UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark one)

x
þQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: February 29, 2012

Or

¨
For the quarterly period ended: August 31, 2011
Or
oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from:                            to                            

Commission File Number: 0-30746

FRONTIER OILFIELD SERVICES, INC.

(Formerly TBX RESOURCES, INC.Resources, Inc.)

(Exact name of registrant as specified in its charter)

Texas 
Texas75-2592165

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification Number)

3030 LBJ Freeway, Suite 1320 75234
(Address of principal executive offices) (Zip Code)

(972) 234-2610

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.o¨  Yesþx  No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).o¨  Yeso¨  No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer ¨  Accelerated Filer ¨
Large AcceleratedNon-Accelerated Filero
 Accelerated Filero¨Non-Accelerated FileroSmaller Reporting Companyþ
(Do  (Do not check if smaller reporting company)  Smaller Reporting Companyx

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).o¨  Yesþx  No

As of September 30, 2011,April 12, 2012, there were 4,027,4429,278,288 shares of common stock, par value $0.01 per share, outstanding.

 


FRONTIER OILFIELD SERVICES, INC.

(Formerly TBX Resources, Inc.)

TBX RESOURCES, INC.
Index

   Pg. No. 

  

  

   F-1  

   F-2  

   F-3  

   F-4  

   3  

5

Item 4T. Controls and Procedures

5

PART II – Other Information

Item 1. Legal Proceedings

   6  
6
7
7

   76  

   76  

   76  

   76  

   8  
EX-31.1
EX-32.1

2


PART 1 — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

FRONTIER OILFIELD SERVICES, INC.

(Formerly TBX RESOURCES, INC.

Resources, Inc.)

CONDENSED BALANCE SHEETS
         
  August 31,    
  2011  November 30, 
  (Unaudited)  2010 
ASSETS
        
Current Assets
        
Cash $531  $665 
Oil and gas revenue receivable  3,334   8,271 
Inventory     8,300 
       
Total current assets  3,865   17,236 
         
Oil and gas properties (successful efforts method), net
     37,567 
         
Other
  6,211   6,211 
       
Total Assets
 $10,076  $61,014 
       
         
LIABILITIES AND STOCKHOLDERS’ DEFICIT
        
         
Current Liabilities
        
Trade accounts payable and accrued expenses $25,463  $33,609 
Advances from affiliate  67,532    
Deferred revenue     8,300 
       
Total current liabilities  92,995   41,909 
       
         
Long-term Liabilities
        
Asset retirement obligations     21,347 
       
         
Commitments and Contingencies (Note 10)
        
         
Stockholders’ Deficit
        
Preferred stock- $.01 par value; authorized 10,000,000; no shares outstanding      
Common stock- $.01 par value; authorized 100,000,000 shares; 4,027,442 shares issued and outstanding at August 31, 2011, 4,027,442 shares issued and outstanding at November 30, 2010  40,274   40,274 
Additional paid-in capital  11,363,172   11,363,172 
Accumulated deficit  (11,486,365)  (11,405,688)
       
Total stockholders’ deficit  (82,919)  (2,242)
       
Total Liabilities and Stockholders’ Deficit
 $10,076  $61,014 
       

   February 29,
2012
(Unaudited)
  November 30,
2011
 

ASSETS

  

Current Assets:

   

Cash

  $3,767   $13,871  

Oil and gas revenue receivable

   1,150    4,057  

Advances receivable from affiliate

   11,200    —    
  

 

 

  

 

 

 

Total current assets

   16,117    17,928  

Office furniture and fixtures, net

   909    996  

Investments in unconsolidated affiliated company (Note 5)

   3,135,595    3,136,553  

Other

   6,211    6,211  
  

 

 

  

 

 

 

Total Assets

  $3,158,832   $3,161,688  
  

 

 

  

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

  

Current Liabilities:

   

Trade accounts payable and accrued expenses

  $73,889   $66,746  

Advances payable from affiliate (Note 6)

   640,550    338,490  
  

 

 

  

 

 

 

Total current liabilities

   714,439    405,236  
  

 

 

  

 

 

 

Commitments and Contingencies (Note 9)

   

Stockholders’ Equity:

   

