dry and as such there was no interest to transfer to Matrixx. In addition, the Company believes that Matrixx owes it approximately $16,000 in connection with additional fees and expenses which were paid by the Company, but attributable to Matrixx’s interest, and which were in addition to the $60,000 previously paid by Matrixx. While the parties are currently in discussions regarding such debt and we have been threatened with litigation by Matrixx, neither the Company nor Matrixx has filed any formal legal proceedings in connection with such debts to date.

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

None during the period of this report.

PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Our common stock currently trades on the "pink sheets" published by the National Quotation Bureau under the symbol "TXHE". However, the fact that our securities have limited and sporadic trading on the pink sheets does not by itself constitute a public market, and as such, historical price quotations relating to trades in our stock on the pink sheets have not been included in this filing. In the future, we plan to apply for quotation on the Over-The-Counter Bulletin Board, now that the Company has become current in its periodic filings with the Commission. As of December 26, 2007, the Company had approximately 231,412,224 shares of common stock outstanding held by approximately 184 shareholders of record, which amount does not include 18,000,000 shares of common stock previously held by Valeska Energy Corp. as of December 26, 2007, which the Company and Valeska have cancelled to date.

Recent Sales Of Unregistered Securities

In July 2007, we issued Mr. Ibrahim Nafi Onat an aggregate of 500,000 restricted shares of our common stock in connection with his entry into the Consulting Agreement (described above). We claim an exemption from registration afforded by Section 4(2) of the Securities Act of 1933, for the above issuance, since the issuance did not involve a public offering, the recipient took the securities for investment and not resale and the Company took appropriate measures to restrict transfer. No underwriters or agents were involved in the issuance and no underwriting discounts or commissions were paid by the Company.

In August 2007, we issued 1,000 shares of our Series A Preferred Stock to Valeska in connection with the Second Amendment to Management Services Agreement with Valeska (described above). We claim an exemption from registration afforded by Section 4(2) of the Securities Act of 1933, for the above issuance, since the issuance did not involve a public offering, the recipient took the securities for investment and not resale and the Company took appropriate measures to restrict transfer. No underwriters or agents were involved in the issuance and no underwriting discounts or commissions were paid by the Company.

In August 2007, in connection with the Second Amendment to Management Services Agreement with Valeska, we agreed to issue Valeska 10,000,000 shares of our restricted common stock and “cashless” options to purchase 60,000,000 shares of our common stock at an exercise price of $0.02 per share which price was greater than 110% of the trading value of our common stock on the grant date of such options, which options and shares have been issued as of the date of this report. We claimed an exemption from registration afforded by Section 4(2) of the Securities Act of 1933, for the above issuances, since the issuances did not involve a public offering, the recipient took the securities for investment and not resale and the Company took appropriate measures to restrict transfer. No underwriters or agents were involved in the issuance and no underwriting discounts or commissions were be paid by the Company.

In connection with the Reiersen Release (described above), we agreed to issue Terje Reiersen 250,000 restricted shares of our common stock, which shares have been issued. We will claim an exemption from registration afforded by Section 4(2) of the Securities Act of 1933, for the above issuance, since the issuance will not involve a public offering, the recipient will take the securities for investment and not resale and the Company will take appropriate measures to restrict transfer. No underwriters or agents will be involved in the issuance and no underwriting discounts or commissions will be paid by the Company.

On or about November 28, 2007, we entered into a Subscription Agreement with Pagest Services SA, a Swiss Company, pursuant to which we agreed to sell two units consisting of $125,000 in Convertible Promissory Notes with a conversion price of $0.0125 per share, convertible at the option of Purchaser, into the Company’s common stock, and Class A and Class B Warrants to purchase 5,000,000 shares of common stock with an exercise price of $0.02 and $0.03 per share, respectively, exercisable for a period of two years from the date of the Subscription Agreement (the “Units”). One Unit was sold immediately to the Purchaser, and one Unit was sold to Purchaser shortly after December 15, 2007. The Convertible Promissory Notes bear interest at the rate of 2% per annum, until paid in full, which amount will increase to 15% per annum, upon the occurrence of an Event of Default (as defined in the Convertible Promissory Notes). The Convertible Promissory Notes are due on the first anniversary of the date they are sold, with the first $125,000 in Convertible Promissory Notes being due on November 28, 2008, and the second on December 19, 2008, unless converted into shares of our common stock. In the event that our common stock trades on the market or exchange on which it then trades, at a trading price of more than $0.02 per share, for any 10 day trading period, the Convertible Promissory Note will automatically convert into shares of our common stock at the rate of one share for each $0.0125 owed to the subscriber. We also agreed to provide the subscriber piggy-back subscription rights in connection with the sale of the Units. We claim an exemption from registration afforded by Regulation S of the Securities Act of 1933, as amended ("Regulation S") for the above issuances since the issuances were made to a non-U.S. person (as defined under Rule 902 section (k)(2)(i) of Regulation S), pursuant to an offshore transaction, and no directed selling efforts were made in the United States by us, a distributor, any respective affiliates, or any person acting on behalf of any of the foregoing.

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

Plan of Operations

The Company’s current plan of operations for the next twelve (12) months is to seek a quotation of the Company’s common stock on the OTCBB, continue to get the Company’s accounting and controls and procedures in order, and work to decrease the Company’s current liabilities. In addition, the Company is aggressively seeking opportunities for acquisitions to grow the asset base of the Company and increase revenue and shareholder value.

In connection with our properties, a deal we had in place to sell the Clovelly Field interests fell through, and we are relying on the operators of our other properties regarding the direction of those prospects. To date, all of those operators have indicated that they have no plans to expand their current drilling prospects.

We currently believe that we can continue our operations for approximately the next three months with funds raised in June 2007, and anticipate needing to raise approximately $300,000 in the next twelve months to pay our current liabilities and maintain our current rate of monthly expenditures, of which there can be no assurance. Additionally, due to the fact that the assets held by Texaurus are not generating the level of revenue as we originally anticipated, we will need to raise additional capital in Texaurus to repay the interest and principal on the Laurus Note and/or for working capital purposes in the future, which funds may be raised through the sale of debt and/or equity in Texaurus.

RESULTS OF OPERATIONS FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2007 COMPARED TO THE FISCAL YEAR ENDED SEPTEMBER 30, 2006

We reported revenues of $1,848,000 for the year ended September 30, 2007 compared with $2,258,000 for the year ended September 30, 2006. The decrease in revenues for the year ended September 30, 2007, compared to the year ended September 30, 2006, was due to the fact that for the year ended September 30, 2007 we incurred revenue of $90,000 from the promotion and sale of our oil and gas lease investments as compared with revenue of $650,000 for the year ended September 30, 2006. This was offset by a $150,000 increase in production revenue due to our Little White Lake property, due to a full year of earning for the property during the year ended September 30, 2007, compared to only nine months for the year ended September 30, 2006. The result of the decrease in revenues from the promotion of oil and gas lease investments, offset by the increase in production revenue was a net decrease of $410,000 in revenue for the year ended September 30, 2007 as compared with the year ended September 30, 2006.

We had oil and gas exploration expenses of $445,000 for the year ended September 30, 2007 compared to $4,003,000 for the year ended September 30, 2006, a decrease of $3,558,000 from the prior period. The oil and gas exploration expenses for the year ended September 30, 2006, were higher than the year ended September 30, 2007, due to $920,000 in write down of investments that proved to be non-producing and were abandoned. In addition, the future production of the Little White Lake Property was estimated to be less than the value originally anticipated and as such an impairment of $2,682,000 was recognized for the year ended September 30, 2006, which was not represented for the year ended September 30, 2007.

Depletion of $1,036,000 was recorded for the year ended September 30, 2007 as compared with $1,302,000 for the year ended September 30, 2006. The reduced expense reflects the reduction in the value of Little White Lake Property as a result of recognizing the impairment at September 30, 2006.

We had total general and administrative expenses of $1,997,000 for the year ended September 30, 2007, compared to $810,000 for the year ended September 30, 2006, an increase of $1,187,000 from the prior period. The increase in general and administrative expenses was mainly due to $800,000 of option expense, $180,000 of accounting and legal expense incurred as a result of efforts to bring our filings current, and management fees of approximately $503,000 in the form of stock issued to Valeska Energy, which were not present during the year ended September 30, 2006.

In connection with our raising the necessary capital funding to pursue our planned oil and gas purchases we issued stock warrants to new subscribers of our common stock as well and our lenders. As a result of the expiration of some of these warrants during the year ended September 30, 2007, we recognized an $859,000 reduction in related stock accretion expense for the year ended September 30, 2007, as compared with accretion expense of $1,165,000 for the year ended September 30, 2006.

In order to raise capital, we also sold a portion of our working interest acquisitions to other parties and as a result earned $161,000 on these sales for the year ended September 30, 2006, as compared with $0 for the year ended September 30, 2007. As part of the proceeds from selling working interests in 2006, we accepted 200,000 shares of Morgan Creek Energy (“MCRE”) common stock with a value of $350,000. As of September 30, 2007 the trading price MCRE was trading at $0.50 per share and as such we reported an impairment of the investment of $250,000. Subsequent to the year ended September 30, 2007, we released all rights to the MCRE shares to our former officer and Director, Frank Jacobs, in connection with our entry into the Jacobs Agreement, described above.

We incurred net interest expense of $1,158,000 for the year ended September 30, 2007, in connection with the Laurus Note as compared with $583,000 of net interest expense for the year ended September 30, 2006. The increase in interest expense associated with the Laurus Note was due to the fact that the Laurus Note was outstanding and accruing interest for all of the year ended September 30, 2007, compared to only nine months of the year ended September 30, 2006.

We incurred a net loss of $2,188,000 for the year ended September 30, 2007 as compared to a net loss of $5,443,000 for the year ended September 30, 2006, a decrease in net loss of $3,255,000 from the prior period. The decrease in net loss was mainly due to the reduction in oil and gas exploration expenses and the reduction in stock accretion and impairment expenses and the reduction in depletion and depreciation offset by the increase in interest expense due on the Laurus note and option expense and the increase in general and administrative expenses.

LIQUIDITY AND CAPITAL RESOURCES

As of September 30, 2007, we had total assets of $5,870,000, consisting of cash of $45,000 and restricted cash, in connection with the funding by Laurus, which cash is only distributable with the consent of Laurus of $219,000, accounts receivable of $434,000, net oil and gas properties of $4,556,000 and other assets of $616,000.

We had current liabilities of $2,159,000, consisting of accounts payable of $503,000, accrued expenses of $1,203,000 and notes payable related parties of $453,000, and a long term note payable of $8,155,000, representing the amount due to Laurus under the Laurus Note at September 30, 2007. Our notes payable to related parties included notes which were payable to Capersia, Clover Capital and MFS Technology, of which the notes payable to Capersia, and Clover Capital were subsequently forgiven in connection with our entry into the Jacobs Agreement.

The approximately $493,000 note payable to Frank Jacobs, our former officer and Director, is comprised of a portion of the accrued expenses and notes payable described above, netted with advances to Mr. Jacobs which are included in accounts receivable. The full amount of the funds owed to Mr. Jacobs was forgiven by him as a result of the Jacobs Settlement described above.

We had negative working capital of $1,461,000 and a retained deficit of $15,005,000 as of September 30, 2007.

For the year ended September 30, 2007, we had cash provided by operating activities of $103,000, which consisted mainly of $714,594 of accrued expenses, $1,031,853 of depletion, $514,001 of stock issued for services, $323,018 of depreciation and amortization and $210,728 of other, offset by $2,187,921 of net loss and $858,573 of stock accretion gain.

We used cash for investing activities of $250,000, which amount reflects the impairment of the MCRE common stock investment.

We used $79,000 in cash for financing activities for the year ended September 30, 2007, a result of $381,391of repayments of loans from Laurus and from affiliates, offset by $297,500 of proceeds from the sale of common stock and warrants during the year ended September 30, 2007, which funds were raised to support our operating activities.

FUNDING TRANSACTIONS:

We raised an aggregate of $297,500 through the sale of 23,800,000 shares of common stock at $0.0125 per share between May and July 2007.

We raised an aggregate of $125,000 through the sale of a convertible note and warrants to an investor (described in greater detail above) subsequent to the year ended September 30, 2007. The same investor has also invested an additional $125,000 on similar terms on or about December 19, 2007.

We have subsequently used the majority of this funding to pay our general and administrative expenses and certain acquisitions including the purchase of the Leases from Sunray and the Management Agreement with Valeska, as described above.

We believe that we do not currently have sufficient funds to continue to pay the interest payments required on the Secured Term Note with Laurus, through the payment of production payments on the properties owned by Texaurus on an ongoing basis. As such, we are currently in negotiations with Laurus to amend the terms of the Secured Term Note, which there can be no assurance will be amended. Additionally, we will need to repay $8,500,000 (minus any payment of principal on the Note which we are able to make through our 80% production payments to Laurus) on March 27, 2009, which funds we do not currently have and which we can provide no assurances will be available when such Note is due. As such, if we are unable to come to terms with Laurus regarding the amendment and/or revision of the terms of the Secured Term Note, we will likely not be able to continue our business operations for more than approximately three months. Not including the substantial funds we will require to repay the principal on the Secured Term Note and/or that we will require to make the required interest payments on the Secured Term Note, we will require approximately $300,000 of additional capital to continue our planned oil and gas operations and seek out new acquisitions.

The Company remains reliant on raising further equity funds and our growth and continued operations could be impaired by limitations on our access to the capital markets. In the event that we or Texaurus do not generate the amount of revenues from our oil and gas properties which we anticipate, and/or we or Texaurus decide to purchase additional oil and gas properties and are required to raise additional financing, we may have to raise additional capital and/or scale back our operations which would have a material adverse impact upon our ability to pursue our business plan. There can be no assurance that capital from outside sources will be available, or if such financing is available, it may involve issuing securities senior to our common stock, the common stock of Texaurus or additional shares of the common stock of Texaurus or equity financings which are dilutive to holders of our common stock. In addition, in the event we do not raise additional capital from conventional sources, it is likely that our growth will be restricted and we may need to scale back or curtail implementing our business plan.

We have no current commitments from our officers and Directors or any of our shareholders to supplement our operations or provide us with financing in the future. If we are unable to raise additional capital from conventional sources and/or additional sales of stock in the future, we may be forced to curtail or cease our operations. Even if we are able to continue our operations, the failure to obtain financing could have a substantial adverse effect on our business and financial results.

RISK FACTORS

You should carefully consider the following risk factors and other information in this annual report on Form 10-KSB before deciding to become a holder of our Common Stock. If any of the following risks actually occur, our business and financial results could be negatively affected to a significant extent.

WE WILL NEED ADDITIONAL FINANCING TO CONTINUE OUR BUSINESS PLAN AND DRILL AND STUDY ADDITIONAL WELLS, WHICH FINANCING, IF WE ARE UNABLE TO RAISE MAY FORCE US TO SCALE BACK OR ABANDON OUR BUSINESS PLAN.

We raised $8,500,000 from the sale of a Secured Term Note to Laurus Master Fund, Ltd. ("Laurus") in March 2006. However, approximately $7,894,235 of the amount borrowed from Laurus was subsequently used to purchase the Intracoastal City property, the interests in the Barnes Creek gas field and the Edgerly field and to pay closing costs and fees in connection with the various funding transactions.

We raised an aggregate of $384,000 through the sale of 4,800,000 units at a price of $0.08 per unit during June through December 2006, which units each included one (1) share of common stock and one (1) one-year warrant to purchase one (1) share of our common stock at an exercise price of $0.15 per share. We raised an aggregate of $297,500 through the sale of 23,800,000 shares of common stock at $0.0125 per share between May and July 2007.

Additionally, as described below, we cannot be sure that we will find any oil and/or gas on our properties in the future, our current properties will continue to produce, our current production will be sufficient to repay the interest (or principal) on the Laurus Note, nor can we provide any assurances that if found, that the oil and/or gas will be in commercial quantities, that we will be able to extract it from the ground, that we will not face liability in connection with our extraction efforts, and/or that we will be able to generate the revenues we expect from the future sale of any oil and gas we may discover in the future.

Finally, we may choose to spend additional monies on the purchases of oil and gas properties in the future. Depending on the decisions of our management, the volatility of the prices of oil and/or gas, our exploration activities, and/or potential liability, and the amount of money we receive from the sale of oil and gas, if any, we may need to raise additional capital substantially faster than six months, which we currently estimate such previously borrowed monies will last. We do not currently have any additional commitments or identified sources of additional capital from third parties or from our officers, directors or majority shareholders. We can provide no assurance that additional financing will be available on favorable terms, if at all. If we are not able to raise the capital necessary to continue our business operations, we may be forced to abandon or curtail our business plan and/or suspend our exploration activities.

WE OWE LAURUS MASTER FUND, LTD., A SUBSTANTIAL AMOUNT OF MONEY WHICH WE DO NOT HAVE.

In connection with the Securities Purchase Agreement, Laurus Master Fund, Ltd. ("Laurus"), purchased a $8,500,000 Secured Term Note from Texaurus, which we have guaranteed, and which bears interest at the rate of 9.25% per year (as of December 26, 2007), which is due and payable on March 27, 2009, and which principal and interest is repayable by way of a production payments equal to 80% of the gross production revenue received by Texaurus in connection with the Intracoastal City Field, the Edgerly and the Barnes Creek Properties.

There can be no assurance that we will have sufficient funds to pay any principal or interest on the Note when due on March 27, 2009, if such repayment amount is not sufficiently covered by the payment of production proceeds to Laurus, as described above, and we do not currently believe that such production payments will be sufficient to repay such Note or such interest as of the date of this filing. If we do not have sufficient funds to pay the total remaining amount of the Note (after taking into account payments of principal, which we may not have sufficient funds to pay) when due, we will be in default and Laurus may take control of substantially all of our assets (as described in more detail under "Risks Relating to the Company's Securities"). As a result, we will need to raise or otherwise generate approximately $8,500,000 to repay the Note (not including any adjustments for payment of principal in connection with production payments paid by Texaurus) by March 27, 2009. If we fail to raise this money, we could be forced to abandon or curtail our business operations, which could cause any investment in the Company to become worthless.

WE RELY HEAVILY ON WILLIAM M. SIMMONS AND DANIEL VESCO, OUR OFFICERS AND DIRECTORS, AND IF THEY WERE TO LEAVE, WE COULD FACE SUBSTANTIAL COSTS IN SECURING SIMILARLY QUALIFIED OFFICERS AND DIRECTORS.

Our success depends upon the personal efforts and abilities of William M. Simmons, our President and Director and Daniel Vesco, our Chief Executive Officer and Director. Our ability to operate and implement our exploration activities is heavily dependent on the continued service of Mr. Simmons and Mr. Vesco and our ability to attract qualified contractors and consultants on an as-needed basis.

We face continued competition for such contractors and consultants, and may face competition for the services of Mr. Simmons and/or Mr. Vesco in the future. We do not have any employment contracts with Mr. Simmons or Mr. Vesco, nor do we currently have any key man insurance on Mr. Simmons or Mr. Vesco. Mr. Simmons and Mr. Vesco are our driving forces and are responsible for maintaining our relationships and operations. We cannot be certain that we will be able to retain Mr. Simmons and Mr. Vesco and/or attract and retain such contractors and consultants in the future. The loss of either Mr. Simmons and Mr. Vesco, or both and/or our inability to attract and retain qualified contractors and consultants on an as-needed basis could have a material adverse effect on our business and operations.

WE HAVE BECOME AWARE THAT SPAM EMAILS REFERENCING THE COMPANY HAVE BEEN DISSEMINATED IN THE PAST, WHICH COULD AFFECT THE MARKET FOR AND/OR THE VALUE OF OUR COMMON STOCK.