Preferred stock- $.01 par value; authorized 10,000,000;no shares outstanding

   —      —    

Preferred stock subscriptions

   3,150,000    3,000,000  

Common stock- $.01 par value; authorized 100,000,000 shares; 9,278,288 shares issued and outstanding at February 29, 2012, 8,853,288 shares issued and outstanding at November 30, 2011

   92,782    88,532  

Additional paid-in capital

   11,952,452    11,558,639  

Prepaid stock compensation

   (212,500  —    

Accumulated deficit

   (12,538,341  (11,890,719
  

 

 

  

 

 

 

Total stockholders’ equity

   2,444,393    2,756,452  
  

 

 

  

 

 

 

Total Liabilities and Stockholders’ Equity

  $3,158,832   $3,161,688  
  

 

 

  

 

 

 

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

F-1


FRONTIER OILFIELD SERVICES, INC.


(Formerly TBX Resources, Inc.)

TBX RESOURCES, INC.
CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)

                 
  For the Three Months Ended  For the Nine Months Ended 
  Aug. 31, 2011  Aug. 31, 2010  Aug. 31, 2011  Aug. 31, 2010 
Revenues:
                
Oil and gas sales $3,505  $22,557  $5,927  $58,666 
             
Total revenues  3,505   22,557   5,927   58,666 
             
                 
Expenses:
                
Lease operating and taxes  337   8,064   4,517   27,641 
General and administrative  12,091   32,841   68,218   113,918 
Depreciation, depletion, amortization and accretion     4,908      10,438 
Loss on forfeiture of oil and gas properties        16,089    
             
Total expenses  12,428   45,813   88,824   151,997 
             
                 
Operating Loss
  (8,923)  (23,256)  (82,897)  (93,331)
                 
Other Income:
                
Gain on sales of office furniture and fixtures        2,220     
Partial loss recovery (Note 12)     5,062      99,126 
             
                 
Income (Loss) Before Provision for Income Taxes
  (8,923)  (18,194)  (80,677)  5,795 
Provision for income taxes            
             
                 
Net Income (Loss)
 $(8,923) $(18,194) $(80,677) $5,795 
             
                 
Net Income (Loss) per Common Share:
                
Basic and Diluted
 $(0.00) $(0.00) $(0.02) $0.00 
             
                 
Weighted Average Common Shares Outstanding:
                
Basic and Diluted
  4,027,442   4,027,442   4,027,442   4,027,442 
             

   For the Three Months Ended 
   Feb. 29, 2012  Feb. 28, 2011 

Revenues:

   

Oil and gas sales

  $1,609   $1,490  
  

 

 

  

 

 

 

Total revenues

   1,609    1,490  
  

 

 

  

 

 

 

Expenses:

   

Lease operating and taxes

   1,524    372  

General and administrative

   496,662    36,773  

Depreciation

   87    —    

Loss on forfeiture of oil and gas properties

   —      16,089  
  

 

 

  

 

 

 

Total expenses

   498,273    53,234  
  

 

 

  

 

 

 

Operating Loss

   (496,664  (51,744

Other Expense:

   

Equity in loss of unconsolidated affiliated company

   150,958    —    
  

 

 

  

 

 

 

Loss Before Provision for Income Taxes

   (647,622  (51,744

Provision for income taxes

   —      —    
  

 

 

  

 

 

 

Net Loss

  $(647,622 $(51,744
  

 

 

  

 

 

 

Net Loss per Common Share, Basic and Diluted

  $(0.07 $(0.01
  

 

 

  

 

 

 

Weighted average common shares used in calculations:

   

Basic and Diluted

   9,232,318    4,027,442  
  

 

 

  

 

 

 

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

F-2


FRONTIER OILFIELD SERVICES, INC.


(Formerly TBX Resources, Inc.)

TBX RESOURCES, INC.
CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

         
  For the Nine Months Ended 
  Aug. 31, 2011  Aug. 31, 2010 
Cash Flows From Operating Activities:
        
Net income (loss) $(80,677) $5,795 
Adjustments to reconcile net income (loss) to net cash provided by (used for) operating activities:        
Depreciation, depletion, amortization and accretion     10,438 
Loss on forfeiture of oil and gas properties  16,089    
Gain on sale of office furniture and fixtures  (2,220)   
Allocated general and administrative expenses  22,476    
Changes in operating assets and liabilities other than advances from affiliate:        
Decrease (increase) in operating assets:        
Oil and gas revenue receivable  (1,288)  95,808 
Inventory  8,300   294 
Increase (decrease) in operating liabilities:        
Trade accounts payable and accrued expenses  (1,790)  (29,328)
Deferred revenue  (8,300)  (294)
       
Net cash provided by (used for) operating activities  (47,410)  82,713 
       
         
Cash Flows From Investing Activities:
        
Proceeds from sale of office furniture and fixtures  2,220    
       
Net cash provided by investing activities  2,220    
       
         
Cash Flows From Financing Activities:
        
Advances from affiliate  45,056   135,580 
Payments to affiliate     (216,189)
       
Net cash provided by (used for) financing activities  45,056   (80,609)
       
         
Net Increase (Decrease) in Cash
  (134)  2,104 
Cash at beginning of period  665   5,327 
       
Cash at end of period $531  $7,431 
       

   For the Three Months Ended 
   Feb. 29, 2012  Feb. 28, 2011 

Cash Flows From Operating Activities:

   

Net loss

  $(647,622 $(51,744

Adjustments to reconcile net loss to net cash used in operating activities:

   

Depreciation

   87    —    

Issuance of common stock for services

   185,563    —    

Equity in loss of unconsolidated affiliated company

   150,958    —    

Allocated and direct expenses to affiliates

   (58,440  —    

Loss on forfeiture of oil and gas properties

   —      16,089  

Changes in operating assets and liabilities other than advances from affiliates:

   

Decrease (increase) in operating assets:

   

Oil and gas revenue receivable

   2,907    (1,117

Advances receivable

   (11,200  —    

Inventory

   —      8,300  

Increase (decrease) in operating liabilities:

   

Trade accounts payable and accrued expenses

   7,143    4,972  

Deferred revenue

   —      (8,300
  

 

 

  

 

 

 

Net cash used in operating activities

   (370,604  (31,800
  

 

 

  

 

 

 

Cash Flows From Investing Activities

   —      —    
  

 

 

  

 

 

 

Cash Flows From Financing Activities:

   

Proceeds from preferred stock subscriptions

   3,000    —    

Advances from affiliates

   357,500    31,576  
  

 

 

  

 

 

 

Net cash provided by financing activities

   360,500    31,576  
  

 

 

  

 

 

 

Net Decrease In Cash

   (10,104  (224

Cash at beginning of period

   13,871    665  
  

 

 

  

 

 

 

Cash at end of period

  $3,767   $441  
  

 

 

  

 

 

 

Supplemental Schedule of Non-Cash Investing and Financing Activities:

   

Direct deposit of receipts from preferred stock subscriptions used to purchase additional interest in unconsolidated affiliated company

  $147,000   $—    
  

 

 

  

 

 

 

Purchase of additional interest in unconsolidated affiliated company exchanged for advances payable

  $3,000   $—    
  

 

 

  

 

 

 

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

F-3


FRONTIER OILFIELD SERVICES, INC.


(Formerly TBX Resources, Inc.)

TBX RESOURCES, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
August 31, 2011

February 29, 2012

(Unaudited)

1. BASIS OF PRESENTATION:

The condensed financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles have been omitted. However, in the opinion of management, all adjustments (which include only normal recurring accruals) necessary to present fairly the financial position and results of operations for the periods presented have been made. The results for interim periods are not necessarily indicative of trends or of results to be expected for the full year. These financial statements should be read in conjunction with the financial statements of the Company for the year ended November 30, 20102011 (including the notes thereto) set forth in Form 10-K.