It has come to our attention that during the month of October 2006 certain spam-emails, containing false and misleading information about our company, were disseminated over the internet. The spam-emails distributed by third parties that are not associated with the Company or its Officers or Directors have not been authorized, sanctioned or paid for by the Company. We caution investors to review our most recent Form 8-K with the Commission, our official press releases and our periodic filings, which we anticipate filing and amending in the future, before making any investment in us.

While we are not responsible for the dissemination of the spam-emails and are not aware of who was responsible, we were contacted by the Commission and were requested to voluntarily provide shareholder information and disclosures in connection with the origins of the dissemination of such spam emails. The Company cooperated fully with the Commission.

The fact that someone disseminated spam emails about our company and the fact that the Commission previously looked into such emails may be perceived by potential investors as a negative factor which could adversely affect the market for and/or the value of our stock.

BECAUSE OF THE SPECULATIVE NATURE OF OIL AND GAS EXPLORATION, THERE IS SUBSTANTIAL RISK THAT NO ADDITIONAL COMMERCIALLY EXPLOITABLE OIL OR GAS WILL BE FOUND AND THAT OUR BUSINESS WILL FAIL.

The search for commercial quantities of oil as a business is extremely risky. We cannot provide investors with any assurance that our properties contain commercially exploitable quantities of oil and/or gas.

The exploration expenditures to be made by us may not result in the discovery of commercial quantities of oil and/or gas and problems such as unusual or unexpected formations and other conditions involved in oil and gas exploration, and often result in unsuccessful exploration efforts. If we are unable to find commercially exploitable quantities of oil and gas, and/or we are unable to commercially extract such quantities, we may be forced to abandon or curtail our business plan, and as a result, any investment in us may become worthless.

OUR TOTAL AMOUNT OF ISSUED AND OUTSTANDING SHARE AMOUNTS MAY BE INCORRECT, AND WE MAY HAVE OUTSTANDING SHARES WHICH ARE UNACCOUNTED FOR.

We have become aware of a subscription agreement relating to the sale of certain shares of our common stock in February 2005, which shares have not been issued to date, and which subscription agreement we have been unable to verify as of the date of this filing. As a result of the subscription agreement, and our previous failure to issue shares in connection with such subscription agreement, we may have potential liability for such shareholders loss of liquidity and/or the decline in the value of our common stock. Additionally, there may be other subscription agreements which we are not aware of relating to the sale of our common stock, which sales and issuances are not currently reflected with our Transfer Agent and/or in the number of outstanding shares of common stock disclosed throughout this report. As a result, we may have a larger number of shares outstanding than we currently show on our shareholders list. This difference, if present, may force us to revise our filings and/or may mean that the ownership percentage of certain shares of common stock disclosed throughout this report is incorrect. If we are required to issue additional shares of common stock in the future relating to previous subscription agreements which our current management was and/or is not aware, it could cause substantial dilution to our existing shareholders and/or we could face potential liability in connection with our failure to issue such shares when originally subscribed.

BECAUSE OF THE INHERENT DANGERS INVOLVED IN OIL AND GAS EXPLORATION, THERE IS A RISK THAT WE MAY INCUR LIABILITY OR DAMAGES AS WE CONDUCT OUR BUSINESS OPERATIONS, WHICH COULD FORCE US TO EXPEND A SUBSTANTIAL AMOUNT OF MONEY IN CONNECTION WITH LITIGATION AND/OR A SETTLEMENT.

The oil and natural gas business involves a variety of operating hazards and risks such as well blowouts, pipe failures, casing collapse, explosions, uncontrollable flows of oil, natural gas or well fluids, fires, spills, pollution, releases of toxic gas and other environmental hazards and risks. These hazards and risks could result in substantial losses to us from, among other things, injury or loss of life, severe damage to or destruction of property, natural resources and equipment, pollution or other environmental damage, cleanup responsibilities, regulatory investigation and penalties and suspension of operations. In addition, we may be liable for environmental damages caused by previous owners of property purchased and leased by us. As a result, substantial liabilities to third parties or governmental entities may be incurred, the payment of which could reduce or eliminate the funds available for exploration, development or acquisitions or result in the loss of our properties and/or force us to expend substantial monies in connection with litigation or settlements. As such, there can be no assurance that any insurance obtained by us will be adequate to cover any losses or liabilities. We cannot predict the availability of insurance or the availability of insurance at premium levels that justify our purchase. The occurrence of a significant event not fully insured or indemnified against could materially and adversely affect our financial condition and operations. We may elect to self-insure if management believes that the cost of insurance, although available, is excessive relative to the risks presented. In addition, pollution and environmental risks generally are not fully insurable. The occurrence of an event not fully covered by insurance could have a material adverse effect on our financial condition and results of operations, which could lead to any investment in us becoming worthless.

WE REQUIRE SUBSTANTIAL ADDITIONAL FINANCING TO CONTINUE OUR EXPLORATION AND DRILLING ACTIVITIES, WHICH FINANCING IS OFTEN HEAVILY DEPENDENT ON THE CURRENT MARKET PRICE FOR OIL AND GAS, WHICH WE ARE UNABLE TO PREDICT.

Our growth and continued operations could be impaired by limitations on our access to capital markets. If the market for oil and/or gas were to weaken for an extended period of time, our ability to raise capital would be substantially reduced. There can be no assurance that capital from outside sources will be available, or that if such financing is available, that it will not involve issuing securities senior to the common stock or equity financings which will be dilutive to holders of common stock. Such issuances, if made, would likely cause a decrease in the value of our common stock.

THE MARKET FOR OIL AND GAS IS INTENSELY COMPETITIVE, AND AS SUCH, COMPETITIVE PRESSURES COULD FORCE US TO ABANDON OR CURTAIL OUR BUSINESS PLAN.

The market for oil and gas exploration services is highly competitive, and we only expect competition to intensify in the future. Numerous well-established companies are focusing significant resources on exploration and are currently competing with us for oil and gas opportunities. Additionally, there are numerous companies focusing their resources on creating fuels and/or materials which serve the same purpose as oil and gas, but are manufactured from renewable resources. As a result, there can be no assurance that we will be able to compete successfully or that competitive pressures will not adversely affect our business, results of operations and financial condition. If we are not able to successfully compete in the marketplace, we could be forced to curtail or even abandon our current business plan, which could cause any investment in us to become worthless.

WE MAY NOT BE ABLE TO SUCCESSFULLY MANAGE OUR GROWTH, WHICH COULD LEAD TO OUR INABILITY TO IMPLEMENT OUR BUSINESS PLAN.

Our growth is expected to place a significant strain on our managerial, operational and financial resources, especially considering that we currently only have three Directors and a small number of executive officers and employees. Further, as we enter into additional contracts, we will be required to manage multiple relationships with various consultants, businesses and other third parties. These requirements will be exacerbated in the event of our further growth or in the event that the number of our drilling and/or extraction operations increases. There can be no assurance that our systems, procedures and/or controls will be adequate to support our operations or that our management will be able to achieve the rapid execution necessary to successfully implement our business plan. If we are unable to manage our growth effectively, our business, results of operations and financial condition will be adversely affected, which could lead to us being forced to abandon or curtail our business plan and operations.

THE PRICE OF OIL AND NATURAL GAS HAS HISTORICALLY BEEN VOLATILE AND IF IT WERE TO DECREASE SUBSTANTIALLY, OUR PROJECTIONS, BUDGETS, AND REVENUES WOULD BE ADVERSELY EFFECTED, AND WE WOULD LIKELY BE FORCED TO MAKE MAJOR CHANGES IN OUR OPERATIONS.

Our future financial condition, results of operations and the carrying value of our oil and natural gas properties depend primarily upon the prices we receive for our oil and natural gas production. Oil and natural gas prices historically have been volatile and likely will continue to be volatile in the future, especially given current world geopolitical conditions. Our cash flows from operations are highly dependent on the prices that we receive for oil and natural gas. This price volatility also affects the amount of our cash flows available for capital expenditures and our ability to borrow money or raise additional capital. The prices for oil and natural gas are subject to a variety of additional factors that are beyond our control. These factors include:

o the level of consumer demand for oil and natural gas;

o the domestic and foreign supply of oil and natural gas;

o the ability of the members of the Organization of Petroleum Exporting Countries ("OPEC") to agree to and maintain oil price and production controls;

o the price of foreign oil and natural gas;

o domestic governmental regulations and taxes;

o the price and availability of alternative fuel sources;

o weather conditions;

o market uncertainty due to political conditions in oil and natural gas producing regions, including the Middle East; and

o worldwide economic conditions.

These factors as well as the volatility of the energy markets generally make it extremely difficult to predict future oil and natural gas price movements with any certainty. Declines in oil and natural gas prices would not only reduce our revenue, but could reduce the amount of oil and natural gas that we can produce economically and, as a result, could have a material adverse effect upon our financial condition, results of operations, oil and natural gas reserves and the carrying values of our oil and natural gas properties. If the oil and natural gas industry experiences significant price declines, we may be unable to make planned expenditures, among other things. If this were to happen, we may be forced to abandon or curtail our business operations, which would cause the value of an investment in us to decline in value, or become worthless.

OUR ESTIMATES OF RESERVES COULD HAVE FLAWS, OR MAY NOT ULTIMATELY TURN OUT TO BE CORRECT OR COMMERCIALLY EXTRACTABLE AND AS A RESULT, OUR FUTURE REVENUES AND PROJECTIONS COULD BE INCORRECT.

Estimates of reserves and of future net revenues prepared by different petroleum engineers may vary substantially depending, in part, on the assumptions made and may be subject to adjustment either up or down in the future. Our actual amounts of production, revenue, taxes, development expenditures, operating expenses, and quantities of recoverable oil and gas reserves may vary substantially from the estimates. Oil and gas reserve estimates are necessarily inexact and involve matters of subjective engineering judgment. In addition, any estimates of our future net revenues and the present value thereof are based on assumptions derived in part from historical price and cost information, which may not reflect current and future values, and/or other assumptions made by us that only represent our best estimates. If these estimates of quantities, prices and costs prove inaccurate, we may be unsuccessful in expanding our oil and gas reserves base with our acquisitions. Additionally, if declines in and instability of oil and gas prices occur, then write downs in the capitalized costs associated with our oil and gas assets may be required. Because of the nature of the estimates of our reserves and estimates in general, we can provide no assurance that additional or further reductions to our estimated proved oil and gas reserves and estimated future net revenues will not be required in the future, and/or that our estimated reserves will be present and/or commercially extractable. If our reserve estimates are incorrect, the value of our common stock could decrease and we may be forced to write down the capitalized costs of our oil and gas properties.

OUR OPERATIONS ARE HEAVILY DEPENDENT ON CURRENT ENVIRONMENTAL REGULATIONS, WHICH WE ARE UNABLE TO PREDICT, AND WHICH MAY CHANGE IN THE FUTURE, CAUSING US TO EXPEND SUBSTANTIAL ADDITIONAL CAPITAL.

Public interest in the protection of the environment has increased dramatically in recent years. Our oil and natural gas production and our processing, handling and disposal of hazardous materials, such as hydrocarbons and naturally occurring radioactive materials (if any) are subject to stringent regulation. We could incur significant costs, including cleanup costs resulting from a release of hazardous material, third-party claims for property damage and personal injuries fines and sanctions, as a result of any violations or liabilities under environmental or other laws. Changes in or more stringent enforcement of environmental laws could force us to expend additional operating costs and capital expenditures to stay in compliance.

Various federal, state and local laws regulating the discharge of materials into the environment, or otherwise relating to the protection of the environment, directly impact oil and gas exploration, development and production operations, and consequently may impact our operations and costs. These regulations include, among others, (i) regulations by the Environmental Protection Agency and various state agencies regarding approved methods of disposal for certain hazardous and non-hazardous wastes; (ii) the Comprehensive Environmental Response, Compensation, and Liability Act, Federal Resource Conservation and Recovery Act and analogous state laws which regulate the removal or remediation of previously disposed wastes (including wastes disposed of or released by prior owners or operators), property contamination (including groundwater contamination), and remedial plugging operations to prevent future contamination; (iii) the Clean Air Act and comparable state and local requirements which may result in the gradual imposition of certain pollution control requirements with respect to air emissions from our operations; (iv) the Oil Pollution Act of 1990 which contains numerous requirements relating to the prevention of and response to oil spills into waters of the United States; (v) the Resource Conservation and Recovery Act which is the principal federal statute governing the treatment, storage and disposal of hazardous wastes; and (vi) state regulations and statutes governing the handling, treatment, storage and disposal of naturally occurring radioactive material.

Management believes that we are in substantial compliance with applicable environmental laws and regulations. To date, we have not expended any material amounts to comply with such regulations, and management does not currently anticipate that future compliance will have a materially adverse effect on our consolidated financial position, results of operations or cash flows. However, if we are deemed to not be in compliance with applicable environmental laws, we could be forced to expend substantial amounts to be in compliance, which would have a materially adverse effect on our financial condition. If this were to happen, any investment in us could be lost.

THE COMPANY HAS ESTABLISHED PREFERRED STOCK WHICH CAN BE DESIGNATED BY THE COMPANY'S BOARD OF DIRECTORS WITHOUT SHAREHOLDER APPROVAL AND HAS ESTABLISHED SERIES A PREFERRED STOCK, WHICH GIVES THE HOLDERS MAJORITY VOTING POWER OVER THE COMPANY.

The Company has 1,000,000 shares of preferred stock authorized, and 1,000 shares of Series A Preferred Stock authorized. Shares of preferred stock of the Company may be issued from time to time in one or more series, each of which shall have distinctive designation or title as shall be determined by the Board of Directors of the Company ("Board of Directors") prior to the issuance of any shares thereof. The preferred stock shall have such voting powers, full or limited, or no voting powers, and such preferences and relative, participating, optional or other special rights and such qualifications, limitations or restrictions thereof as adopted by the Board of Directors. Because the Board of Directors is able to designate the powers and preferences of the preferred stock without the vote of a majority of the Company's shareholders, shareholders of the Company will have no control over what designations and preferences the Company's preferred stock will have. As a result of this, the Company's shareholders may have less control over the designations and preferences of the preferred stock and as a result the operations of the Company.

THE COMPANY HAS ESTABLISHED SERIES A PREFERRED STOCK, WHICH GIVES THE HOLDERS MAJORITY VOTING POWER OVER THE COMPANY.

The Company has 1,000 shares of Series A Preferred Stock authorized. All outstanding shares of Series A Preferred stock, which are all currently held by Valeska Energy Corp., the beneficial owner of which is William M. Simmons, the President and Director of the Company, can vote in aggregate on all shareholder matters equal to fifty-one percent (51%) of the total vote. Because of the shares of Series A Preferred Stock, Valeska Energy Corp., will effectively exercise voting control over the Company. As a result of this, the Company's shareholders will have less control over the operations of the Company.

WILLIAM M. SIMMONS, OUR PRESIDENT CAN EXERCISE VOTING CONTROL OVER CORPORATE DECISIONS.

William M. Simmons (through his personal beneficial ownership and through his voting control over Valeska Energy Corp. (“Valeska”)) beneficially owns 27,200,000 shares of common stock, additionally; Valeska holds all 1,000 shares of our outstanding shares of Series A Preferred Stock, which vote approximately 240,857,776 voting shares. As a result, Mr. Simmons is able to vote a total of approximately 268,057,776 voting shares based on approximately 472,270,000 voting shares outstanding (representing 231,412,224 shares of common stock outstanding and approximately 240,857,776 shares of stock which the Series A Preferred Stock are able to vote) representing approximately 61.6% of our outstanding voting shares. As a result, our Directors and officers will exercise control in determining the outcome of all corporate transactions or other matters, including the election of directors, mergers, consolidations, the sale of all or substantially all of our assets, and also the power to prevent or cause a change in control. The interests of Mr. Simmons may differ from the interests of the other stockholders and thus result in corporate decisions that are adverse to other shareholders.

THE REMOVAL OF MR. VESCO AND MR. SIMMONS AS DIRECTORS OF THE COMPANY IS PROTECTED BY VOTING AGREEMENTS ENTERED INTO WITH THE COMPANY’S MAJORITY SHAREHOLDERS.

Certain of the Company’s majority shareholders, including Capersia Pte. Ltd., Lucayan Oil and Gas Investments, Ltd., Frank A. Jacobs (the Company’s former Chief Executive Officer and Director) and Valeska Energy Corp. (the “Voting Shareholders”) entered into Voting Agreements whereby they agreed that they would not vote the aggregate of 71,874,000 shares of common stock which they hold for (i.e. in favor of) the removal of Mr. Simmons or Mr. Vesco (the “New Directors”) until the expiration of the agreements on June 5, 2009. The Voting Shareholders also agreed that in the event of any shareholder vote of the Company (either by Board Meeting, a Consent to Action without Meeting, or otherwise) relating to the removal of the New Directors; the re-election of the New Directors; and/or the increase in the number of directors of the Company during the term of the Voting Agreements, that such Voting Shareholders would vote their shares against the removal of the New Directors; for the re-election of such New Directors; and/or vote against the increase in the number of directors of the Company, without the unanimous consent of the New Directors, respectively. The Voting Agreements also included a provisions whereby in the event that either of the New Directors breaches his fiduciary duty to the Company, including, but not limited to such New Director’s conviction of an act or acts constituting a felony or other crime involving moral turpitude, dishonesty, theft or fraud; such New Director’s gross negligence in connection with his service to the Company as a Director and/or in any executive capacity which he may hold; and/or if any Voting Shareholder becomes aware of information which would lead a reasonable person to believe that such New Director has committed fraud or theft from the Company, or a violation of the Securities laws (each a “Breach of Fiduciary Duty”), this voting requirement set forth above shall not apply. As a result of the Voting Agreements, it will likely be impossible for the shareholders of the Company to remove Mr. Simmons or Mr. Vesco as Directors of the Company, unless a Breach of Fiduciary Duty occurs, and even then, due to Valeska’s ownership of the Series A Preferred Stock (as described above), it will likely be impossible for such New Directors to be removed as Directors of the Company.

THE INTERESTS OF MR. SIMMONS AND MR. VESCO, OUR PRESIDENT AND CHIEF EXECUTIVE OFFICER, RESPECTIVELY, MAY DIFFER FROM THE INTERESTS OF OUR OTHER SHAREHOLDERS, AND THEY MAY ALSO COMPETE WITH THE COMPANY OR ENTER INTO TRANSACTIONS SEPARATE FROM THE COMPANY.

Mr. Simmons and Mr. Vesco, our President and Chief Executive Officer, respectively, are involved in business interests separate from their involvement with the Company, including but not limited to Valeska Energy Corp., which business and/or companies may also operate in the oil and gas industry similar to and/or in competition with the Company. Mr. Simmons and Mr. Vesco are under no obligation to include us in any transactions which they undertake. As a result, we may not benefit from connections they make and/or agreements they enter into while employed by us, and they, or companies they are associated with, including, but not limited to Valeska, may profit from transactions which they undertake while we do not. As a result, they may find it more lucrative or beneficial to cease serving as officers or Directors of the Company in the future and may resign from the Company at that time. Furthermore, while employed by us, shareholders should keep in mind that they are under no obligation to share their contacts and/or enter into favorable contracts and/or agreements they may come across with the Company, and as a result may choose to enter into such contracts or agreements through companies which they own, which are not affiliated with us, and from which we will receive no benefit. Finally, certain of the agreements they may enter into on our behalf may benefit them more than us, including, but not limited to the Management Agreement, which currently pays Valeska $20,000 per month.