2. BUSINESS ACTIVITIES:

Frontier Oilfield Services, Inc. (formerly TBX Resources, Inc.), a Texas corporation (“Frontier” or the “Company”), was incorporated inorganized on March 24, 1995. The Company’s principal historical business activity has been acquiring and developing oil and gas properties. However, during fiscal year 2004, the state of Texas in March 1995.Company began providing contract services to an affiliate, Gulftex Operating, Inc. The services continued to August 31, 2006 when the agreement was terminated by mutual agreement. In the past, we have primarily focused our business efforts on acquiring oil and gas productionthe Company’s philosophy was to locate properties and leases. We did this because we believed thatwith the major oil companies were leavingopportunity of reworking existing wells and/or drilling development wells to make a profit. In addition, the US domestic oil and gas market due to domestic oil and gas exploration properties being significantly depleted. However this trendCompany has changed and major oil companies are again acquiring domestic properties primarily in fields where natural gas is prevalent. This has increasedsponsored and/or managed joint venture development partnerships for the competition and prices for oil properties and management believes, due to our current financial condition, that we will not be able to compete for and purchasepurpose of developing oil and gas properties as effectively as we have in the past. In response to this trend managementfor profit. Management has recently initiated changes to the Company’s business plan. Currently, ourthe primary focus is to secure additional capital through business alliances with third parties or other debt/equity financing arrangements to acquire companies andand/or assets which will allow the Company to further operate in the oil field services industry with an emphasis on acquiring companies involved in salt water and drilling fluid disposal. Secondarily weFrontier will continue to seek out and acquire producing oil and gas leases and wells. See Note 14.

3. GOING CONCERN:

The accompanying condensed financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. However, the Company has negative stockholders’ equity and minimal working capital. In addition, the Company sold its primary source of revenue (East Texas properties) effective April 1, 2008 and forfeited itsa minor overriding interest in the Johnson #12 producing gas wells in Parker County, Texas and Johnson #2 Joint Ventures effective September 7 2010 (see Note 8). These factors raise substantial doubt about the ability of the Company to continue as a going concern. See Note 14.

4.producing gas wells in Denton County, Texas.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Revenue Recognition

     For direct oil

Oil and gas operations, the revenue is recorded when production is sold. The Company accrues revenue for oil and gas production sold but not paid.

See Receivables below.

Equity Method of Accounting

The Company uses the equity method of accounting for its 36.10 % ownership in Frontier Income and Growth, LLC (FIG). Under the equity method of accounting the initial investment is recorded at cost with subsequent earnings recorded as increases to the investment account and losses recorded as decreases to the investment account.

Concentration of Credit Risk

During the ninethree months ended August 31, 2011February 29, 2012 the Company had a net increase inreceived advances from GulftexFIG totaling $67,532. The Company had a net decrease in$360,500. There were no advances from Gulftex totaling $80,609 duringFIG for the ninethree months ended August 31,February 28, 2011. The balance due Gulftex as of August 31, 2011 is $67,532. The cash portion of this balance is $45,056. See Note 14.

F-4


Oil and Gas Revenue Receivable

Receivables consist of accrued oil and gas receivables due from either purchasers of oil and gas or operators in oil and natural gas wells for which the Company owns an interest. Oil and natural gas sales are generally unsecured and such amounts are generally due within 30 days after the month of sale.

F-4


Inventory
     Inventory consists of crude oil held in storage tanks. Inventory is stated at market based on anticipated selling prices.
Property and Equipment

Property and equipment are stated at the Company’s cost and are depreciated on a straight-line basis over fivethree to sevenfive years. Maintenance and repair costs are expensed when incurred, while major improvements are capitalized.

Oil

Property and Gas Properties

equipment consist of the following:

    Feb. 29,
2012
  Feb. 28,
2011
 

Office furniture and fixtures

  $46,055   $46,055  

Accumulated depreciation and amortization

   (45,146  (45,059
  

 

 

  

 

 

 
  $909   $996  
  

 

 

  

 

 

 

Equity Instruments Issued for Goods and Services

The Company follows the successful efforts method of accounting for oil and gas exploration and development expenditures. Under this method, costs of successful exploratory wells and all development wells are capitalized. Costs to drill exploratory wells that do not find proved reserves are expensed.