RISKS RELATING TO THE COMPANY'S SECURITIES

A DEFAULT BY US UNDER THE SECURED TERM NOTE, TEXHOMA WARRANT OR TEXAURUS WARRANT, WOULD ENABLE LAURUS MASTER FUND, LTD., TO TAKE CONTROL OF SUBSTANTIALLY ALL OF OUR ASSETS.

The Secured Term Note, Texhoma Warrant and Texaurus Warrant, are secured by Laurus by a continuing security interest in all of our assets, including without limitation, our cash, cash equivalents, accounts receivable, deposit accounts, inventory, equipment, goods, fixtures and other tangible and intangible assets, which we own or at any time in the future may acquire rights, title or interest to. As a result, if we default under any provision of the Note, Texhoma Warrant or Texaurus Warrant or we fail to pay any amounts due to Laurus, Laurus may take control of substantially all of our assets. If this were to happen, we could be left with no revenue producing assets, and the value of our common stock could become worthless.

WE MAY BE REQUIRED TO PAY PENALTIES TO LAURUS MASTER FUND, LTD. UNDER THE REGISTRATION RIGHTS AGREEMENT, WHICH COULD FORCE US TO EXPEND A SUBSTANTIAL AMOUNT OF THE MONEY WE HAVE PREVIOUSLY RAISED.

We granted Laurus Master Fund, Ltd., registration rights to the shares issuable to Laurus in connection with the Texhoma Warrant, pursuant to a Registration Rights Agreement, and we plan to register such shares pursuant to a Form SB-2 Registration Statement, once we become current in our filings with the Commission. We agreed pursuant to the Registration Rights Agreement to use our best efforts to file the Registration Statement by May 29, 2006 (60 days after the Closing) and to obtain effectiveness of such registration statement by September 25, 2006 (180 days after the Closing), neither of which deadlines we have met; however, pursuant to the First Amendment (described above), Laurus agreed to amend the date we are required to have gained effectiveness of the Registration Statement by, to April 30, 2008.. Moving forward, should we fail to obtain effectiveness of the registration statement, and such failure is deemed to be a default under the Note, we could be forced to pay penalties to Laurus. As a result, we could be forced to abandon or scale back our current planned operations and/or raise additional capital, which could cause substantial dilution to our existing shareholders.

THE TEXHOMA WARRANT CONTAINS PROVISIONS WHEREBY LAURUS MASTER FUND, LTD. MAY HOLD MORE THAN 4.99% OF OUR COMMON STOCK, PROVIDED THEY PROVIDE US SEVENTY-FIVE (75) DAYS NOTICE OR AN EVENT OF DEFAULT OCCURS.

Although Laurus may not exercise its Texhoma Warrant if such exercise would cause it to own more than 4.99% of our outstanding common stock, the Texhoma Warrant also contains provisions which provide for the 4.99% limit to be waived provided that Laurus provides us with 75 days notice of its intent to hold more than 4.99% of our common stock or upon the occurrence of an event of default (as defined under the Note). As a result, if we receive 75 days notice from Laurus and/or an event of default occurs, Laurus may fully exercise the Texhoma Warrant and fully convert the Texhoma Warrant into shares of our common stock. If this were to happen, it would cause immediate and substantial dilution to our existing shareholders and if it were to happen when our Registration Statement covering Laurus' securities has been declared effective, the subsequent sale of such shares in the marketplace, if affected, could cause the trading value of our common stock, if any, to decrease substantially.

IF AN EVENT OF DEFAULT OCCURS UNDER THE NOTE, TEXHOMA WARRANT OR TEXAURUS WARRANT OR ANY OF THE RELATED AGREEMENTS, WE COULD BE FORCED TO IMMEDIATELY PAY THE AMOUNTS DUE UNDER THE NOTE.

The Secured Term Note, Texhoma Warrant and Texaurus Warrant include provisions whereby Laurus Master Fund, Ltd., may make the amounts outstanding under the Note due and payable if an event of default occurs under the Note, which events of default include:

our failure to pay amounts due under the Note;

breach of any covenants under the Note, if not cured in the time periods provided;

breach of any warranties found in the Note;

the occurrence of any default under any agreement, which causes any contingent obligation to become due prior to its stated maturity or to become payable;

any change or occurrence likely to have a material adverse effect on the business, assets, liabilities, financial condition, our operations or prospects;

an indictment or other proceedings against us or any executive officer; or

a breach by us of any provision of the Securities Purchase Agreement, or any other Related Agreement entered into in connection with the sale of the Notes.

If any event of default were to occur under the Note and Laurus was to make the entire amount of the Note immediately due and payable, and we did not have sufficient funds on hand to pay such amounts, we could be forced to sell some or all of our assets at less than fair market value, and/or abandon or curtail our business plan and operations.

THE ISSUANCE OF COMMON STOCK IN CONNECTION WITH THE EXERCISE OF THE TEXHOMA WARRANT WILL CAUSE IMMEDIATE AND SUBSTANTIAL DILUTION.

Once we are able to file a registration statement covering the shares of common stock issuable in connection with the exercise of the Texhoma Warrant, which we do not anticipate being able to file until such time as we are current in our filings, the issuance of common stock upon exercise of the Texhoma Warrant will result in immediate and substantial dilution to the interests of other stockholders since Laurus Master Fund, Ltd., may ultimately receive and sell the full amount issuable on exercise of the Texhoma Warrant, which has an exercise price of $0.04 per share, currently more than the average trading value of our common stock during the past thirty days. Although Laurus may not exercise its warrant if such conversion or exercise would cause it to own more than 4.99% of our outstanding common stock (unless Laurus provides us 75 days notice and/or an event of default occurs, this restriction does not prevent Laurus from exercising some of its holdings, selling those shares, and then converting the rest of its holdings, while still staying below the 4.99% limit. In this way, Laurus could sell more than this limit while never actually holding more shares than this limit prohibits. If Laurus chooses to do this, it will likely cause the value of our common stock to decline in value (if such common stock is trading at more than $0.04 per share prior to such sales) and will likely also cause substantial dilution to our common stock.

THE MARKET FOR OUR COMMON STOCK MAY CONTINUE TO BE VOLATILE, ILLIQUID AND SPORADIC, IF WE HAVE A MARKET AT ALL.

The market for our common stock on the Pinksheets has historically been volatile, illiquid and sporadic and we anticipate that such market, and the market for our common stock on the Over-The-Counter Bulletin Board (which we plan to trade our shares once we become current in our filings, of which there can be no assurance) will continue to be subject to wide fluctuations in response to several factors, including, but not limited to:

	(1)	actual or anticipated variations in our results of operations;
	(2)	our ability or inability to generate new revenues;
	(3)	increased competition; and
	(4)	conditions and trends in the oil and gas exploration industry and the market for oil and gas and petroleum based products.

Our common stock is traded on the Pinksheets under the symbol "TXHE." In recent years, the stock market in general has experienced extreme price fluctuations that have oftentimes been unrelated to the operating performance of the affected companies. Similarly, the market price of our common stock may fluctuate significantly based upon factors unrelated or disproportionate to our operating performance. These market fluctuations, as well as general economic, political and market conditions, such as recessions, interest rates or international currency fluctuations may adversely affect the market price of our common stock.

INVESTORS MAY FACE SIGNIFICANT RESTRICTIONS ON THE RESALE OF OUR COMMON STOCK DUE TO FEDERAL REGULATIONS OF PENNY STOCKS.

Our common stock will be subject to the requirements of Rule 15(g)9, promulgated under the Securities Exchange Act as long as the price of our common stock is below $4.00 per share. Under such rule, broker-dealers who recommend low-priced securities to persons other than established customers and accredited investors must satisfy special sales practice requirements, including a requirement that they make an individualized written suitability determination for the purchaser and receive the purchaser's consent prior to the transaction. The Securities Enforcement Remedies and Penny Stock Reform Act of 1990, also requires additional disclosure in connection with any trades involving a stock defined as a penny stock. Generally, the Commission defines a penny stock as any equity security not traded on an exchange or quoted on NASDAQ that has a market price of less than $4.00 per share. The required penny stock disclosures include the delivery, prior to any transaction, of a disclosure schedule explaining the penny stock market and the risks associated with it. Such requirements could severely limit the market liquidity of the securities and the ability of purchasers to sell their securities in the secondary market. In addition, various state securities laws impose restrictions on transferring "penny stocks" and as a result, investors in the common stock may have their ability to sell their shares of the common stock impaired.

Other Considerations

There are numerous factors that affect our business and the results of its operations. Sources of these factors include general economic and business conditions, federal and state regulation of business activities, the level of demand for the Company’s product or services, the level and intensity of competition in the industry and the pricing pressures that may result, the Company’s ability to develop new services based on new or evolving technology and the market’s acceptance of those new services, the Company’s ability to timely and effectively manage periodic product transitions, and geographic sales mix of any particular period, and the ability to continue to improve infrastructure including personnel and systems, to keep pace with the growth in its overall business activities.

ITEM 7. FINANCIAL STATEMENTS

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and

Stockholders of Texhoma Energy, Inc.

We have audited the accompanying consolidated balance sheets of Texhoma Energy, Inc. as of September 30, 2007 and 2006, and the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the years in the two-year period ended September 30, 2007. These financial statements are the responsibility of the company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

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

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Texhoma Energy, Inc. as of September 30, 2007 and 2006, and the results of its operations and cash flows for each of the years in the two-year period ended September 30, 2007 in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 12 to the financial statements, the Company has recurring operating losses, negative working capital and is dependent on financing to continue operations. These factors raise substantial doubt about the ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.


/s/ GLO CPAs, LLP
GLO CPAs, LLP
Houston, Texas
January 15, 2008

F-1

TEXHOMA ENERGY, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

September 30, 2007 and September 30, 2006

ASSETS	September 2007			September 2006

Current Assets
Cash and cash equivalents	$	44,785		$	134,852
Restricted cash		219,088			355,025
Accounts receivable-miscellaneous		185,350			378,415
Accounts receivable-net oil and gas production		248,882			322,402

Total Current Assets		698,105			1,190,694

Oil and Gas Properties, net of depletion of $2,333,426 and $1,301,574 at September 30, 2007 and 2006, respectively		4,556,305			5,342,314

Other Assets		615,728			1,145,328

TOTAL ASSETS	$	5,870,138		$	7,678,336

LIABILITIES AND STOCKHOLDERS’ DEFICIT

Current Liabilities
Accounts payable	$	502,875		$	414,483
Accrued expenses		1,202,438			387,428
Notes payable related parties		453,432			603,432


Total Current Liabilities		2,158,745			1,405,343

Long term notes payable		8,155,280			8,381,471

Commitments and Contingencies (Note 10)		-			-

Stockholders’ Deficit
Preferred stock, $0.001 par value, 1,000,000 shares authorized, 1,000 shares issued and outstanding at September 30, 2007		1			-
Common stock, $0.001 par value, 300,000,000 shares authorized, 231,162,252 and 181,662,252 shares issued and outstanding at September 30, 2007 and 2006, respectively		231,162			181,662
Additional paid-in capital		10,330,166			10,527,155
Retained deficit		(15,005,216	)		(12,817,295	)

Total Stockholders’ Deficit		(4,443,887	)		(2,108,478	)


TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT	$	5,870,138		$	7,678,336

See accompanying summary of accounting policies and notes to financial statements.

F-2

TEXHOMA ENERGY, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS

For the years ended September 30, 2007 and 2006

	September 2007			September 2006
Revenues
Oil and gas interests	$	1,847,647		$	2,258,425

Total revenues		1,847,647			2,258,425

Operating expenses:
Oil and gas exploration		444,742			4,003,313

Gross Margin (Loss)		1,402,905			(1,744,888	)

Depletion and depreciation		1,036,000			1,301,574
General and administrative expenses		1,996,520			809,612

Operating income (loss)		(1,629,615	)		(3,856,074	)

Other income (expenses):
Loss on sale of furniture and equipment		(8,441	)		-
Stock accretion gain		858,573			(1,165,211
Foreign currency exchange		-			(211
Gain on sale of working interest promote		-			161,429
Loss on impairment of investments		(250,000	)		-
Interest income		13,456			18,947
Interest expense		(1,171,894	)		(601,416

Total other income (expense)		(558,306	)		(1,586,462

Income (loss) before income taxes		(2,187,921	)		(5,442,536	)

Net income (loss)	$	(2,187,921	)	$	(5,442,536	)

Weighted average common shares outstanding		195,395,950			142,059,991

Basic earnings (loss) per share:	$	(0.01	)	$	(0.04	)

See accompanying summary of accounting policies and notes to financial statements.

F-3

TEXHOMA ENERGY, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)
For the years ended September 30, 2007 and 2006
											Paid-In							Total
											Capital							Stockholders'
	Common Stock				Preferred Stock				Paid-In		Preferred		Contributed		Accumulated			Equity
	Shares		Amount		Shares		Amount		Capital		Stock		Capital		Deficit			[Deficit]
Balance, September 30, 2005		106,812,252		106,812		-		-		6,222,794		-		-		(7,374,759	)		(1,045,153	)

Shares issued, February 6, 2006 at $0.04 per share		2,000,000		2,000						78,000									80,000
Shares issued, March 15, 2006 at $0.04 per share		37,500,000		37,500						1,462,500									1,500,000
Shares issued, March 24, 2006 at $0.04 per share		7,500,000		7,500						292,500									300,000
Shares issued, April 10, 2006 for loan conversion at $0.04 per share		4,000,000		4,000						156,000									160,000
Shares issued, May 22, 2006 for loan conversion at $0.04 per share		18,375,000		18,375						716,625									735,000
Shares issued, May 31, 2006 for asset purchase at $0.08 per share		375,000		375						29,625									30,000
Shares issued, June 5, 2006 at $0.08 per share		1,000,000		1,000						79,000									80,000
Shares issued, June 19, 2006 at $0.08 per share		250,000		250						19,750									20,000
Shares issued, June 27, 2006 at $0.08 per share		1,925,000		1,925						152,075									154,000
Shares issued, July 6, 2006 at $0.08 per share		1,000,000		1,000						79,000									80,000
Shares issued, September 25, 2006 at $0.08 per share		625,000		625						49,375									50,000
Shares issued, September 28, 2006 for employee services at $0.08 per share		300,000		300						24,700									25,000
Net (loss) at September 30, 2006																(5,442,536	)		(5,442,536	)
Stock accretion for warrants										1,165,211									1,165,211

Balance, September 30, 2006		181,662,252		181,662		-		-		10,527,155		-		-		(12,817,295	)		(2,108,478	)

F-4

Shares issued, June 7,2007 at $0.0125 per share	18,000,000	18,000		207,000				225,000
Shares issued, June 7,2007 at $0.0125 per share	4,800,000	4,800		55,200				60,000
Shares issued, June 10, 2007 for management agreement at $0.02 per share	15,200,000	15,200		288,800				304,000
Shares issued, July 9, 2007 at $0.0125 per share	1,000,000	1,000		11,500				12,500
Shares issued, July 1, 2007 for services agreement at $0.02 per share	500,000	500		9,500				10,000
Shares issued August 13, 2007 for management agreement at $0.02 per share	10,000,000	10,000		190,000				200,000
Shares issued August 13, 2007 for management agreement at $0.001 per share	1,000		1					1
Net (loss) at September 30, 2007						(2,187,921	)	(2,187,921	)
Stock accretion for warrants				(958,989	)			(958,989	)

Balance, September 30, 2007	231,162,252	231,162	1	10,330,166		(15,005,216	)	(4,443,887	)

See accompanying summary of accounting policies and notes to financial statements

F-5

TEXHOMA ENERGY, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years Ended September 30, 2007 and 2006

	September 2007			September 2006
Cash flows from operating activities: Net loss	$	(2,187,921	)	$	(5,442,536	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depletion		1,031,853			1,301,574
Depreciation and amortization		323,018			162,864
Stock issued for services		514,001			25,000
Stock based compensation		-			-
Stock accretion gain		(858,573	)		1,165,211
Oil and gas exploration costs		-			3,590,082

Change in assets and liabilities:
Accounts receivable		266,584			(700,817	)
Accounts payable		88,393			387,034
Accrued expenses		714,594			264,919
Other		210,728			(351,578	)
Net cash provided by operating activities		102,677			401,753

Cash flows from investing activities:
Investment in Black Swan		-			-
Oil and gas property investments		(249,990	)		(11,190,584	)
Other assets		-			-
Net cash used in investing activities		(249,990	)		(11,190,584	)

Cash flows from financing activities:
Loans from affiliates		5,200			413,432
Loan repayment to affiliates		(65,200	)		(105,000	)
Notes payable proceeds		-			11,250,000
Repayment of notes payable		(316,191	)		(2,723,529	)
Stock issued for asset purchase		-			1,610,000
Proceeds from issuance of common stock		297,500			684,000
Net cash provided by (used in) financing activities		(78,691	)		11,128,903

Increase (decrease) in cash and cash equivalents		(226,004	)		340,072
Cash and cash equivalents at beginning of period		489,877			149,805
Cash and cash equivalents at end of year	$	263,873		$	489,877

See accompanying summary of accounting policies and notes to financial statements

F-6

TEXHOMA ENERGY, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2007 and 2006

1. Summary of Significant Accounting Policies

Description of Business - Texhoma Energy, Inc. was originally incorporated as Pacific Sports Enterprises, Inc. in 1998. Texhoma is engaged in the exploration for and the production of hydrocarbons, more commonly known as the exploration and production of crude oil and natural gas. In March 2006, Texhoma incorporated a subsidiary, Texaurus Energy, Inc. in Delaware for the same purpose.

Organization and Basis of Presentation – Texhoma’s securities are registered with the Securities and Exchange Commission in the United States of America and its securities currently trade under the symbol “TXHE.PK” on the pink sheets.

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

Use of Estimates – Texhoma’s financial statement preparation requires that management make estimates and assumptions which affect the reporting of assets and liabilities and the related disclosure of contingent assets and liabilities in order to report these financial statements in conformity with accounting principles generally accepted in the United States of America. Actual results could differ from those estimates.

The primary estimates made by management included in these financial statements are the impairment reserves applied to various long-lived assets and the fair value of its stock tendered in various non-monetary transactions.

Cash and Cash Equivalents - Cash includes all highly liquid investments that are readily convertible to known amounts of cash and have original maturities of three months or less.

Restricted Cash – Texaurus maintains the residual cash from the proceeds of the Laurus Fund note in a restricted account for as long as Texaurus shall have any obligations to Laurus. Texaurus may request authorization from Laurus for access to these funds for the consummation of acquisitions of oil and gas assets.

Fair Value of Financial Instruments - SFAS No. 107, Disclosures about Fair Values of Financial Instruments (FAS 107), requires disclosing fair values to the extent practicable for financial instruments, which are recognized or unrecognized in the balance sheet. For certain financial instruments, including cash, accounts payable, and accrued expenses and short term debt, it was assumed that the carrying value does not materially differ from fair value. The fair value of debt was determined based upon current rates at which Texhoma could borrow funds with similar maturities remaining.

Property and Equipment- Property and equipment are recorded at cost less impairment. Depreciation is computed using the straight-line basis over the estimated useful lives of the assets at the rates in the accompanying table.

Asset Category	Depreciation/ Amortization Period

Building	30 Years
Plant & Equipment	7 Years
Production Tooling	$10 per unit
Automotive Equipment	5 Years
Office Equipment	5 to 3 Years

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Texhoma’s subsidiary purchased oil and gas property interests on March 28, 2006 with ownership of their portion of the oil and gas production from the Barnes Creek and Edgerly properties becoming effective January 1, 2006. Little White Lakes was purchased effective April 1, 2006. Depletion is computed based upon the estimated remaining proved reserves as determined by a third party petroleum and geology consulting firm. Based upon those estimations, the total proven reserves for the leaseholds were as follows:

Field	Total Proven Reserves	Remaining at September 30, 2007	Depletion rate for September 30, 2007	Depletion rate for September 30, 2006

Barnes Creek	73,310	51,450	16.2%	14.9%

Edgerly	210,574	51,273	15.9%	4.9%

Little White Lakes	27,673	10,159	50.5%	20.8%

Oil and Natural Gas Exploration and Development – Texhoma records its exploration operations in accordance with SFAS 19, Financial Accounting and Reporting by Oil and Gas Producing Companies (FAS 19). Exploration involves identifying areas that may warrant inspection and/or examination of specific areas that indicate they may possess the presence of oil and gas reserves, including the drilling of exploration wells and collecting seismic data.

Texhoma adopted “Successful Efforts” accounting for exploration costs as defined in FAS 19. Under this method, geological and geophysical costs, the costs of carrying and retaining undeveloped properties such as delay rentals, ad valorem taxes on properties, legal costs for the title defense, maintenance of land and lease records, and dry and bottom hole contributions are charged to expense as incurred. The cost of drilling exploratory wells is capitalized, pending determination of whether the well can produce hydrocarbons. If it is determined the well has no commercial potential, the capitalized costs, net of any salvage value are expensed.

Should it be determined subsequent to a financial reporting period and prior to the issuance of financial statements for that reporting period, that an exploratory well has not found commercially exploitable hydrocarbons, any costs incurred through the end of that reporting period, net of salvage value, must be written off in that prior period under FASB Interpretation No. 36, Accounting for Exploratory Wells in Progress at the End of the Period (FAS 36).

Equity Method of Accounting for Investments in Common Stock - The equity method of accounting for investments in Common Stock when the ownership is 50 percent or less of the voting stock of the enterprise is governed by APB Opinion No. 18, The Equity Method of Accounting for Investments in Common Stock (APB 18). It states that use of the equity method of accounting for an investment is required if the investor exercises significant influence over the operating and financial policies of the investee. APB 18 includes presumptions, based on the investor’s percentage of ownership, as to whether the investor has that ability.

Long-Lived Assets - The Company's accounting policy regarding the assessment of the recoverability of the carrying value of long-lived assets, including property, equipment and purchased intangible assets with finite lives, is to review the carrying value of the assets if the facts and circumstances suggest that they may be impaired. If this review indicates that the carrying value will not be recoverable, as determined based on the projected undiscounted future cash flows, the carrying value is reduced to its estimated fair value.

Income Taxes - Management evaluates the probability of the realization of its deferred income tax assets. The Company has estimated a $3,273,000 deferred income tax asset at September 30, 2007 relating to net operating loss carryforwards and deductible temporary differences. Of that amount, an estimated $2,836,000 is related to the net operating loss generated for the year ended September 30, 2007. Management determined that because the Company has not yet generated taxable income, because of the changes in control that have occurred and the fact that certain losses were generated outside of the United States, it is more likely than not that a tax benefit will not be realized from these operating loss carryforwards and deductible temporary differences. Accordingly, the deferred income tax asset is offset by a full valuation allowance.

F-8

If the Company begins to generate taxable income, management may determine that some, or all of the deferred income tax asset may be recognized. Recognition of the asset could increase after tax income in the future. The net operating tax loss carry forward of approximately $8,340,000 expires from 2011 to 2026. The future utilization of the net operating losses is uncertain.

Earnings or (Loss) Per Share - Per SFAS No. 128, Earnings per Share (FAS 128), earnings per share (or loss per share), is computed by dividing the earnings (loss) for the period by the weighted average number of common stock shares outstanding for the period. Diluted earnings (loss) per share reflects the potential dilution of securities by including other potential common stock, including stock options and warrants, in the weighted average number of common shares outstanding for the period, if dilutive. Therefore because including options and warrants issued would have an anti-dilutive effect on the loss per share, only the weighted average (loss) per share is reported.

Share-Based Payment - In December 2004, the FASB issued SFAS No. 123R, Accounting for Stock-Based Compensation (FAS 123(R)), which supersedes APB 25. Accordingly, Texhoma is required to measure all stock-based compensation awards using a fair value method and recognize such expense in its financial statements as services are performed. In addition, the adoption of FAS No. 123(R) will require additional accounting related to the income tax effects and additional disclosure regarding the cash flow effects resulting from share-based payment arrangements. FAS No. 123(R) became effective for small business issuers as of the first interim or annual reporting period that begins after December 31, 2005.

The effects of the adoption of FAS No. 123(R) on Texhoma’s results of operations and financial position are dependent upon a number of factors, including the number of employee stock options outstanding and unvested, the number of stock-based awards which may be granted in the future, the life and vesting features of stock-based awards which may be granted in the future, the future market value and volatility of Texhoma’s stock, movements in the risk free rate of interest, award exercise and forfeiture patterns, and the valuation model used to estimate the fair value of each award. In addition, Texhoma utilizes restricted stock units as a key component of its ongoing employee stock-based compensation plan. These awards generally are recognized at their fair value, equal to the quoted market price of Texhoma’s common stock on the date of issuance, and this amount is amortized over the vesting period of the shares of restricted stock held by the grantee

Accounting Changes and Error Corrections - In May 2005, the FASB issued SFAS No. 154 , Accounting Changes and Error Corrections (FAS 154) . This statement replaces APB Opinion No. 20, Accounting Changes , and SFAS No. 3, Reporting Accounting Changes in Interim Financial Statements, and changes the requirements for the accounting and reporting of a change in accounting principle. This statement applies to all voluntary changes in accounting principles. It also applies to changes required by an accounting pronouncement in the unusual instance that the pronouncement does not include specific transition provisions. When a pronouncement includes specific transition provisions, those provisions should be followed. FAS 154 requires retrospective application to prior periods’ financial statements of voluntary changes in accounting principles. FAS 154 is effective for accounting changes and corrections of errors made during 2007, beginning on January 1, 2007. Texhoma does not believe the adoption of FAS 154 has had a material impact on its financial statements.

Inventory Cost - In November 2004, the FASB issued SFAS No. 151 , Inventory Costs—an Amendment of ARB No. 43, Chapter 4 (FAS 151) . FAS 151 amends Accounting Research Bulletin (“ARB”) No. 43, Chapter 4, to clarify that abnormal amounts of idle facility expense, freight, handling costs, and wasted materials (spoilage) should be recognized as current-period charges. In addition, this statement requires that allocation of fixed production overheads to the costs of conversion be based on the normal capacity of the production facilities. The provisions of this statement are effective for inventory costs incurred beginning in Texhoma’s first quarter of 2006. Texhoma does not believe that the adoption of FAS 151 did not have a material impact on its financial statements.

2. PROPERTY AND EQUIPMENT

No acquisitions of oil and gas properties were made during the year ended September 30, 2007.

Texhoma and its subsidiary, Texaurus Energy, Inc. acquired oil and gas leasehold properties at a cost of $11.191 million during the year ended September 30, 2006. During the year $916,000 of those acquisitions proved to be unsuccessful, and were written off for the financial statement presentation. In addition, third party engineering reports projected that the future value of the Little White Lake interest retained significantly less future value than was reflected in the depleted amount per the balance sheet at September 30, 2006 and as such recorded an impairment of $2,682,000 for the year then ended.

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3. SHARE CAPITAL

Stock for Services Compensation Plan - In accordance with Texhoma’s Stock for Services Compensation Plan, on August 26, 2004, the Company filed a registration statement on Form S-8 with the Securities and Exchange Commission, for registration under the Securities Act of 1933 of Securities to Be Offered to Employees Pursuant to Employee Benefit Plans to register the shares of common stock under Texhoma’s Plan in an amount of up to 11,000,000 pre forward split shares and 44,000,000 post forward split shares at various exercise prices. The Board of Directors is authorized, without further approval; to issue shares of common stock under the plan from time to time of up to an aggregate of 44,000,000 post forward split shares of the Company’s common stock.

Common Stock – In May 2007, 4,800,000 shares of our common stock were subscribed for at $0.0125 per share for a total consideration of $60,000.

In May 2007, Valeska Energy Corp. entered into a management agreement with Texhoma for a minimum period of three months. Mr. William M. Simmons is the President of Valeska. In exchange for these services, Valeska was issued 15,200,000 shares of Texhoma’s stock as payment and retainer. On June 8, 2007, Capersia transferred 1,000,000 shares of Texhoma stock to Mr. William Simmons, 1,000,000 shares to Valeska Energy Corp., and 1,000,000 shares to Asset Solutions (Hong Kong) Ltd.

In June 2007, 18,000,000 shares of our common stock were purchased at $0.0125 per share by Hobart Global Ltd., a British Virgin Islands corporation in exchange for $225,000.

In July 2007, additional shares of common stock were sold to Camecc A/S, a Norwegian company for $12,500 or $0.0125 per share and another 500,000 shares were issued to Mr. Ibrahim Nafi Onat in consideration for his entry into a Consulting Agreement with us.

On or about August 13, 2007, we entered into a Second Amendment to Management Services Agreement with Valeska Energy Corp. (“Valeska” and the “Second Amendment”).

Pursuant to the Second Amendment, we and Valeska agreed to extend the term of the Management Services Agreement until September 30, 2008, and to pay Valeska the following consideration in connection with agreeing to perform the services required by the original Management Services Agreement, and in consideration for allowing Daniel Vesco and William M. Simmons to serve as Directors of the Company, bringing on personnel to assist the Company with the day to day operations of the Company, and helping bring the Company current in its filings (the “Services”):

	·	1,000 shares of the Company’s Series A Preferred Stock;
	·	A monthly fee of $20,000 per month during the extended term of the Second Amendment, plus reasonable and actual costs incurred by Valeska (or individuals or designees brought on by Valeska, including lodging, car rental and telephone expenses therewith) in connection with such Services;
	·	10,000,000 restricted shares of the Company’s common stock; and
	·	60,000,000 options to purchase shares of the Company’s common stock, which shall have a cashless exercise provision, shall be valid for a period of three years from their grant date, which had an exercise price of $0.02 per share, which was greater than 110% of the trading price of the Company’s common stock on the Pinksheets on the day of such grant.

In March 2006, our former Executive Chairman and Director, Frank Jacobs subscribed for 7,500,000 shares of our common stock at $0.04 per share, for aggregate consideration of $300,000, which funds were immediately used by us in connection with the Closing of the Kilrush Property (described below).

On March 28, 2006, Texaurus closed the purchase of certain interests from Structured Capital in exchange for a) two million five hundred thousand dollars ($2,500,000) and b) the issuance of 37,500,000 shares of our common stock at $0.04 per share.

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In March 2006, the Company issued 1,062,500 warrants to purchase 1,062,500 shares at $0.04 cents per share and expiring in five years. The warrants were issued to Energy Capital Solutions in consideration for raising capital for the Company. In addition, up to 10,625,000 warrants to purchase Texhoma common stock at $0.04 per share, expiring in five years, as well as 961 warrants at $0.001 per share to purchase common shares of Texaurus Energy, Inc., a wholly owned subsidiary of Texhoma, at any time following Texhoma’s repayment of all obligations were issued to Laurus Master Fund Ltd.

On April 10, 2006, Texhoma Energy, Inc. (the "Company") entered into a Debt Conversion Agreement with Lucayan Oil and Gas Investments, Ltd., a Bahamas corporation, formerly Devon Energy Thai Holdings, Ltd. ("LOGI"). The Company and LOGI agreed to convert $160,000 of the $895,000 which LOGI was owed into an aggregate of 4,000,000 shares (or one (1) share for each $0.04 of debt converted) of newly issued shares of the Company's restricted common stock. The Director and 50% owner of LOGI is Max Maxwell, was a Director of the Company from April 10, 2006 until May 1, 2007 and President of the Company from April 12, 2006 until May 1, 2007 and Chief Executive Officer of the Company from June 5, 2006 until May 1, 2007.

On May 15, 2006, Lucayan Oil and Gas Investments, Ltd. ("LOGI") provided the Company notice of its desire to convert its $735,000 Promissory Note into 18,375,000 shares of the Company's common stock. The Company's Board of Directors approved such issuance on May 18, 2006.

In June 2006, the Company accepted subscriptions for 3,175,000 shares of its common stock at $0.08 share for $254,000 in cash. The Company also granted warrants to purchase 3,175,000 shares at $0.15 per share expiring in one year and all warrants have since expired.

In June 2006, the Company accepted subscriptions for 1,000,000 shares of our common stock at $0.08 per share for $80,000 in cash and the Company also granted warrants to purchase 1,000,000 shares with an exercise price of $0.15 per share expiring in one year. Of which all warrants have since expired.

In conjunction with the acquisition of three of the Sunray properties, we issued 375,000 shares of common stock and granted warrants to purchase 375,000 shares at an exercise price of $0.15 per share expiring in one year, these warrants have since expired.

In July 2006 the Company accepted subscriptions for 1,000,000 shares of our common stock at $0.08 per share for $80,000 in cash and the Company also granted warrants to purchase 1,000,000 shares with an exercise price of $0.15 per share expiring in one year and as of September 30, 2007 these warrants have expired.

In September, 2006 the Company accepted subscriptions for 625,000 shares of our common stock at $0.08 per share for $50,000 and the Company also granted warrants to purchase 625,000 shares with an exercise price of $0.15 per share expiring in one year. These warrants have expired as of September 30, 2007.

On September 19, 2006, Mr. Brian Alexander decided not to seek re-election as a director of the Company and as a result, In connection with monies we owed Mr. Alexander in director and consulting fees, 300,000 shares of restricted common stock were issued to Mr. Alexander in lieu of cash.

4. STOCK OPTIONS

On June 1, 2006, the Company's Board of Directors approved the grant of an aggregate of 10,000,000 options to the Company's then officers, Directors and employees, pursuant to the Company's 2006 Stock Incentive Plan (the "Plan"). All of the options were at an exercise price of $0.13 per share, which was equal to the average of the highest ($0.125) and lowest ($0.111) quoted selling prices of the Company's common stock on June 1, 2006, multiplied by 110%. The options were granted to the following individuals in the following amounts:

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Max Maxwell, our former president and Director was granted 750,000 qualified options and 3,250,000 non-qualified options (for 4,000,000 total options), which options were to vest at the rate of 500,000 options every three months, with the qualified options to vest first, in consideration for services to be rendered to the Company as the Company's president and Director. The options were to expire if unexercised on June 1, 2009, or at the expiration of three months from the date of the termination of his employment with the Company. All of Mr. Maxwell’s options have since expired unexercised;

Frank Jacobs, our former Director was granted 4,000,000 non-qualified options, which options were to vest at the rate of 500,000 options every three months, in consideration for services to be rendered to the Company as the Company's Director. The options were to expire if unexercised on June 1, 2009, or at the expiration of three months from the date of the termination of his employment with the Company. Mr. Jacobs resigned from the Company effective June 14, 2007, and as such all 2,000,000 of his vested options expired unexercised on September 14, 2007;

Brian Alexander, our former Chief Financial Officer and Director was granted 1,000,000 non-qualified options, which options vested upon Mr. Alexander's execution of a deed of release and settlement between Mr. Alexander and the Company in connection with his resignation from his positions as the Company's Chief Financial Officer and Director. The options expired unexercised on July 1, 2007; and

Mr. Terje Reiersen then working as a consultant to the Company was granted 1,000,000 non-qualified options, which options were to vest at the rate of 250,000 options every three months, in consideration for consulting services to be rendered to the Company in connection with corporate advice in relation to a secondary listing amongst other things. The options were to expire if unexercised on June 1, 2009, or at the expiration of three months from the date of the termination of his employment with the Company. All of Mr. Reiersen’s options have since expired unexercised.

Additionally, on June 1, 2006, the Board of Directors approved the issuance of 2,000,000 options to another consultant to the Company in consideration for investor relations services rendered to the Company. The options granted to the consultant were not granted pursuant to the Plan. The options have an exercise price of $0.13 per share, vest at a rate of 250,000 options every three months and expire if unexercised on June 1, 2009.

The following is a summary of the option activity during the years ended September 30, 2007 and 2006:

	Number		Average
	Of		Exercise
	Options		Price

Outstanding at October 1, 2005		-		-
Granted		12,000,000	$	0.13
Balance at September 30, 2006		12,000,000	$	0.13
Expired		10,000,000	$	0.13
Granted		60,000,000	$	0.02
Balance at September 30, 2007		62,000,000	$	0.0235

Compensation costs associated with the issuance of options to purchase shares of common stock to employees, directors or consultants is measured at fair value at the date of issuance based upon the options vested and expensed during the current period.

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As of September 30, 2007, 61,250,000 of the options were vested. During the year 10,000,000 of options issued to former employees and associates expired and 60,000,000 new options were issued to Valeska Energy Corp. The trading price of our stock was $0.01375 per share at September 30, 2007 and the Black-Scholes option model with the following assumptions: weighted average risk-free interest rate of 4.25%, estimated volatility of 182%, weighted-average expected life of 1.667 years and no expected dividend yield, resulted in a fair value per option of $0.015. As such we increased the accrual for option expense by $811,000 in our current financial statements.

As of September 30, 2006, 2,500,000 of options were vested and based on our knowledge at that date, we applied a forfeiture rate of 90% to the vested options. $12,964 of option expense was accrued as of September 30, 2006. The trading price of our stock was $0.09 per share on September 30, 2006. The Black-Scholes option model with the following assumptions: weighted average risk-free interest rate of 4.25%, estimated volatility of 127%, weighted-average expected life of two years and no expected dividend yield, resulted in a fair value per option of $0.0518.

5. ACQUISITIONS

On or about December 10, 2005, the Company entered into a 6% participation agreement with the "Clovelly Joint Venture.” On February 2, 2006, we executed a Sale and Purchase Agreement (the “Clovelly SPA”) with Sterling Grant Capital, Inc. pursuant to which we acquired a further 5% (five percent) working interest in the Clovelly South prospect located in Lafourche Parish, Louisiana. We funded Clovelly SPA through a Joint Operating Agreement, the issuance to Sterling Grant of 2,000,000 shares of Company common stock and payment of $15,000.

On March 15, 2006, Texhoma’s wholly-owned subsidiary, Texaurus Energy, Inc., which was formed in March 2006 as a Delaware corporation ("Texaurus"), entered into a Sales and Purchase Agreement with Structured Capital Corp., a Texas corporation to purchase certain oil and gas leases in Vermillion Parish, Louisiana, which represent a 10% working interest (7.3% net revenue interest) in such leases. The agreed purchase price of the Little White Lake Property was a) two million five hundred thousand dollars ($2,500,000) and b) the issuance of 37,500,000 shares of our common stock. This purchase had an effective date of April 1, 2006.

On March 28, 2006, with an effective date of January 1, 2006, Texaurus closed a Sales & Purchase Agreement to purchase certain interests from Kilrush Petroleum, Inc. in Allen Parish, Louisiana and Calcasieu Parish, Louisiana, for aggregate consideration of $5,225,000. Texaurus paid the $5,225,000 purchase price with proceeds received from its sale of the Secured Term Note with Laurus Master Fund, Ltd. (“Laurus”).

On March 28, 2006 Texaurus entered into a Securities Purchase Agreement and a Registration Rights Agreement, issued a Common Stock Purchase Warrant; entered into a Master Security Agreement with Laurus; and sold Laurus a Secured Term Note in the amount of $8,500,000 as well as various other agreements. Additionally, in connection with the closing, we issued Laurus Common Stock Purchase Warrants to purchase up to 10,625,000 shares of Texhoma common stock and up to 49% of Texaurus’ common stock.