Significant costs associated with the acquisition of oil and gas properties are capitalized. Upon sale or abandonment of units of property or the disposition of miscellaneous equipment,measures the cost is removed fromof employee services received in exchange for an award of equity instruments based on the asset account, the related reserves relieved of the accumulated depreciation or depletion and the gain or abandonment loss is credited to or charged against operations. Both proved and unproved oil and gas properties that are individually significant are periodically assessed for impairment of value, and a loss is recognized at the time of impairment. Capitalized costs of producing oil and gas properties, after considering estimated dismantlement and abandonment costs and estimated salvage values are depreciated and depleted by the unit-of-production method. Support equipment and other property and equipment are depreciated over their estimated useful lives.
Long-lived Assets
     The Company reviews its long-lived assets to be held and used, including proved oil and gas properties accounted for under the successful efforts method of accounting, whenever events or circumstances indicate that the carrying value of those assets may not be recoverable. An impairment loss is indicated if the sum of the expected future cash flows is less than the carrying amount of the assets. In this circumstance, the Company recognizes an impairment loss for the amount by which the carrying amount of the asset exceeds the estimated fair value of the asset.
The Company provides for depreciation, depletion and amortization of its investment in producing oil and gas propertiesaward on the units-of-production method, based upon independent reserve engineers’ estimates of recoverable oil and gas reserves from the property.
Asset Retirement Obligations
     The Company accounts for asset retirement obligations by recording the fair value of a liability for an asset retirement obligation (“ARO”)grant date. That cost is recognized in the financial statements over the period during which the employee is required to provide services in which it is incurred when a reasonable estimate of fair value can be made. Asset retirement obligations are capitalized as part of the carrying value of the long-lived asset. The Company writes down capitalized ARO assets if they are impaired.
The following table describes changes to the asset retirement liabilityexchange for the nine months ended August 31, 2011.
     
ARO at November 30, 2010
 $21,347 
Accretion expense   
Liabilities settled (see Note 8)  (21,347)
Changes in estimates   
    
ARO at August 31, 2011
 $ 
    

F-5

award with a corresponding increase in additional paid-in capital.


Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Income tax expense is the tax payable for the year plus or minus the change during the period in deferred tax assets and liabilities.

Equity Instruments Issued for Goods and Services
     The Company measures the cost of employee services received in exchange for an award of equity instruments based on the fair value of the award on the grant date. That cost is recognized in the financial statements over the period during which the employee is required to provide services in exchange for the award with a corresponding increase in additional paid-in capital.

Earnings Per Share (EPS)

Basic earnings per common share is calculated by dividing net income or loss by the weighted average number of shares outstanding during the year. Diluted earnings per common share is calculated by adjusting outstanding shares, assuming conversion of all potentially dilutive stock options. The computation of diluted EPS does not assume conversion, exercise, or contingent issuance of shares that would have an antidilutive effect on earnings per common share. Antidilution results from an increase in earnings per share or reduction in loss per share from the inclusion of potentially dilutive shares in EPS calculations.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates include: estimates of proved reserves as key components of the Company’s depletion rate for oil properties; accruals of operating costs; estimates of production revenues; and calculating asset retirement obligations. Because there are numerous uncertainties inherent in the estimation process, actual results could differ materially from these estimates.

F-5


Fair Value Measurements

The Company adopted fair value accounting for certain financial assets and liabilities that have been evaluated at least annually. The standard defines fair value as the price at which an asset could be exchanged in a current transaction between knowledgeable, willing parties. A liability’s fair value is defined as the amount that would be paid to transfer the liability to a new obligor, not the amount that would be paid to settle the liability with the creditor. Management has determined that it will not, at this time, adopt fair value accounting for nonfinancial assets or liabilities currently recorded in the financial statements, which includes property and equipment, investments carried at cost, deposits and other assets. Impairment analyses will be made of all assets using fair value measurements.

Assets and liabilities measured at fair value are categorized based upon the level of judgment associated with the inputs used to measure their fair value. Hierarchical levels, defined by generally accepted accounting principles and directly related to the amount of subjectivity associated with the inputs to fair valuation of these assets and liabilities, are as follows:

F-6


Level 1  Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Company has the ability to access.
Level 2  Inputs to the valuation methodology include:
  

-   quoted prices for similar assets or liabilities in active markets;

  

-   quoted prices for identical or similar assets or liabilities in inactive markets;

  

-   inputs other than quoted prices that are observable for the asset of liability;

  

-   inputs that are derived principally from or corroborated by observable market data by correlation or other means.

  If the asset or liability has specified (contractual) term, the Level 2 impute must be observable for substantially the full term of the asset or liability.
Level 3  Inputs to the valuation methodology are unobservable and significant to the fair value measurement.

Cash, receivable and payable amounts, accrued expenses and other current liabilities are carried at book value amounts which approximate fair value due to the short-term maturity of these instruments.