A Letter of Intent was executed by Texhoma on April 28, 2006, agreeing to participate in a 25% working interest in the exploration of the Bayou Choctaw oil and gas project, located in Iberville Parish, Louisiana. In July 2006, Texhoma executed a new Letter of Intent increasing its agreement of participation to 41.667% in the project. Texhoma identified that the exposure was in excess of its corporate guidelines and assigned its right to the interest to Morgan Creek Energy Corp. in exchange for $250,000 and 200,000 shares of Morgan Creek Energy.

On May 31, 2006, Texhoma entered into six (6) participation agreements to purchase various oil and gas leases from Sunray Operating Company LLC (“Sunray”). In June and August 2006, Texhoma closed the purchase of three (3) of the participation agreements, entering into Assignments and Bill of Sales for purchase from Sunray the following Leases:

F-13

Leases covering approximately 196 acres of land in Brazoria County, Texas. In the purchase, Texhoma acquired an undivided 37.5% interest, subject to existing overriding royalty interests equal to 25% of 8/8. Additionally, Sunray is entitled to a five-eighth of eight-eighths (62.5% of 8/8) working interest, proportionally reduced at payout.

Leases covering approximately 20 acres of land in Brazoria County, Texas. In the purchase, Texhoma acquired an undivided 35% interest in the leases, subject to existing overriding royalty interests equal to 25% of 8/8.

Leases covering approximately 280 acres of land in Brazoria County, Texas. In the purchase, Texhoma acquired an undivided 72.5% interest in the leases, subject to existing overriding royalty interests equal to 28% of 8/8. Texhoma simultaneously sold a 42.5% interest leaving a 30% interest.

Texhoma declined to participate in the purchase of the leases covering approximately 80 acres in Brazoria County. In September 2006, this well was a dry hole and participation in subsequent wells was declined. However, Texhoma continues to hold a 12.5% back in Working Interest.

Two leases for another 160 acre site and a 60 acre site which were subsequently declined by Texhoma, retaining a 12.5% back in Working Interest.

In conjunction with the acquisition of three of the Sunray properties, we issued 375,000 shares of common stock and granted warrants to purchase 375,000 shares of common stock at an exercise price of $0.15 per share expiring in one year. Subsequent to the acquisition of the Sunray properties, we executed an agreement to sell a percentage of our working interest in the properties to Matrixx, thereby reducing our cash investment and liability for future cash calls. Additionally, we agreed to pay Sunray $113,161 in cash, of which $50,624 remained outstanding as of December 31, 2007.

In September 2006, drilling on the properties acquired in the Sunray agreement proved to be unsuccessful and the investment was retired.

6. RELATED PARTIES

On December 7, 2004, the Company borrowed $50,000 from a related party, MFS Technology. The loan is evidenced by a convertible promissory note, see Note 7 for additional information.

On or about December 10, 2005, the Company entered into a 6% participation agreement with the "Clovelly Joint Venture," of which ORX Resources, Inc. is the Operator. Our former President and Director Max Maxwell served as Vice President of the Operator at the time we entered into the participation agreement. On February 14, 2006 the Company increased its working interest to 11% through the purchase of a further 5% working interest in this property from Sterling Grant. We funded this additional interest through a Joint Operating Agreement, issuance to Sterling Grant of 2,000,000 shares of Texhoma common stock at $0.04 per share and payment of $15,000.

On March 24, 2006, Mr. Jacobs, the Company’s former Chief Executive Officer, subscribed for 7,500,000 shares of the Company's common stock at $0.04 per share, for an aggregate consideration of $300,000, which funds were immediately used by the Company as a portion of the consideration paid by the Company for the purchase of certain oil and gas interests from Kilrush Petroleum, Inc., located in Allen Parish, Louisiana and Calcasieu Parish, Louisiana.

On April 10, 2006, Texhoma entered into a $735,000 Debt Conversion Agreement with Lucayan Oil and Gas Investments, Ltd., a Bahamas corporation ("LOGI"). Texhoma owed $895,000 to LOGI as of the date of the Debt Conversion Agreement in connection with money advanced to the Company in March 2005 for the fulfillment of a portion of the cash call commitments for the drilling by Black Swan Thai. Pursuant to the Debt Conversion Agreement, the Company and LOGI agreed to convert $160,000 of the $895,000 of which LOGI was owed into an aggregate of 4,000,000 shares (or one (1) share for each $0.04 of debt converted) of newly issued shares of the Company’s restricted common stock. Mr. Max Maxwell, our former President is a 50% owner of LOGI.

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On May 15, 2006, LOGI provided the Company notice of its desire to convert its $735,000 Promissory Note, which amount remained from LOGI’s Debt Conversion Agreement entered into with Texhoma in April 2006, into 18,375,000 shares of the Company's common stock and as a result of such conversion, which shares were subsequently issued to LOGI.

On June 1, 2006, the Company's Board of Directors approved the issuance of an aggregate of 10,000,000 options to the Company's officers, directors and employees, pursuant to the Company's 2006 Stock Incentive Plan and an additional 2,000,000 options for a consultant. All options expire if unexercised on June 1, 2009, or three (3) months from the date of the termination of employment with the Company.

All options were issued at an exercise price of $0.13 per share, which was equal to the average of the highest ($0.125) and lowest ($0.111) quoted selling prices of the Company’s common stock on June 1, 2006, multiplied by 110%. Options of 4,000,000 were granted to Max Maxwell and Frank Jacobs, and options of 1,000,000 were granted to Brian Alexander, and Terje Reiersen. On June 7, 2006, the Board of Directors approved the grant of an additional 1,000,000 options to Peter Wilson, which amount was later amended to include 2,000,000 options, which expire if unexercised on June 1, 2009.

On September 19, 2006, Mr. Brian Alexander decided not to seek re-election as a director of the Company due to other business and work commitments. In connection with monies we owed Mr. Alexander in director and consulting fees, 300,000 shares of restricted common stock were issued to Mr. Alexander in lieu of cash. In addition Mr. Alexander’s vesting was accelerated such that his options were fully vested with a new expiration date of June 1, 2007. Mr. Alexander and the Company executed a letter of Mutual Release when Mr. Alexander resigned as an officer and director of the Company on September 27, 2006. Mr. Alexander did not exercise his option rights and those options expired on June 1, 2007.

In March 2007, Capersia Pte. Ltd. transferred 10,000,000 of its shares of Texhoma stock to Pacific Spinner Ltd.

Mr. Maxwell resigned from the Company on May 1, 2007, did not exercise any of his option rights and as a result all option grants expired on August 1, 2007. Frank Jacobs resigned on June 14, 2007 and his options expired unexercised on September 14, 2007.

In June 2007, Valeska Energy Corp. entered into a management agreement with Texhoma for a minimum period of three months. Mr. William Simmons is the President of Valeska. In exchange for these services, Valeska was issued 15,200,000 shares of Texhoma’s stock as payment and retainer. On June 8, 2007, Capersia transferred 1,000,000 shares of Texhoma stock to Mr. William Simmons and 1,000,000 shares to Valeska Energy, Corp.

In July 2007, 500,000 shares were issued to Mr. Ibrahim Nafi Onat in consideration for his entry into a consulting agreement with us.

On or about August 13, 2007, we entered into a Second Amendment to Management Services Agreement with Valeska Energy Corp. (“Valeska” and the “Second Amendment”).

Pursuant to the Second Amendment, we and Valeska agreed to extend the term of the Management Services Agreement until September 30, 2008, and to pay Valeska the following consideration in connection with agreeing to perform the services required by the original Management Services Agreement, and in consideration for allowing Daniel Vesco and William M. Simmons to serve as Directors of the Company, bringing on personnel to assist the Company with the day to day operations of the Company, and helping bring the Company current in its filings (the “Services”):

	·	1,000 shares of the Company’s Series A Preferred Stock;
	·	A monthly fee of $20,000 per month during the extended term of the Second Amendment, plus reasonable and actual costs incurred by Valeska (or individuals or designees brought on by Valeska, including lodging, car rental and telephone expenses therewith) in connection with such Services;

	·	10,000,000 restricted shares of the Company’s common stock; and
	·	60,000,000 options to purchase shares of the Company’s common stock, which shall have a cashless exercise provision, shall be valid for a period of three years from their grant date, and had an exercise price of $0.02 per share, equal to greater than 110% of the trading price of the Company’s common stock on the Pinksheets on the day of such grant.

All of the above transactions may have been entered into at terms which may not have been available to unrelated parties.

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7. NOTES PAYABLE AND CONVERTIBLE LOANS

On December 7, 2004, the Company borrowed $50,000 from a related party. The loan is evidenced by a convertible promissory note. The loan bears interest at 5% per annum calculated 6 months after the advancement of funds. $25,000 was due on June 7, 2005 and the remaining balance, plus interest was due on December 7, 2005. The loan has not been repaid, extended or converted. The lender has the option during the term of the loan, and any extension, to convert the principle and interest into shares of common stock at a conversion price of $0.30 per shares.

The Laurus Master Fund, Ltd (“Laurus”) note accrues interest at the Prime Rate plus two percent (2.0%) as published in The Wall Street Journal, but shall not at any time be less than eight percent (8.0%). Payments of accrued interest and principal equal eighty (80%) of the Net Revenue paid to Texaurus in respect of oil, gas and/or other hydrocarbon production in which Texaurus has an interest and each payment is applied first to accrued interest due and then to the principal balance of the note. The note further states that any unpaid monthly interest becomes payable at the end of the term.

In conjunction with the purchase of the Little White Lake oil and gas property, we executed a short term note payable with Polaris Capital in the amount of $2,500,000 to be repaid through the funding provided by Laurus. The note was repaid in April 2006 from the funds received from Laurus.

On April 10, 2006, Texhoma Energy, Inc. (the "Company") entered into a Debt Conversion Agreement with Lucayan Oil and Gas Investments, Ltd., a Bahamas corporation, formerly Devon Energy Thai Holdings, Ltd. ("LOGI"). The Company owed $895,000 to LOGI as of the date of the Debt Conversion Agreement in connection with money received by the Company for the drilling in Thailand in March 2005, which debt was transferred by Fidelio Business, S.A. and Quick Assets and Cash Corp. (Bank Sal Oppenheim) to LOGI in November 2005. Pursuant to the Debt Conversion Agreement, the Company and LOGI agreed to convert $160,000 of the $895,000 which LOGI was owed into an aggregate of 4,000,000 shares (or one (1) share for each $0.04 of debt converted) of newly issued shares of the Company's restricted common stock. The Director and 50% owner of LOGI is Max Maxwell, who became a Director of the Company on April 10, 2006, President of the Company on April 12, 2006, and Chief Executive Officer of the Company on June 5, 2006, and resigned as President, Chief Executive Officer and Director on May 1, 2007.

On April 10, 2006, the Company entered into a convertible note with LOGI evidencing the $735,000 of debt which remained outstanding. The convertible note provided that LOGI could convert the $735,000 debt into Company common stock at the rate of one share of common stock for each $0.04 of outstanding debt. In May 2006, LOGI converted the $735,000 remaining under the Promissory Note into 18,375,000 shares of the Company's common stock.

On June 8, 2006, we entered into a Promissory Note and Security Agreement (the "Promissory Note"), with Polaris Holdings, Inc., which held 12,500,000 shares of our common stock ("Polaris"). Pursuant to the Promissory Note, Polaris gave us a $250,000 loan. The Promissory Note was due and payable on August 10, 2006, with interest at 12% per annum. As part payment of the note we exchanged our remaining interest in Buck Snag and 5% of our interest in Sandy Point to Polaris, in consideration for a reduction of the note in the amount of $90,000. Since May 2007, the balance of the note has been repaid. We also gave Polaris an Option to participate in our Clovelly Field interests in connection with the Promissory Note (described below). We agreed pursuant to the Promissory Note to repay the amounts owed to Polaris by way of (a) two-thirds of the net proceeds we receive from any stock sales while the Promissory Note is outstanding, and (b) one-third of our share of the production income we receive from our oil and gas interests in Vermillion Parish, Louisiana, which represents a 10% working interest (7.3% net revenue interest) in such leases and our oil and gas interests in the Barnes Creek Field, located in Allen Parish, Louisiana and the Edgerly Field located in Calcasieu Parish, Louisiana from Kilrush Petroleum, Inc., which constitutes a 7.42% working interest (a 5.38% net revenue interest) in the Barnes Creek gas field, and an 11.76% working interest (8.47% net revenue interest) in the Edgerly oil field (the "Texaurus Interests").

F-16

On or about October 19, 2006, we issued a Promissory Note to Mr. Frank Jacobs, our then Director, in the amount of $493,643.77, which amount represented funds advanced to the Company by Mr. Jacobs during the 2006 calendar year and management fees owed to Mr. Jacobs for his services to the Company during the 2006 calendar year (the “Jacobs' Note”). The Jacobs' Note bears interest at the rate of 6% per annum until paid, and is payable by the Company at any time on demand. The Jacobs' Note may be pre-paid at any time without penalty. Any amounts not paid on the Jacobs' Note when due shall bear interest at the rate of 15% per annum.

The Company also entered into a Security Agreement with Mr. Jacobs under which Agreement the Board of Directors ratified the assignment of 200,000 shares of the common stock of Morgan Creek Energy Corp., which shares were held by the Company, to Mr. Jacobs as security for the money that is owed to Mr. Jacobs under the Jacobs' Note.

8. NET LOSS PER SHARE

Restricted shares and warrants are included in the computation of the weighted average number of shares outstanding during the periods presented. The net loss per common share is calculated by dividing the consolidated loss by the weighted average number of shares outstanding during the periods. Because we report net losses, the inclusion of options and warrants in the calculation would be anti-dilutive, and they are excluded from the computation presented in the financial statements.

9. WARRANTS

The following is a summary of the warrant activity during the years ended September 30, 2007 and 2006:

			Weighted
	Number		Average
	Of		Exercise
	Warrants		Price

Outstanding, October 1, 2005	-		-
Granted		11,687,500	$	0.04
Granted		5,175,000	$	0.15
Outstanding at September 30, 2006		16,862,500	$	0.074
Expired		5,175,000	$	0.15
Balance at September 30, 2007		11,687,500	$	0.04

Costs attributable to the issuance of share purchase warrants are measured at fair value at the date of issuance and expensed with a corresponding increase to additional Paid-in-Capital at the time of issuance. When the warrant is exercised, and consideration is received, the transaction is recorded as an increase in Common Shares and Paid-in-Capital.

During the year ended September 30, 2007 5,175,000 of warrants granted expired unexercised. The trading price of our stock was $0.01375 and the warrants remaining were issued at $0.04 per share. The Black Scholes option model with the following assumptions: weighted average risk-free interest rate of 4.25%, estimated volatility of 182%, weighted-average expected life of 3.5 years and no expected dividend yield, resulted in a fair value per warrant of $0.01767. As a result, based upon the Black-Scholes option pricing model we reported a reduction in warrant expense for the year ended September 30, 2007 by $858,573.

F-17

During the year ended September 30, 2006, we granted 4,800,000 warrants in conjunction with subscriptions of our common stock,. Another 375,000 warrants were granted as part of the consideration given for the Sunray purchase. Additionally, a total of 11,687,500 warrants were granted to Laurus and related parties in conjunction with the $8,500,000 funding to further our oil and gas property acquisitions.

The trading price of our stock was $0.09 per share on September 30, 2006. Warrants were originally issued at $0.04 and $0.15 per share with a weighted average price of $0.074 per share. The Black-Scholes option model with the following assumptions: weighted average risk-free interest rate of 4.25%, estimated volatility of 127%, weighted-average expected life of 3.1 years and no expected dividend yield, resulted in a fair value per warrant of $0.0701.

The fair value of the warrants granted and vested during the year, based upon the Black-Scholes option pricing model was $1,165,211 and as such we reflected the expense incurred in our current financial statements.

The earnings per share presentation reflects only the weighted average loss per share, because including the warrants when a loss is being reported has an anti-dilutive effect on earnings (loss) per share calculations.

10. COMMITMENTS AND CONTINGENCIES

As discussed in the prior year filings, management wound down operations in Thailand and Australia related to their Black Swan investment, after unsuccessful drilling in the Concession. A determination has not been made as to the financial or legal consequence to Texhoma or its officers or its shareholders, for subsequent obligations, if any, to persons or governmental entities which may arise from doing business or owning or leasing property in Thailand and Australia.

11. SUBSEQUENT EVENTS

On or about October 30, 2007, we entered into a Cooperation Agreement and Mutual Release with our former consultant Terje Reiersen (“Reiersen” and the “Reiersen Release”). Pursuant to the Reiersen Release, Reiersen agreed to release us, our current and former officers, agents, directors, servants, attorneys, representatives, successors, employees and assigns from any and all rights, obligations, claims, demands and causes of action in contract or tort, under any federal or state law, whether known or unknown, relating to his services with the Company or the Company in general for any matter whatsoever other than in connection with any claims against any former officers or Directors of the Company, which claims Reiersen assigned to the Company. In connection with the Reiersen Release, we paid Reiersen $2,500 and issued Reiersen 250,000 restricted shares of our common stock.

(a)	waive any default which may have occurred as a result of our failure to become current in our filings with the Commission, assuming that we become current in our filings prior to December 15, 2007;

(b)	amend the terms of the Laurus Note to provide that a “Change of Control” of Texaurus under the Note, which requires approval of Laurus, includes any change in Directors such that Daniel Vesco and William M. Simmons are no longer Directors of Texaurus; and

(c)

F-18

On or about November 28, 2007, we entered into a Settlement Agreement and Mutual Release (the “Agreement”) by and between the Company, Frank A. Jacobs, our former officer and Director (“Jacobs”), and Jacobs Oil & Gas Limited, a British Columbia corporation (“JOGL” and collectively with Jacobs, the “Jacobs Parties”), Clover Capital, a creditor of the Company (“Clover”), Capersia Pte. Ltd., a Singapore company and a significant stockholder of the Company (“Capersia”), Peter Wilson, an individual and a former Director of the Company (“Wilson”), and Sterling Grant Capital, Inc., a British Columbia corporation, controlled by Mr. Wilson (“SGC” and collectively with Clover, Capersia and Wilson, the “Non-Jacobs Parties,” and with the Jacobs Parties, the “Interested Parties”). We had various disputes with the Interested Parties relating to the issuances of and transfers of various shares of our common stock and various of the Interested Parties had alleged that we owed them consideration (the “Disputes”). We entered into the Agreement to settle the Disputes with the Interested Parties.

In consideration for the Company agreeing to enter into the Agreement, the Jacobs Parties agreed to the following terms: the Jacobs Parties would return to the Company for cancellation 5,000,000 of the 7,500,000 shares purchased by Jacobs in March 2006 (the “Jacobs Shares”); all debt owed by Texhoma to the Jacobs Parties, known or unknown, was discharged and forgiven, including the total outstanding amount of the approximately $500,000 Promissory Note owed to Frank A. Jacobs by the Company (the “Jacobs Note”); the Company owes Jacobs no rights to contribution and/or indemnification in connection with Jacobs employment with the Company; Jacobs agreed to certify the accuracy and correctness of the Company’s previously prepared annual and interim financial statements and periodic reports, relating to the time period of his employment from approximately January 2005 to June 2007; the Jacobs Parties agreed they have no interest in and will not interfere with the issuance of or any subsequent transfers of shares to or from Lucayan Oil and Gas Investments, Ltd. (the “LOGI Shares”), a Bahamas corporation; Jacobs agreed to use his best efforts to answer the Company’s questions and produce documents in the future regarding operations and financials of the Company; Jacobs agreed that he no longer holds any exercisable options of the Company; the Voting Agreement entered into between various parties in June 2007, including Jacobs, remains in full affect and force against Jacobs; and Jacobs has no interest in any shares other than the aforementioned 2,500,000 shares.

Additionally, in consideration for the Company agreeing to enter into the Agreement, the Non-Jacobs Parties agreed to the following terms: any and all debts owed by Texhoma to Clover, which purportedly totaled approximately $60,000, Capersia, which purportedly totaled $60,000 or any of the Non-Jacobs Parties (including approximately $20,000 purportedly owed to Wilson) was discharged and forgiven; the Non-Jacobs Parties agreed that they have no interest in and will not interfere with the issuance of the LOGI Shares; the Voting Agreement remains in full force and effect against Capersia; and in connection with the 30,000,000 shares of Company stock in Capersia’s possession received through Texhoma’s previous purchase of a 40% interest in Black Swan Petroleum Pty. Ltd. (the “Capersia Shares”), Capersia will not transfer shares in excess of 2% of Texhoma’s then outstanding shares in any three (3) month period, until the second anniversary of the Agreement.

Further, pursuant to the Agreement, the Interested Parties agreed to release the Company from any and all rights, obligations, claims, demands and causes of action, known or unknown, asserted or unasserted relating to the Disputes or the Company or its current or former Directors, and the Company agreed to release the Jacobs Parties and the Non-Jacobs Parties from any and all rights, obligations, claims, demands, and causes of action arising from or relating to the Capersia Shares, Jacobs’ employment with the Company, the Jacobs Note, the Jacobs Shares, the Morgan Creek shares, and the LOGI Shares.

As a result of the Agreement, the Company was able to settle approximately $640,000 in debt which it purportedly owed to the various Interested Parties and to settle any and all other claims which such parties, in return for the consideration discussed above, which mainly consisted of assigning the rights to the 200,000 shares of Morgan Creek Energy Corp. stock to Frank A. Jacobs, which shares had an approximate value of $92,000 based on the trading price of Morgan Creek Energy Corp.’s common stock on the date of the Agreement of $0.46.

F-19

On or about November 28, 2007, we entered into a Subscription Agreement with Pagest Services SA, a Swiss Company, pursuant to which we agreed to sell two units consisting of $125,000 in Convertible Promissory Notes with a conversion price of $0.0125 per share, convertible at the option of Purchaser, into the Company’s common stock, and Class A and Class B Warrants to purchase 5,000,000 shares of common stock each, with an exercise price of $0.02 and $0.03 per share, respectively, exercisable for a period of two years from the date of the Subscription Agreement (the “Units”). One Unit was sold immediately to the Purchaser, and one Unit was sold to Purchaser shortly after December 15, 2007. The Convertible Promissory Notes bear interest at the rate of 2% per annum, until paid in full, which amount will increase to 15% per annum, upon the occurrence of an Event of Default (as defined in the Convertible Promissory Notes). The Convertible Promissory Notes are due on the first anniversary of the date they are sold, with the first $125,000 in Convertible Promissory Notes being due on November 28, 2008 and the second due on December 19, 2008, unless converted into shares of our common stock. In the event that our common stock trades on the market or exchange on which it then trades, at a trading price of more than $0.02 per share, for any 10 day trading period, the Convertible Promissory Note will automatically convert into shares of our common stock at the rate of one share for each $0.0125 owed to the subscriber. We also agreed to provide the subscriber piggy-back subscription rights in connection with the sale of the Units.

12. GOING CONCERN ISSUES

We cannot provide any assurances that the Company will be able to secure sufficient funds to satisfy the cash requirements for the next 12 months. The inability to secure additional funds would have a material adverse effect on the Company.

These financial statements are presented on the basis that the Company will continue as a going concern. Other than the previously disclosed impairments, no adjustments have been made to these financial statements to give effect to valuation adjustments that may be necessary in the event the Company is not able to continue as a going concern. The effect of those adjustments, if any, could be substantial.

The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America which contemplate continuation of the Company as a going concern. The Company incurred net losses from operations of $2,188,000 for the current fiscal year and has incurred $15,005,000 in cumulative losses. Further, the Company has inadequate working capital to maintain or develop its operations, and is dependent upon funds from its stockholders and third party financing.

These factors raise substantial doubt about the ability of the Company to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of these uncertainties. There is no assurance that the Company will receive the necessary loans required to funds its exploration plans.

* * * * * * * *

SUPPLEMENTAL OIL AND GAS INFORMATION (UNAUDITED)

The following supplemental information regarding the oil and gas activities of Texhoma Energy, Inc. is presented pursuant to the disclosure requirements promulgated by the SEC and Statement of Financial Standards (“SFAS”) No. 69, Disclosures About Oil and Gas Producing Activities.

The following estimates of reserve quantities and related standardized measure of discounted net cash flows are estimates only, and are not intended to reflect realizable values or fair market values of the Texhoma’s reserves. Texhoma emphasizes that reserve estimates are inherently imprecise and that estimates of new discoveries are more imprecise than producing oil and gas properties. Additionally, the price of oil has been very volatile and downward changes in prices can significantly affect quantities that are economically recoverable. Accordingly, these estimates are expected to change as future information becomes available and these changes may be significant.

Proved reserves are estimated reserves of crude oil and natural gas that geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions. Proved developed reserves are those expected to be recovered through existing wells, equipment and operating methods.

F-20

The standardized measure of discounted future net cash flows is computed by applying year-end prices of oil and gas (with consideration of price changes only to the extent provided by contractual arrangements) to the estimated future production of proved oil and gas reserves, less estimated future expenditures (based on a year-end costs) to be incurred in developing and producing the proved reserves, less estimated future income tax expenses. The estimated future net cash flows are then discounted using a rate of 10% per year to reflect the estimated timing of the future cash flows.

Capitalized Costs Related to Oil and Gas Activities

Aggregate capitalized costs at September 30, 2007 relating to Texhoma's crude oil and natural gas producing activities, including asset retirement costs and related accumulated DD&A are shown below:

Unproved properties	$	-
Proved properties		9,571,925
Less accumulated DD&A and impairment reserve		5,015,620

Net capitalized costs	$	4,556,305

Costs Incurred in Oil and Gas Activities

Costs incurred in connection with Texhoma's crude oil and natural gas acquisition, exploration and development activities are shown below:

September 30, 2007

Property acquisition
Unproved	$	-
Proved		253,531
Exploration		-
Development		-

Total costs incurred	$	253,531

September 30, 2006

Property acquisition
Unproved	$	-
Proved		9,318,395
Exploration		916,000
Development		-

Total costs incurred	$	10,234,395

F-21

Results of Operations for Producing Activities

The following schedule includes only the revenues from the production and sale of gas, oil, condensate and Natural Gas Liquids (“NGLs”). The income tax expense is calculated by applying the current statutory tax rates to the revenues after deducting costs, which include Depletion, Depreciation & Amortization (“DD&A”) allowances, after giving effect to permanent differences. Due to significant net operating loss carryforwards related to producing activities, income taxes have not been provided at September 30, 2007 and 2006. The results of operations exclude general office overhead and interest expense attributable to oil and gas activities.

		2007		2006
Net revenue from production	$	1,757,647	$	2,258,425

Production costs		444,742		1,321,119
DD&A		1,031,851		1,301,574
Impairment reserve		-		2,682,194

Total costs		1,476,593		5,304,887

Gain (Loss) before income tax		281,054		(3,046,462	)

DD&A rate per Barrel of Oil Equivalency “BOE”		7.23		4.18

DD&A and impairment rate per BOE		7.23		12.79

Proved Reserves

The following reserve schedule summarizes Texhoma's net ownership interests in estimated quantities of proved oil reserves and changes in proved reserves, all of which are located in the continental United States. Reserve estimates for crude oil contained below were prepared by RA Lenser & Associates, Inc., independent petroleum engineers.

Proved reserves:	Equivalent bbls
Balance - September 30, 2006		283,808
Revisions of previous estimates		(140,990	)
Purchases of minerals in place		-
Extensions, discoveries and other additions		-
Production		(29,936	)

Balance, September 30, 2007		112,882

Standardized Measure of Discounted Future Net Cash Flows

The following table presents the standardized measure of future net cash flows from proved oil reserves in accordance with SFAS No. 69. All components of the standardized measure are from proved reserves, all of which are located within the continent of the United States. As prescribed by this statement, the amounts shown are based on prices and costs at September 30, 2006, and assume continuation of existing economic conditions. Future income taxes are based on year-end statutory rates, adjusted for tax credits and carryforwards. A discount factor of 10 percent was used to reflect the timing of future net cash flows. Extensive judgments are involved in estimating the timing of production and the costs that will be incurred through the remaining lives of the fields. Accordingly, the estimates of future net revenues from proved reserves and the present value thereof may not be materially correct when judged against actual subsequent results. Further, since prices and costs do not remain static, and no price or cost changes have been considered, and future production and development costs are estimated to be incurred in developing and producing the estimated proved oil reserves, the results are not necessarily indicative of the fair market value of estimate proved reserves, and the results may not be comparable to estimates by other oil producers.

F-22

Future cash inflows	$	7,666,217
Future production costs		(1,231,649	)
Future development costs		(33,358	)
Future income tax expenses		(-	)

Future net cash flows		6,401,210
10% annual discount for estimated timing of cash flows		1,781,386

Standardized measure of discounted future cash flows	$	4,619,824

F-23

The standardized measure of discounted future net cash flows as of September 30, 2006 was calculated using $81.77 per barrel of oil and $6.87 per thousand cubic feet (“mcf”) of gas.

Sources of Changes in Discounted Future Net Cash Flows

Principal changes in the aggregate standardized measure of discounted future net cash flows attributable to Texhoma's proved crude oil reserves, as required by SFAS No. 69, at September 30, 2007 and 2006 are set forth in the table below.

Standardized measure of discounted future net cash flows
September 30, 2006	$	8,685,000
Purchases of minerals in place		245,000
Changes in estimated future development costs		(509,000	)
Sales of oil and gas, net of production		(1,313,000	)
Revisions of previous quantity estimates		(1,287,000	)
Accretion of discount, other		(1,200,000	)
Standardized measure of discounted future net cash flows
September 30, 2007	$	4,621,000

* * * * * * * * *

F-24

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

Effective May 26, 2006, we engaged Jewett, Schwartz & Associates, Certified Public Accountants ("JSA") as our principal independent public accountant for the fiscal years ended September 30, 2005 and September 30, 2006. The decision to engage JSA was recommended and approved by the Company's Board of Directors effective May 26, 2006. JSA succeeded the Company's previous independent auditor, Chisholm, Bierwolf & Nilson, LLC, ("CBN") who was dismissed by the Company's Board of Directors effective March 3, 2006 (which dismissal is described in greater detail in our amended report on Form 8-K filed with the Commission on April 13, 2006).

The Company had not previously consulted with JSA regarding either (i) the application of accounting principles to a specific completed or contemplated transaction; (ii) the type of audit opinion that might be rendered on the Company's financial statements; or (iii) a reportable event (as provided in Item 304(a)(1)(iv)(B) of Regulation S-B) during the Company's fiscal years ended September 30, 2004 and September 30, 2003, and any later interim period, including the interim period up to and including the date the relationship with CBN ceased. JSA reviewed the disclosure required by Item 304 (a) before it was filed with the Commission and was been provided an opportunity to furnish the Company with a letter addressed to the Commission containing any new information, clarification of the Company's expression of its views, or the respects in which it does not agree with the statements made by the Company in response to Item 304 (a). JSA did not furnish a letter to the Commission.

Effective June 1, 2007, the client auditor relationship between the Company and Jewett, Schwartz, Wolfe & Associates, Certified Public Accountants, formerly Jewett, Schwartz & Associates, Certified Public Accountants ("JSWA") was terminated. Effective June 1, 2007, the Company engaged GLO CPAs, LLP, Certified Public Accountants ("GLO") as its principal independent public accountant for the fiscal year ended September 30, 2007, and the audit of the Company’s previously unaudited and unfiled September 30, 2005 and 2006 financial statements. The decision to change accountants was recommended and approved by the Company's Board of Directors on June 1, 2007.

While JSWA never issued a report on the financial statements of the Company, JSWA's review of our amended and restated financial statements for the periods ended March 31, 2005 and June 30, 2005, and any later interim period, up to and including the date the relationship with JSWA ceased, did not contain any adverse opinion or disclaimer of opinion and was not qualified or modified as to uncertainty, audit scope or accounting principles except for concerns about the Company's ability to continue as a going concern.

In connection with the review of our restated financial statements for the quarterly periods ended December 31, 2004, March 31, 2005 and June 30, 2005, and any later interim period, including the interim period up to and including the date the relationship with JSWA ceased, there were no disagreements between JSWA and the Company on a matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreement, if not resolved to the satisfaction of JSWA would have caused JSWA to make reference to the subject matter of the disagreement in connection with its report on the Company's financial statements.

There have been no reportable events as provided in Item 304(a)(1)(iv)(B) of Regulation S-B during the Company's fiscal years ended September 30, 2005 and September 30, 2006, and any later interim period, including the interim period up to and including the date the relationship with JSWA ceased.

The Company has authorized JSWA to respond fully to any inquiries of any new auditors hired by the Company relating to their engagement as the Company's independent accountant. The Company has requested that JSWA review the disclosure and JSWA has been given an opportunity to furnish the Company with a letter addressed to the Commission containing any new information, clarification of the Company's expression of its views, or the respect in which it does not agree with the statements made by the Company herein. Such letter has been incorporated by reference as an exhibit to this Report.

The Company has not previously consulted with GLO regarding either (i) the application of accounting principles to a specific completed or contemplated transaction; (ii) the type of audit opinion that might be rendered on the Company's financial statements; or (iii) a reportable event (as provided in Item 304(a)(iv)(B) of Regulation S-B) during the Company's fiscal years ended September 30, 2005 and September 30, 2006, and any later interim period, including the interim period up to and including the date the relationship with JSWA ceased. GLO has reviewed the disclosure required by Item 304 (a) before it was filed with the Commission and has been provided an opportunity to furnish the Company with a letter addressed to the Commission containing any new information, clarification of the Company's expression of its views, or the respects in which it does not agree with the statements made by the Company in response to Item 304 (a). GLO did not furnish a letter to the Commission.

ITEM 8A. CONTROLS AND PROCEDURES.

(a) Evaluation of disclosure controls and procedures. Our Chief Executive Officer and Principal Financial Officer, after evaluating the effectiveness of our "disclosure controls and procedures" (as defined in the Securities Exchange Act of 1934 Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this Annual Report on Form 10-KSB (the "Evaluation Date"), have concluded that as of the Evaluation Date, our disclosure controls and procedures were not effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Our controls were not effective because we failed to complete the required audit of Black Swan in compliance with GAAP, and failed to file our 2005, 2006 and 2007 quarterly and annual reports timely.

Moving forward, our current management intends to allocate sufficient resources to allow us to timely file our periodic and current reports with the Commission.

(b) Changes in internal control over financial reporting. There were no changes in our internal control over financial reporting during the fiscal year reported by this Form 10-KSB, that materially affected, or were reasonably likely to materially affect, our internal control over financial reporting.

ITEM 8B. OTHER INFORMATION.

None.

PART III

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

The current Directors and Officers of the Company are as follows:

Name	Age	Position

William M. Simmons	54	President,
		Secretary, Treasurer and Director

Daniel Vesco	54	Chief Executive Officer,,
		Chief Financial Officer and
		Director

Ibrahim Nafi Onat	61	Director and
		Vice President of Operations

William M. Simmons

President, Secretary, Treasurer and Director

William M. Simmons, age 54, has served as our President since May 17, 2007, as a Director of the Company since June 4, 2007 and as Secretary and Treasurer of the Company since July 26, 2007. Mr. Simmons has served as a Director of Texaurus since June 30, 2007. Mr. Simmons currently serves as the President of Valeska Energy Corp., which position he has held since June 2006, and as President of Loosbrock Offshore International, Inc., which position he has held since April 1987, and which company is engaged in the offshore drilling industry as a consultant and broker. From June 2005 until May 2006, Mr. Simmons served as Senior Editor and leader of the energy group for Off The Record Research, LLC, a registered investment advisor and broker dealer firm.

Mr. Simmons obtained his Bachelors degree from Texas A&M University in College Station, Texas in Geography in 1980.

Daniel Vesco

Chief Executive Officer, Chief Financial Officer, and Director

Daniel Vesco, age 54, has served as our Chief Executive Officer since May 17, 2007, as a Director since June 4, 2007 and as Chief Financial Officer since July 26, 2007. Mr. Vesco has served as Chief Executive Officer and as a Director of our wholly owned subsidiary, Texaurus Energy, Inc. since June 30, 2007 (“Texaurus”). Mr. Vesco has been Managing Director of Asset Solutions (Hong Kong) Limited, a Hong Kong based boutique investment bank for the past 7 years and is a resident of Hong Kong. Asset Solutions is engaged in corporate advisory, Mergers and Acquisitions and institutional (non retail) fund raising activities principally focused on Asia, including China.

Ibrahim Nafi Onat

Director and Vice President of Operations

Mr. Ibrahim Nafi Onat, age 61, has served as our Director since June 21, 2007 and our Vice President of Operations since July 1, 2007. Mr. Onat has been employed by Sure Engineering LLC as a Manager since October 1996. From August 1988 to October 1996, Mr. Onat was employed as a Senior Engineer with Resource Services International, a consulting firm. From July 1979 to May 1988, Mr. Onat was employed as the Vice President of Wenner Petroleum Corporation. Mr. Onat received his Bachelors degree in Petroleum Engineering in 1968 and his Masters Degree in Petroleum Engineering in 1970 from the Middle East Technical University in Turkey. He received his Ph.D. in Petroleum Engineering from the Colorado School of Mines in 1975. Mr. Onat is a member of the Society of Petroleum Engineers.

Mr. Simmons and Mr. Vesco are involved in business interests separate from their involvement with the Company, including but not limited to Valeska Energy Corp. As a result, it is possible that the demands on Mr. Simmons and Mr. Vesco from these other businesses could increase with the result that they may not have sufficient time to devote to our business. We do not have an employment agreement with Mr. Simmons or Mr. Vesco and they are under no requirement to spend a specified amount of time on our business. As a result, they may not spend sufficient time in their roles as executive officers and Directors of our company to realize our business plan. If they do not have sufficient time to serve our company, it could have a material adverse effect on our business and results of operations. Furthermore, Mr. Simmons and Mr. Vesco are under no obligation to include us in any transactions which they undertake. As a result, we may not benefit from connections they make and/or agreements they enter into while employed by us, and they may profit from transactions which they undertake while we do not.

Our Directors are elected annually and hold office until our next annual meeting of the shareholders and until their successors are elected and qualified. Officers will hold their positions at the pleasure of the Board of Directors, absent any employment agreement. Our officers and Directors may receive compensation as determined by us from time to time by vote of the Board of Directors. Such compensation might be in the form of stock options. Directors may be reimbursed by us for expenses incurred in attending meetings of the Board of Directors. Vacancies in the Board are filled by majority vote of the remaining directors.

Consulting Agreement With Mr. Onat

Effective July 1, 2007, we entered into a Consulting Agreement with Ibrahim Nafi Onat, our Director (the “Consulting Agreement”), pursuant to which Mr. Onat agreed to serve as our Director and Vice President of Operations for an initial term of twelve (12) months, which term is renewable month to month thereafter with the mutual consent of the parties. Pursuant to the Consulting Agreement we agreed to pay Mr. Onat $2,500 per month during the term of the Consulting Agreement, to issue him 500,000 restricted shares of common stock in connection with his entry into the Consulting Agreement and 500,000 restricted shares of common stock assuming he is still employed under the Consulting Agreement at the expiration of six (6) months from the effective date of the Consulting Agreement (the “Six Month Issuance”).