5.

4. RECENT ACCOUNTING PRONOUNCEMENTS:

During the ninethree months ended August 31, 2011February 29, 2012 and the year ended November 30, 2010,2011, there were several new accounting pronouncements issued by the FASB. Each of these pronouncements, as applicable, has been or will be adopted by the Company. Management does not believe the adoption of any of these accounting pronouncements has had or will have a material impact on the Company’s financial position or operating results. The Company will monitor these emerging issues to assess any potential future impact on its financial statements.

5. INVESTMENT IN UNCONSOLIDATED AFFILIATED COMPANY:

As of February 29, 2012 the Company’s investments in Frontier Income and Growth, LLC (“FIG”) totaled $3,135,595. The investments reflect a $284,900 net profits interest and a $2,850,695 equity interest. The Company’s share of FIG’s losses totaled $150,958 for the current quarter. The Company’s equity interest and net profits interest in FIG at February 29, 2012 was 36.10 % and 52.10%, respectively.

Below is summarized financial information for FIG and subsidiary.

F-6


FRONTIER INCOME AND GROWTH, LLC AND SUBSIDIARY

Summary Consolidated Balance Sheet

February 29. 2012

(Unaudited)

Assets

  

Current assets

  $2,410,419  

Property and equipment, less accum. depreciation of $1,386,940

   5,655,372  

Other assets

   144,052  
  

 

 

 

Total Assets

  $8,209,843  
  

 

 

 

Liabilities and Members’ Capital

  

Current liabilities

  $2,315,008  

Long-term liabilities

   942,305  

Members’ capital

   4,952,530  
  

 

 

 

Total Liabilities and Members’ Capital

  $8,209,843  
  

 

 

 

FRONTIER INCOME AND GROWTH, LLC AND SUBSIDIARY

Summary Consolidated Statement of Operations

For the Three Months Ended February 29, 2012

(Unaudited)

Revenue

  $2,208,175  

Cost of revenue

   2,022,454  

Operating expenses

   250,492  

Depreciation

   286,888  
  

 

 

 

Loss from operations

   (351,659

Other Expenses

   71,903  
  

 

 

 

Net Loss

  $(423,562
  

 

 

 

6. RELATED PARTY TRANSACTIONS:

The Company conducts substantial transactions with Gulftex.Frontier Income and Growth, LLC (FIG) and Gulftex Oil & Gas, LLC (Gulftex). These related party transactions have a significant impact on the financial condition and operations of the Company. If these transactions were conducted with third parties, the financial condition and operations of the Company could be materially different from reported results.

a.On September 2, 2011 the Company entered into an Investment Agreement with LoneStar Income and Growth, LLC (LoneStar) (see Note 9). Under the Agreement Frontier is required to use the funds it receives form the sales of its preferred shares for the acquisition of 51% of FIG’s membership units first and for other corporate purposes secondly. As of February 29, 2012 the Company’s purchased a 36.10% equity interest in FIG with the $3,150,000 investment received from LoneStar. The Company retained $393,000 of the LoneStar investment that was recorded as an advance from FIG.

b.The Company’s president, Tim Burroughs, formerly held an interest in 25% of the profits of FIG through his one half ownership of Frontier Asset Management, LLC (“FAM”) which has a contractual agreement with FIG for its management services. Once the investors in FIG have been repaid 125% of their initial investment by FIG, FAM’S share of the profit will increase to 50%. The Company, in a letter agreement executed on September 2, 2011, acquired FAM’s contractual interest in the profits of FIG for the issuance of 4,070,000 common shares to FAM. Given Frontier’s share price of $0.07 per share, as of August 31, 2011, the transaction was valued at an estimated $284,900.