Pursuant to the Consulting Agreement, Mr. Onat agreed to travel on our behalf through North America as requested by the Board of Directors for up to twenty-one (21) total days during the initial twelve (12) month term of the Consulting Agreement. Any travel expenses incurred by Mr. Onat will be reimbursed by us. Any additional travel in excess of the twenty-one (21) days provided for in the Consulting Agreement will be undertaken by Mr. Onat, assuming he is available for such travel, and such travel time and expense will be reimbursed by us.

The Consulting Agreement shall terminate:

(a)

in the event Mr. Onat suffers an injury, illness, or incapacity of such character as to prevent him from performing his duties without reasonable accommodation for a period of more than sixty (60) consecutive days upon us giving at least thirty (30) days written notice of termination to him;

(b)

upon Mr. Onat's death;

(c)

at any time because of (i) the conviction of Mr. Onat of an act or acts constituting a felony or other crime involving moral turpitude, dishonesty or theft or fraud; or (ii) his negligence in the performance of his duties under the Consulting Agreement;

(d)

Mr. Onat may terminate his employment for "good reason" by giving us ten (10) days written notice if: (i) he is assigned, without his express written consent, any duties materially inconsistent with his positions, duties, responsibilities, or status with us, or a change in his reporting responsibilities or titles; (ii) his compensation is reduced; or (iii) we do not pay any material amount of compensation due under the Consulting Agreement and then fails either to pay such amount within the ten (10) day notice period required for termination hereunder or to contest in good faith such notice; or

(e)

at any time without cause.

In the event of the termination of Mr. Onat's employment pursuant to (a), (b) or (c) above, he will be entitled to all payments of salary earned through the date of termination (plus life insurance or disability benefits).

In the event of the termination of Mr. Onat's employment pursuant to (d) or (e) above, he will be entitled to the compensation earned by him as of the date of such termination plus the Six Month Issuance, even if such Six Month Issuance had not vested as of the date of the termination (plus life insurance or disability benefits).

Under the Consulting Agreement, we agreed to indemnify and hold harmless Mr. Onat, his nominees and/or assigns against any and all losses, claims, damages, obligations, penalties, judgments, awards, liabilities, costs, expenses and disbursements (incurred in any and all actions, suits, proceedings and investigations in respect thereof and any and all legal and other costs, expenses and disbursements in giving testimony or furnishing documents in response to a subpoena or otherwise), including without limitation, the costs, expenses and disbursements, as and when incurred, of investigating, preparing or defending any such action, suit, proceeding or investigation that is in any way related to his employment with us (whether or not in connection with any action in which he is a party). Such indemnification does not apply to acts performed by Mr. Onat, which are criminal in nature or a violation of law. We also agreed that he shall not have any liability (whether direct or indirect, in contract or tort, or otherwise) to us, for, or in connection with, the engagement of Mr. Onat under the Consulting Agreement, except to the extent that any such liability resulted primarily and directly from his gross negligence and willful misconduct.

ITEM 10. EXECUTIVE COMPENSATION.

Summary Compensation Table

The Summary Compensation Table below reflects those amounts received as compensation by the executive officers of the Company during the fiscal years ended September 30, 2007, 2006, and 2005. The Company presently has no pension, health, annuity, insurance, or similar benefit plans.

						Other
	Year					Annual	Total*
Name & Principal	Ended			Restricted Stock	Options/	Compen-	Compen-
Position	September 30	Salary ($)	Bonus ($)	Awards ($)	Warrant Grants	sation	sation

Daniel Vesco	2007(1)	-	-	-	-	-	-
CEO, CFO and Director

William M. Simmons	2007(1)	-	-	-	-	-	-
President and Director

Ibrahim Nafi Onat	2007(6)	$30,000	-	$10,000 (6)	-	-	$40,000
Director

Max Maxwell	2007	$138,804(G)	-	-	-	-	$138,804(G)
Former President and Director (2)	2006	$109,060	$25,000	-	(A)	$16,040 (B)	$150,100

Frank A. Jacobs	2007	$0	-	-	-	-	-
Former Director/CEO/CFO (3)	2006	$80,000 (C)	-	-	(D)	-	$80,000

	2005	$99,000 (C)	-	-	-	-	$99,000

Brian Alexander	2006	$36,000 (E)	-	-	-	-	$36,000
Former President / CEO/CFO/Director (4)	2005	$27,000 (E)	-	-	(F)	-	$27,000

Marc Applbaum	2005	-	-	-	-	-	-
Former President, CEO and Director

* Does not include perquisites and other personal benefits in amounts less than 10% of the total annual salary and other compensation. Other than the individual listed above, we had no executive employees or Directors during the years listed above. No Executive Officer received any bonus, or nonqualified deferred compensation earnings during the years disclosed above, other than as provided above. No executive Director of the Company received any separate consideration for his service to the board other than what he received as an executive officer.

(1)Mr. Vesco and Mr. Simmons are not paid a salary from the Company, they have not been directly issued any restricted shares or options or warrants from the Company, and they are reimbursed by the Company directly or indirectly for any Company expenses. They are paid however through the Management Services Agreement with Valeska, which Mr. Simmons serves as President of and Mr. Vesco beneficially owns through an entity which he controls. Additionally, Valeska has been issued restricted common stock by the Company, and has been granted warrants to purchase shares of common stock as described in greater detail herein. Finally, through the Management Services Agreement, Valeska may be reimbursed directly for the reasonable business expenses of Mr. Vesco and/or Mr. Simmons in connection with their services to the Company. The Management Services Agreement, as amended, is described in greater detail below under “Other Certain Relationships and Related Transactions.” On June 4, 2007, Daniel Vesco was appointed as Chief Executive Officer and as a Director of the Company. On June 4, 2007, William M. Simmons was appointed as President and as a Director of the Company. On July 26, 2007, William M. Simmons was appointed as Secretary and Treasurer of the Company. On July 26, 2007, Mr. Vesco was appointed as our Chief Financial Officer.

(2) Mr. Maxwell served as a Director of the Company from April 10, 2006 to May 1, 2007. Mr. Maxwell served as the Company’s President from April 12, 2006 to May 1, 2007 and as Chief Executive Officer of the Company from June 5, 2006 to May 1, 2007.

(3) Mr. Frank A. Jacobs was appointed as a Director of the Company on January 24, 2005, and served as a Director of the Company until June 14, 2007. Mr. Jacobs served as Chief Executive Officer of the Company from April 12, 2006 to June 5, 2006. Mr. Jacobs also served as Chief Executive Officer from May 17, 2007 to June 4, 2007 and served as Chief Financial Officer from May 17, 2007 to June 14, 2007.

(4) Mr. Alexander served as the Company’s President from November 2, 2004 to April 12, 2006 and as a Director of the Company from November 2, 2004 to September 27, 2006. He also served as our Chief Financial Officer from April 12, 2006 to September 27, 2006.

(5) Served as President and Chief Executive Officer from approximately May 17, 2004 to November 2, 2004.

(6) Effective July 1, 2007, the Company entered into a one year consulting agreement with Mr. Nafi to serve as a Director of the Company, pursuant to which he was to be paid $2,500 per month, 500,000 restricted shares of common stock (valued at $0.02 per share or $10,000), which have been issued to date, and 500,000 restricted shares of common stock assuming he was still employed by the Company six months after the effective date of the agreement, which he was, but which shares have not been issued to date or included in the number of issued and outstanding shares disclosed throughout this report.

(A) Mr. Maxwell was granted an aggregate of 3,250,000 Non-Qualified Stock Options and 750,000 Incentive Stock Options on June 1, 2006. The Options all had an exercise price of $0.13 per share, equal to the mean of the highest ($0.125) and lowest ($0.111) quoted selling prices of the Company’s common stock on June 1, 2006, multiplied by 110%, which was equal to $0.13 per share. The options were to vest at the rate of 500,000 shares every three months, with the Incentive Stock Options granting first, as long as he was employed by the Company. Mr. Maxwell vested 1,500,000 Options as of May 1, 2007, the date of his resignation from the Company. The Options were to expire if unexercised on June 1, 2009, or three (3) months from the date of the termination of his employment with the Company, and as such all of his vested Options expired unexercised on August 1, 2007. As a result, the Options granted to Mr. Maxwell have no value in the table above.

(B) Mr. Maxwell received consideration of $16,040 as a bonus in connection with funds received from subscription agreements which he was able to obtain for the Company.

(C) Approximately $90,000 of Mr. Jacobs' salary for the year ended September 30, 2005 was accrued and remains unpaid. Approximately $55,000 of Mr. Jacobs’ salary for the year ended September 30, 2006 was accrued. All of Mr. Jacobs’ accrued and unpaid salary was extinguished by Mr. Jacobs in connection with Mr. Jacobs entry into the Settlement Agreement and Mutual Release, described above.

(D) Mr. Jacobs was granted an aggregate of 4,000,000 Non-Qualified Stock Options on June 1, 2006. The Options all had an exercise price of $0.13 per share, equal to the mean of the highest ($0.125) and lowest ($0.111) quoted selling prices of the Company’s common stock on June 1, 2006, multiplied by 110%, which was equal to $0.13 per share. The options were to vest at the rate of 500,000 shares every three months as long as Mr. Jacobs was employed by the Company, and as such Mr. Jacobs vested 2,000,000 Options prior to his resignation from the Company on June 14, 2007. The Options were to expire if unexercised on June 1, 2009, or three (3) months from the date of the termination of his employment with the Company, and as such all of his vested Options expired unexercised on September 14, 2007. The Options were issued above the market price of the Company’s common stock on the date of issuance, and as such Options expired unexercised, the grant of such Options have been given no value in the table above.

(E) Approximately $13,000 of Mr. Alexander’s salary for the year ended September 30, 2005 and approximately $12,000 of Mr. Alexander’s salary for the year ended September 30, 2006 was accrued, and settled in September 2005 through the issuance of 300,000 shares of the Company’s restricted common stock to Mr. Alexander in consideration for him releasing all claims he had against the Company, including claims for past amounts owed.

(F) Mr. Alexander was granted an aggregate of 1,000,000 Non-qualified Stock Options on June 1, 2006. The Options all had an exercise price of $0.13 per share, equal to the mean of the highest ($0.125) and lowest ($0.111) quoted selling prices of the Company’s common stock on June 1, 2006, multiplied by 110%, which was equal to $0.13 per share. The options were to vest upon Mr. Alexander’s execution of a Deed of Release and Settlement between Mr. Alexander and the Company, when he resigned from his positions with the Company, which he entered into on September 27, 2006. Once vested, the options were to expire if unexercised on June 1, 2007, and all of the Options granted to Mr. Alexander have since expired unexercised. The Options granted to Mr. Alexander have been given no value in the table above because they were granted above the trading price of the Company’s common stock and have expired unexercised.

(G) This amount included $43,392 which was paid to Mr. Maxwell, and $95,412 which was accrued and later extinguished in connection with the Settlement Agreement entered into with Mr. Maxwell as described in greater detail above.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The following table provides the names and addresses of each person known to own directly or beneficially more than a 5% of the outstanding common stock (as determined in accordance with Rule 13d-3 under the Exchange Act) as of December 26, 2007 and by our officers and directors, individually and as a group. Except as otherwise indicated, all shares are owned directly.

		Common Stock	(1)	Percentage	Shares of Common Stock the Holder of our Series A Preferred Stock is able to Vote*	Total Voting Percentage Including Preferred Stock Outstanding*	(2)

William M. Simmons		87,200,000	(3)	29.9%	240,857,776 (4)	61.6%
President, Secretary, Treasuer and Director
100 Highland Park Village
Dallas, Texas 75205

Daniel Vesco		0	(5)	0.0%	-	0.0%
Chief Executive Officer, Chief Financial Officer and Director
100 Highland Park Village
Dallas, Texas 75205

Nafi Onat		500,000		0.2%	-	0.1%
Director
100 Highland Park Village
Dallas, Texas 75205

Valeska Energy Corp.	(6)	86,200,000		29.6%	240,857,776 (7)	61.4%
1000 Guadalupe Street #2C
Kerrville, Texas 78028

Capersia Pte. Ltd.	(8)	30,000,000		13.0%	-	6.4%
96A Club Street
Singapore 069464

Pagest Services SA	(9)	40,000,000		9.9%	-	8.4%
rue Thalberg 2, c/o
Finova Associes SA,
Geneva Switerland

Structured Capital Corporation	(10)	19,350,000		8.4%	-	4.1%
c/o Gordon Rees L.L.P.
1900 West Loop, Suite 1100
Houston, Texas 77027

Lucayan Oil and Gas Investments, Ltd.	(11)	18,500,000		8.0%	-		3.9%


Hobart Global Ltd.	(12)	18,000,000		7.8%	-		3.8%
116 Main Street, B.V.I.

Polaris Holdings, Inc.	(13)	12,000,000		5.2%	-		2.5%
2411 Fountainview Dr. #120
Houston, Texas 77057


All of the Officers and Directors as a Group (3 persons)		87,700,000	(3)(5)	30.1%	240,857,776	(4)	61.7%

* Approximate.

(1) The number of shares of common stock owned are those "beneficially owned" as determined under the rules of the Commission, including any shares of common stock as to which a person has sole or shared voting or investment power and any shares of common stock which the person has the right to acquire within sixty (60) days through the exercise of any option, warrant or right.

(2) Based on approximately 231,412,224 shares of common stock outstanding and one thousand (1,000) shares of Series A Preferred Stock outstanding, which is able to vote in aggregate, voting as a group, an amount of voting shares equal to 51% of our total voting shares.

(3) Includes 1,000,000 shares which Mr. Simmons owns directly, 26,200,000 shares of common stock, and 60,000,000 warrants to purchase shares of our common stock at an exercise price of $0.02 per share, which Mr. Simmons is deemed to beneficially own through Valeska Energy Corp. (“Valeska”), of which he serves as the President.

(4) Includes one thousand (1,000) shares of Series A Preferred Stock which are held by Valeska, and which Mr. Simmons is deemed to beneficially own, and which voting in aggregate are able to vote an amount of voting shares equal to 51% of our outstanding voting stock.

(5) Daniel Vesco, the Company’s Chief Executive Officer owns a majority of the outstanding shares of common stock of Valeska though an entity which he controls, and is a Director of Valeska; however, Mr. Vesco does not have voting and/or dispositive control over the shares of common stock held by Valeska.

(6) William M. Simmons, the President and a Director of the Company, is the President of Valeska and is deemed to beneficially own the shares of common and preferred stock held by Valeska. Valeska holds 26,200,000 shares of common stock, 60,000,000 warrants to purchase shares of our common stock at an exercise price of $0.02 per share, and one thousand (1,000) shares of Series A Preferred Stock which voting in aggregate are able to vote an amount of voting shares equal to 51% of our outstanding voting stock

(7) Includes one thousand (1,000) shares of Series A Preferred Stock which are held by Valeska, which voting in aggregate are able to vote an amount of voting shares equal to 51% of our outstanding voting stock.

(8) The beneficial owner of Capersia Pte. Ltd. is Sino Atlantic Limited (“Atlantic”) and the Director of Capersia Pte. Ltd. is Richard N. Wilson.

(9) The beneficial owner of Pagest Services SA (“Pagest”) is Jacques Point. The amount of common stock beneficially owned by Pagest includes 20,000,000 shares issuable in connection with the conversion of $250,000 of Convertible Promissory Notes at a conversion price of $0.0125 per share, which Convertible Notes are convertible at the option of the holder, and 10,000,000 Class A and 10,000,000 Class B warrants to purchase shares of the Company’s common stock at an exercise price of $0.02 and $0.03, respectively. Pursuant to the terms of the Convertible Promissory Notes and Warrants held by Pagest, Pagest is not able to convert the Convertible Promissory Notes or exercise the Warrants, if such conversion or exercise, respectively, would cause it to own more than 9.9% of the Company’s common stock, provided however, that Pagest may waive such ownership limitation by providing us at least 75 days prior written notice of its intention to waive such limitation.

(10) The beneficial owner of Structured Capital Corporation is Jostein Hauge.

(11) The beneficial owners of Lucayan Oil and Gas, Ltd. (“LOGI”) are the Company's former President and Director, Max Maxwell, who is a 50% owner and Director of LOGI and A.E. "Buzz" Jehle, who is a 50% owner and Director of LOGI.

(12) The beneficial owner of Hobart Global Ltd. is AIBWorthytrust Limited as Trustees of the Tyser 1998 Discretionary Settlement.

(13) The beneficial owner of Polaris Holdings, Inc. is Ingolfe Grinde.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The following “Certain Relationships and Related Transactions” represent material transactions in which any related person had or will have a direct or indirect material interest, which are known to the Company’s current management team. There may however be various other material transactions regarding the Company which the Company’s current management is not aware of.

Changes in Officers

On November 2, 2004, Marc Applbaum resigned as President, Chief Executive Officer, and Director.

On November 2, 2004, Brian Alexander was appointed as President and Director of the Company.

On January 21, 2005, Mr. Peter G. Wilson tendered his resignation as a Director of the Company.

On January 24, 2005, Frank A. Jacobs was appointed as a Director of the Company.

On April 10, 2006, Max Maxwell was appointed as a Director of the Company.

On April 12, 2006, Frank A. Jacobs was appointed as Chief Executive Officer of the Company.

On April 12, 2006, Brian Alexander resigned as President of the Company and was appointed as Chief Financial Officer of the Company.

On April 12, 1006, Max Maxwell was appointed as President of the Company.

On June 5, 2006, Frank A. Jacobs resigned as Chief Executive Officer of the Company.

On June 5, 2006, Mr. Maxwell was appointed as Chief Executive Officer of the Company.

On September 27, 2006 Brian Alexander resigned as Chief Financial Officer of the Company.

On May 1, 2007, Max Maxwell resigned as a Director, President and Chief Executive Officer of the Company.

On May 17, 2007, Frank A. Jacobs was appointed as Chief Executive Officer and Chief Financial Officer of the Company.

On June 4, 2007, Frank A. Jacobs resigned as Chief Executive Officer of the Company.

On June 4, 2007, Daniel Vesco was appointed as Chief Executive Officer and as a Director of the Company.

On June 4, 2007, William M. Simmons was appointed as President and as a Director of the Company.

On June 14, 2007, Frank A. Jacobs resigned as a Director and as Chief Financial Officer of the Company.

On June 21, 2007 Ibrahim Nafi Onat was appointed as a Director of the Company.

On July 26, 2007, William M. Simmons was appointed as Secretary and Treasurer of the Company.

On July 26, 2007, Mr. Vesco was appointed as our Chief Financial Officer.

Mr. Simmons and Mr. Vesco are involved in business interests separate from their involvement with the Company, including but not limited to Valeska Energy Corp., which we have entered into a Management Services Agreement with as otherwise described herein. As a result, it is possible that the demands on Mr. Simmons and Mr. Vesco from these other businesses could increase with the result that they may not have sufficient time to devote to our business. We do not have an employment agreement with Mr. Simmons or Mr. Vesco and they are under no requirement to spend a specified amount of time on our business. As a result, they may not spend sufficient time in their roles as executive officers and Directors of our company to realize our business plan. If they do not have sufficient time to serve our company, it could have a material adverse effect on our business and results of operations. Furthermore, Mr. Simmons and Mr. Vesco are under no obligation to include us in any transactions which they undertake. As a result, we may not benefit from connections they make and/or agreements they enter into while employed by us, and they may profit from transactions which they undertake while we do not.

OTHER CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

On October 27, 2004, the Company entered into a Share Sale and Purchase Agreement (the "Agreement") to acquire a 40% shareholding in the capital of Black Swan Petroleum Pty. Ltd. ("BSP"), which held a 100% interest in Block B7/38, a Petroleum Exploration Concession (the "Petroleum Concession") in offshore Thailand. In connection with the Agreement, the Company agreed to issue 56,000,000 shares of common stock and to pay $150,000 to Capersia Pte. Ltd. ("Capersia"). At the time of the Company's entry into the Agreement, Capersia was 50% owned by our former Chief Executive Officer and Director, Frank A. Jacobs', brother Peter Jacobs, and 50% owned by Mr. Jacobs' wife, Anna Jacobs.

On December 7, 2004, the Company borrowed $50,000 from a related party, MFS Technology. The loan is evidenced by a convertible promissory note. The loan bears interest at 5% per annum calculated 6 months after the advancement of funds. $25,000 was due on June 7, 2005 and the remaining balance, plus interest was due on December 7, 2005. The loan has not been repaid, extended or converted. The lender has the option during the term of the loan, and any extension, to convert the principle and interest into shares of common stock at a conversion price of $0.30 per share.

On or about December 10, 2005, the Company entered into a participation agreement with the "Clovelly Joint Venture," of which ORX, whom our former President and Director, Max Maxwell used to serve as Vice President and served as a Director of at the time of the parties entry into the agreement, is the Operator. The Company agreed to a 6%-participation in the drilling of the Allain Lebreton #2 well on a prospect close to the existing Clovelly oil and gas field in Louisiana. On February 14, 2006, the Company announced it had increased its working interest to 11% through the purchase of a further 5% working interest in this prospect.

On January 20, 2006, we divested our shareholding in Black Swan Petroleum Pty. Ltd. and Black Swan Petroleum (Thailand) Limited by transferring such shares to Pacific Spinner Limited. Pacific Spinner had, pursuant to a Letter Agreement, agreed to use its best efforts to further sell such shares and to pay us 20% (twenty percent) of any proceeds received from such sale. However, the Company has learned that Black Swan has deregistered itself as an active company in Australia whilst Black Swan Thai has gone into voluntary receivership with little chance of the Company receiving any further benefit from the divestment.

In January 2006, Texhoma agreed to participate in a 25% working interest in the exploration of the Bayou Choctaw oil and gas project, located in Iberville Parish, Louisiana. Texhoma identified that the exposure was in excess of its corporate guidelines and assigned its right to the interest to Morgan Creek Energy Corp. in exchange for $250,000 and 200,000 shares of Morgan Creek Energy.

In March 2006, our Executive Chairman and Director, Frank Jacobs subscribed for 7,500,000 shares of our common stock at $0.04 per share, for aggregate consideration of $300,000, which funds were immediately used by us in connection with the Closing of the Kilrush Property (described above).

On April 10, 2006, Texhoma Energy, Inc. (the "Company") entered into a Debt Conversion Agreement with Lucayan Oil and Gas Investments, Ltd., a Bahamas corporation, formerly Devon Energy Thai Holdings, Ltd. ("LOGI"). The Company owed $895,000 to LOGI as of the date of the Debt Conversion Agreement in connection with money received by the Company for the drilling in Thailand in March 2005, which debt was transferred by Fidelio Business, S.A. and Quick Assets and Cash Corp. (Bank Sal Oppenheim) to LOGI in November 2005. Pursuant to the Debt Conversion Agreement, the Company and LOGI agreed to convert $160,000 of the $895,000 which LOGI was owed into an aggregate of 4,000,000 shares (or one (1) share for each $0.04 of debt converted) of newly issued shares of the Company's restricted common stock. As of the date of this filing, the Company still owes LOGI $735,000. The Director and 50% owner of LOGI is Max Maxwell, who became a Director of the Company on April 10, 2006, President of the Company on April 12, 2006, and Chief Executive Officer of the Company on June 5, 2006, and resigned as President, Chief Executive Officer and Director on May 1, 2007.

On April 10, 2006, the Company entered into a convertible note with LOGI evidencing the $735,000 of debt which remains outstanding. The convertible note provides that LOGI may convert the $735,000 debt into Company common stock at the rate of one share of common stock for each $0.04 of outstanding debt.

On June 1, 2006, the Company's Board of Directors approved the grant of an aggregate of 10,000,000 options to the Company's then officers, Directors and employees, pursuant to the Company's 2006 Stock Incentive Plan (the "Plan"). All of the options were granted at an exercise price of $0.13 per share, which was equal to the average of the highest ($0.125) and lowest ($0.111) quoted selling prices of the Company's common stock on June 1, 2006, multiplied by 110%. The options were granted to the following individuals in the following amounts:

Our former Director, Mr. Brian Alexander decided not to seek re-election as a director of the Company due to other business and work commitments at the annual shareholders meeting which was held on September 19, 2006. In connection with monies we owed Mr. Alexander in directors and consulting fees, we and Mr. Alexander agreed that we would issue 300,000 shares of our restricted common stock to Mr. Alexander in lieu of the amounts owed to him in such fees. In connection with the issuance of the shares and Mr. Alexander's departure, the parties entered into a Mutual Release letter agreement (the "Mutual Release") on September 27, 2006. Pursuant to the Mutual Release, Mr. Alexander agreed to release and forever discharge us, our officers and Directors and we agreed to release Mr. Alexander from all actions, claims, demands and costs, which either party may have had or my have at any time in the future in connection with Mr. Alexander's employment with us. Additionally, pursuant to the terms of Mr. Alexander's 1,000,000 non-qualified options granted to him in consideration for services rendered for his services as the Company's Financial Officer on June 1, 2006, which options were to purchase shares at $0.13 per share, all of the options were immediately vested to Mr. Alexander upon his entry into the Mutual Release and such options later expired unexercised on June 1, 2007.

On or about October 19, 2006, we issued a Promissory Note to Mr. Frank Jacobs, our then Director of the Company, in the amount of $493,643.77, which amount represented funds advanced to the Company by Mr. Jacobs during the 2006 calendar year and management fees owed to Mr. Jacobs for his services to the Company during the 2006 calendar year (the “Jacobs' Note”). The Jacobs' Note bears interest at the rate of 6% per annum until paid, and is payable by the Company at any time on demand. The Jacobs' Note may be pre-paid at any time without penalty. Any amounts not paid on the Jacobs' Note when due shall bear interest at the rate of 15% per annum.

Pursuant to the Management Agreement, we agreed to enter into a Joint Venture agreement with Valeska (the “Joint Venture”), described below; Valeska agreed to provide us management services and act as a Management Consultant to us, for a monthly fee of $10,000 (plus expenses), or 15% of any revenue we generate, whichever is greater (excluded from this definition however are asset sales and/or income of a capital nature, and included in the definition are 20% of the revenues we receive from our Joint Venture with Laurus Master Fund, Ltd.); and we also agreed to issue Valeska 15,200,000 restricted shares of our common stock. We also agreed pursuant to the Management Agreement, as amended, that we would issue Valeska an additional 18,200,000 shares of our common stock upon such time as we are able to bring our public reporting requirements current with the Commission and seek reinstatement on the Over-The-Counter Bulletin Board. The Management Agreement has a minimum term of three months, beginning on May 1, 2007. The Management Services Agreement was later amended and extended by the parties’ entry into the Second Amendment to Management Services Agreement with Valeska Energy Corp. in August, 2007, as described below.

Joint Venture Agreement

Additionally, we have the right, pursuant to the Joint Venture Agreement, to veto any deal which Valeska proposes to include in the Joint Venture.

Voting Agreement

Cooperation Agreement and Mutual Release

On or about July 12, 2007, LOGI; Mr. Maxwell; Meredith Maxwell, Mr. Maxwell’s daughter and our former employee; and A.E. Buzz Jehle, our former consultant (collectively the “Former Interested Parties”) entered into a Cooperation Agreement and Mutual Release (the “Release”) with us and Texaurus Energy, Inc. (“Texaurus”), our wholly owned Delaware subsidiary (for the purposes of the description of the Release, all references to “we,” “us,” the “Company” or similar words include Texaurus). In connection with the Release, we and the Former Interested Parties agreed to release each other (including employees, officers, directors, representatives, employees and assigns) from any and all claims, rights, causes of action and obligations which were known or unknown at the time of the entry into the Release, subject only to the Assignment by the Former Interested Parties of their rights, causes of actions or demands against any former officers or Directors of us to the Company and the New Directors (the “Assignment”) and the Extension. The release we provided to the Former Interested Parties was against any and all claims, rights, causes of action and obligations which were known at the time of the entry into the Release, or which are not brought to the attention of the New Directors or the Company by 5:00 P.M. Central Standard Time, on September 30, 2007 (the “Extension”).

Additionally, in connection with the Release, Mr. Maxwell personally agreed, to the best of his ability, to cooperate with us in connection with an audit of us and Texaurus; to provide a list of the known liabilities of the Company which Mr. Maxwell was aware of; and to personally certify the accuracy and completeness any financial statements which the Company prepared covering the time period during which Mr. Maxwell was President of the Company, in a form similar to the Certification Of Chief Executive Officer and Chief Financial Officer Pursuant To Section 302 of The Sarbanes-Oxley Act Of 2002 and Certification of Chief Executive Officer; and (ii) Certification of Chief Financial Officer Pursuant To 18 U.S.C. Section 1350, as Adopted Pursuant To Section 906 Of The Sarbanes-Oxley Act Of 2002, which reporting companies are required to file as attachments to each periodic filing with the Commission, which certification Mr. Maxwell later made, for the periods from June 30, 2006 to March 31, 2007..

Consulting Agreement

Effective July 1, 2007, we entered into a Consulting Agreement with Ibrahim Nafi Onat, our Director (the “Consulting Agreement”), pursuant to which Mr. Onat agreed to serve as our Director and Vice President of Operations for an initial term of twelve (12) months, which term is renewable month to month thereafter with the mutual consent of the parties. Pursuant to the Consulting Agreement we agreed to pay Mr. Onat $2,500 per month during the term of the Consulting Agreement, to issue him 500,000 restricted shares of common stock in connection with his entry into the Consulting Agreement and 500,000 restricted shares of common stock assuming he is still employed under the Consulting Agreement at the expiration of six (6) months from the effective date of the Consulting Agreement (the “Six Month Issuance”). The Consulting Agreement is described in greater detail above.

On or about August 13, 2007, we entered into a Second Amendment to Management Services Agreement with Valeska Energy Corp. (“Valeska” and the “Second Amendment”).

Pursuant to the Second Amendment, we and Valeska agreed to extend the term of the Management Services Agreement until September 30, 2008, and to pay Valeska the following consideration in connection with agreeing to perform the services required by the original Management Services Agreement, and in consideration for allowing Daniel Vesco and William M. Simmons to serve as Directors of the Company, bringing on personnel to assist the Company with the day to day operations of the Company, and helping bring the Company current in its filings (the “Services”):

	·	1,000 shares of the Company’s Series A Preferred Stock;
	·	A monthly fee of $20,000 per month during the extended term of the Second Amendment, plus reasonable and actual costs incurred by Valeska (or individuals or designees brought on by Valeska, including lodging, car rental and telephone expenses therewith) in connection with such Services;
	·	10,000,000 restricted shares of the Company’s common stock; and
	·	60,000,000 options to purchase shares of the Company’s common stock, which have a cashless exercise provision, are valid for a period of three years from their grant date, and have an exercise price of greater than 110% of the trading price of the Company’s common stock on the Pinksheets on the day of such grant, equal to $0.02 per share.

Subsequent Events

In connection with the Reiersen Release, we paid Reiersen $2,500 and issued Reiersen 250,000 restricted shares of our common stock.

(a)	waive any default which may have occurred as a result of our failure to become current in our filings with the Commission;
(b)	amend the terms of the Laurus Note to provide that a “Change of Control” of Texaurus under the Note, which requires approval of Laurus, includes any change in Directors such that Daniel Vesco and William M. Simmons are no longer Directors of Texaurus; and

(c)

ITEM 13. EXHIBITS

A) THE EXHIBITS LISTED BELOW ARE FILED AS PART OF THIS ANNUAL REPORT.

Exhibit Number	Description of Exhibit

3.1(t)	Certificate of Amendment to Articles of Incorporation increasing the authorized shares of common stock to 300,000,000 shares

3.2(13)	Series A Preferred Stock Designation

10.1(1)	Sale and Purchase Agreement, dated as of January 20, 2006, by and between Sterling Grant Capital Inc. and Texhoma Energy, Inc.

10.2(1)	Letter Agreement, dated as of December 31, 2005 by and between Pacific Spinner Limited and Texhoma Energy, Inc.

10.3(2)	Sales and Purchase Agreement with Structured Capital Corp.

10.4(2)	Sales & Purchase Agreement with Kilrush Petroleum

10.5(2)	Securities Purchase Agreement


10.6(2)	Secured Term Note

10.7(2)	Warrant Agreement (Texaurus)

10.8(2)	Warrant Agreement (Texhoma)

10.9(2)	Registration Rights Agreement

10.10(2)	Stock Pledge Agreement

10.11(2)	Side Letter Agreement

10.12(2)	Guaranty of Texaurus

10.13(2)	Personal Guaranty of Frank Jacobs

10.14(2)	Warrant with Energy Capital Solutions, LLC

10.15(2)	Frank Jacobs Subscription Agreement

10.16(5)	Sales and Purchase Agreement with Structured Capital Corp.
10.17(6)	First Amendment to Sales and Purchase Agreement

10.18(6)	Mortgage, Security Agreement, Finance Statement and Assignment of Production

10.19(6)	Collateral Assignment

10.16(7)	Debt Conversion Agreement with Lucayan Oil and Gas Investments, Ltd.

10.17(7)	Note with Lucayan Oil and Gas Investments, Ltd.

10.18(8)	Promissory Note to Frank Jacobs

10.19(8)	Security Agreement with Frank Jacobs

10.20(10)	Letter Agreement with Matrixx Resource Holdings Inc. regarding the sale of the Clovelly Prospect

10.21(11)	Agreement Regarding Frank A. Jacobs’ Note

10.22(11)	Joint Venture Relationship Agreement

10.23(11)	Management Services Agreement with Valeska and Amendment thereto

10.24(12)	Jacobs Oil & Gas Limited Promissory Note

10.25(13)	Voting Agreement

10.26(13)	Voting Agreement with LOGI


10.27(13)	First Amendment to Voting Agreement with LOGI

10.28(13)	Cooperation Agreement and Mutual Release


10.28(13)	Consulting Agreement with Ibrahim Nafi Onat

10.29(14)	Promissory Note and Security Agreement with Polaris

10.30(16)	Second Amendment to Management Services Agreement

10.31(17)	Option Agreement

10.32(18)	Cooperation Agreement and Mutual Release with Terje Reiersen

10.33(18)	First Amendment to Securities Purchase Agreement, Secured Term Note and Registration Rights Agreement with Laurus

10.34(19)	Settlement Agreement and Mutual Release

16.1(15)	Letter from Braverman & Company, PC

16.2(3)	Letter from Chisholm, Bierwolf & Nilson, LLC

16.3(4)	Letter from Chisholm, Bierwolf & Nilson, LLC

16.4(9)	Letter from Jewett, Schwartz, Wolfe & Associates

21.1*	Subsidiaries

31.1*	Certificate of the Chief Executive Officer and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1*	Certificate of the Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

* Filed herewith.

(t)	Filed as an exhibit to our Form 8-K, filed with the Commission on September 22, 2006, and incorporated herein by reference.

(1)	Filed as exhibits to the Company’s Form 8-K filed with the Commission on February 14, 2006, and incorporated herein by reference.

(2)	Filed as exhibits to the Company’s Form 8-K filed with the Commission on April 4, 2006, and incorporated herein by reference.

(3)	Filed as an exhibit to our Form 8-K filing, filed with the Commission on April 5, 2006, and incorporated herein by reference.

(4)	Filed as an exhibit to our Form 8-K filed with the Commission on April 13, 2006, and incorporated herein by reference.

(5)	Filed as an exhibit to our Form 8-K, filed with the Commission on April 4, 2006, and incorporated herein by reference.

(6)	Filed as exhibits to our Form 8-K, filed with the Commission on April 26, 2006, and incorporated herein by reference.

(7)	Filed as exhibits to our Form 8-K, filed with the Commission on May 24, 2006, and incorporated herein by reference.

(8)	Filed as exhibits to our Form 8-K, filed with the Commission on February 13, 2007, and incorporated herein by reference.

(9)	Filed as an exhibit to our Form 8-K, filed with the Commission on June 21, 2007, and incorporated herein by reference.

(10)	Filed as an exhibit to our Form 8-K, filed with the Commission on May 25, 2007, and incorporated herein by reference.

(11)	Filed as an exhibit to our Form 8-K, filed with the Commission on June 8, 2007, and incorporated herein by reference.

(12)	Filed as an exhibit to our Form 8-K, filed with the Commission on October 20, 2006, and incorporated herein by reference.

(13)	Filed as an exhibit to our Form 8-K, filed with the Commission on July 30, 2007, and incorporated herein by reference.

(14)	Filed as an exhibit to our Form 8-K, filed with the Commission on June 13, 2007, and incorporated herein by reference.

(15)	Filed as an exhibit to our Form 8-K, filed with the Commission on May 17, 2004, and incorporated herein by reference.

(16)	Filed as an exhibit to our Form 10-KSB, filed with the Commission on August 21, 2007, and incorporated herein by reference.

(17)	Filed as an exhibit to our Form 10-QSB, filed with the Commission on September 11, 2007, and incorporated herein by reference.

(18)	Filed as an exhibit to our Form 10-KSB, filed with the Commission on November 9, 2007, and incorporated herein by reference.

(19)	Filed as an exhibit to our Form 8-K, filed with the Commission on December 6, 2007, and incorporated herein by reference.

b) REPORTS ON FORM 8-K

We filed a report on Form 8-K on June 5, 2007, to report our entry into the Voting Agreement, Cooperation Agreement and Mutual Release with Max Maxwell and other parties, the entry into the Consulting Agreement with Nafi Onat, our Director, the sale of certain shares of unregistered securities, the Designation of our Series A Preferred Stock, and the appointment of Daniel Vesco as CEO, Director and interim CFO, and William M. Simmons as President, Treasurer and Director.

We filed a report on Form 8-K on December 6, 2007, to report our entry into the Settlement Agreement and Mutual Release with Frank Jacobs and related parties and the sale of certain units consisting of convertible promissory notes and warrants.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

AUDIT FEES

During the fiscal year ended September 30, 2007, the Company incurred approximately $84,000 in fees to its principal independent accountant for professional services rendered in connection with preparation and audit of the Company's financial statements for fiscal year ended September 30, 2007 and for the review of the Company's unaudited quarterly financial statements as filed in the Company’s reports on Form 10-QSB for the year ended September 30, 2007.

During the fiscal year ended September 30, 2006, the Company incurred approximately $69,736 in fees to its principal independent accountants for professional services rendered in connection with preparation and audit of the Company's financial statements for fiscal year ended September 30, 2006 and for the review of the Company's unaudited quarterly financial statements as filed in the Company’s reports on Form 10-QSB for the year ended September 30, 2006.

AUDIT RELATED FEES

None.

TAX FEES

None.

ALL OTHER FEES

None.

SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

TEXHOMA ENERGY, INC.

/s/ Daniel Vesco

Daniel Vesco

Chief Executive Officer

(Principal Executive Officer)

Date: January 15, 2008

In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

SIGNATURE	TITLE	DATE


/s/ Daniel Vesco
Daniel Vesco	Chief Executive Officer	January 15, 2008
	Chief Financial Officer,
	(Principal Financial Officer) and
	Director
/s/ William M. Simmons
William M. Simmons	President,	January 15, 2008
	Secretary, Treasurer and
	Director

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