F-7


c.During the ninethree months ended August 31, 2010,February 29, 2012 the Company had a net reduction inreceived advances from GulftexFIG totaling $80,609.$357,500. Advances from FIG are offset by allocated and direct expenses paid by the Company (see Note 6d below). The balance due FIG as of February 29, 2012 is $640,550. During the ninethree months ended August 31,February 28, 2011 the Company received advances from Gulftex totaling $67,532 and the balance due Gulftex as of August 31, 2011 is also $67,532.$31,576.

 d.On September 1, 2011 the Company entered into a service agreement with FIG. Under the agreement Frontier is charging FIG for a portion of administrative services and rent. For the three months ended February 29, 2012 the Company billed $35,040 for these services that is recorded as an offset to general and administrative expense. In addition the Company paid consulting fees billable to FIG totaling $23,400 in the current quarter that was also recorded as an offset to general and administrative expense. The total of these billings are used to reduce the advances payable from FIG (see Note 6c above).

b. Gulftex is billinge.During the current quarter the Company for rent paid on behalf of the Company. Gulftex is also charging theadvanced Gultex $11,200. The Company administrative expenses as it relates to TBX operations. For the nine months ended August 31, 2011, Gulftex billed the Company $24,695 for rent and administrative services. In the previous fiscal year the Companypreviously charged Gulftex rent for a portion of the Company’s office space plus administrative expenses paid by the Company that relatesrelated to Gulftex’s operations. The Company billed Gulftex $50,138for administrative expenses totaling $13,352 for the ninethree months ended February 28, 2011. The Agreement was terminated on August 31, 2010.2011.

7.STOCK BASED COMPENSATION:

The Company executed an amended Employment Agreement effective August 4, 2005 with our president Mr. Tim Burroughs for three years.

a.The Company executed a new Employment Agreement effective December 1, 2011 with its President Mr. Tim Burroughs for one year. Thereafter, the Agreement will automatically renew for successive one (1) year terms unless terminated as provided for in the Employment Agreement. Among other items, the Agreement provides that Mr. Burroughs has the contractual right to the issuance of certain common stock of the Company upon achieving certain goals; 100,000 shares of the Company’s common stock will be set aside for distribution to Mr. Burroughs on a per annual basis (25,000 shares per quarter) beginning 90 days from the date of the employment agreement (25,000 common shares to be issued each quarter). The Company recorded compensation expense of $23,250 with an offsetting credit to stockholders’ equity in the current quarter. In addition Mr. Burroughs will receive the following annual stock grant and options.

i.Grant: Mr. Burroughs shall annually receive 5,000 common shares of the Company common stock times his number of years completed service to the Company to a maximum of 100,000 shares. The Company recorded compensation expense of $16,788 with an offsetting credit to stockholders’ equity in the current quarter.

ii.Option: Mr. Burroughs shall receive the right to purchase up to 15,000 shares of the Company’s common stock per calendar quarter at an exercise price equal to the ending bid price of the last market day prior to the date of the option award. The option exercise period for each option will be up to two years from its date of issuance, at which time the option will expire. In the event of a change in ownership, all unexercised options will be accelerated to the current monthly period. The Company recorded compensation expense of $7,050 with an offsetting credit to stockholders’ equity in the current quarter.

b.The Company executed a new Employment Agreement effective December 1, 2011 with its Executive Vice President Mr. Bernard Richard O’Donnell for one year. Thereafter, the Agreement shall automatically renew for successive one (1) year terms unless terminated as provided for in the Employment Agreement. Among other items, the Agreement provides that Mr. O’Donnell has the contractual right to the issuance of certain common stock of the Company upon achieving certain goals; 100,000 shares of the Company’s common stock will be set aside for distribution to Mr. O’Donnell on a per annual basis (25,000 shares per quarter) beginning 90 days from the date of the employment agreement (25,000 common shares to be issued each quarter). The Company recorded compensation expense of $23,250 with an offsetting credit to stockholders’ equity in the current quarter. In addition Mr. O’Donnell will receive the following annual stock grant and options.

F-8


i.Grant: Mr. O’Donnell shall annually receive 5,000 common shares of the Company common stock times his number of years completed service to the Company to a maximum of 100,000 shares. The Company recorded compensation expense of $5,925 with an offsetting credit to stockholders’ equity in the current quarter.

ii.Options: Mr. O’Donnell shall receive the right to purchase up to 15,000 shares of the Company’s common stock per calendar quarter at an exercise price equal to the ending bid price of the last market day prior to the date of the option award. The option exercise period for each option will be up to two years from its date of issuance, at which time the option will expire. In the event of a change in ownership, all unexercised options will be accelerated to the current monthly period. The Company recorded compensation expense of $7,050 with an offsetting credit to stockholders’ equity in the current quarter.

d.The Company executed an Employment Agreement effective January 1, 2012 with its Vice President and the Chief Financial Officer Mr. Kenneth K. Conte for one year. Thereafter, the agreement shall automatically renew for successive one (1) year terms unless terminated as provided for in the Employment Agreement. Among other items, the Agreement provides that Mr. Conte has the contractual right to the issuance of certain common stock of the Company upon achieving certain goals; 100,000 shares of the Company’s common stock will be set aside for distribution to Mr. Conte on a per annual basis (25,000 shares per quarter) beginning 90 days from the date of the employment agreement (25,000 common shares to be issued each quarter). In addition Mr. Conte received a grant of 300,000 common shares as a sign on bonus for his services as Chief Financial Officer of the Company. However the granted shares will not be vested in Mr. Conte until such time as he has been continuously employed by the Company for a period of one year from the date of the Agreement. The value of the sign on bonus shares was $255,000 of which $42,500 was recorded as compensation expense in the current quarter with the balance of $212,500 for prepaid compensation recorded as a charge to stockholders’ equity. The offsetting credit for the sign on bonus was to stockholders’ equity. The prepaid portion of the equity award is to be amortized over the remaining ten months of the vesting period.

e.Each Director, except for Mr. O’Donnell, is awarded 25,000 shares of the Company’s common stock per calendar quarter (issued at the beginning of each quarter). The Company recorded compensation expense of $42,500 with an offsetting credit to stockholders’ equity in the current quarter.

f.The Company executed a contract on January 12, 2012 for consulting and marketing services. Under the terms of the contract a portion of the fees to be paid are in the form of the Company’s common stock. The Company recorded professional fees of $17,250 with an offsetting credit to stockholders’ equity in the current quarter.

A summary of the agreement provides that Mr. Burroughs hasstatus of the contractual right to require TBX to issue, upon his request, up to 250,000 common share options subject to certain conditions. The conditions are that the options will not be issued unless Mr. Burroughs makes a demand for their issuanceCompany’s option grants as of February 29, 2012 and the numberchanges during the period then ended is presented below:

    Shares   Weighted-Average
Exercise Price
 

Outstanding December 1, 2011

   —       —    

Granted

   30,000    $0.70  

Exercised

   —      $0.70  
  

 

 

   

 

 

 

Outstanding February 29, 2012

   30,000    $0.70  
  

 

 

   

 

 

 

Options exercisable at February 29, 2012

   30,000    $0.70  
  

 

 

   

 

 

 

F-9


The weighted average fair value at date of shares so demanded have vested (the agreement provides that 50,000 potentialgrant for options vest atduring three month period ended February 29, 2012 was estimated using the beginning of each employment year forBlack-Scholes option valuation model with the five year termfollowing:

Average expected life in years

2

Average risk-free interest rate

2.00

Average volatility

75

Dividend yield

0

A summary of the agreementstatus of the Company’s vested and are cumulative.) nonvested option grants at February 29, 2012 and the weighted average grant date fair value is presented below:

    Shares   Weighted Average
Grant Date

Fair Value per Share
   Weighted Average
Grant Date

Fair Value
 

Vested

   30,000    $.47    $14,100  

Nonvested

   —       —       —    
  

 

 

   

 

 

   

 

 

 

Total

   30,000    $.47    $14,100  
  

 

 

   

 

 

   

 

 

 

The amendment also changed howstatus of the options are to be priced. The options are to be pricedCompany’s nonvested stock grant at a maximum exercise priceFebruary 29, 2012 and the grant date value is presented below:

    Shares   Grant Date
Value per Share
   Grant Date
Value
 

Nonvested

   300,000    $.85    $252,000  

Forfeited

   —       —       —    
  

 

 

   

 

 

   

 

 

 

Total

   300,000    $.85    $252,000  
  

 

 

   

 

 

   

 

 

 

As of one-halfFebruary 29, 2012, the bid price for TBX common stock as of August 4, 2005 or $0.70 per share (one-half $1.40 the closing bid price on August 4, 2005.) In the event the closing bid price of TBX’s common stock is below $0.70 on the date of a call by Mr. Burroughs, the exercise price would be reducedCompany’s unrecognized compensation expense related to the lower actual bid price. Mr. Burroughs’ Employment Agreementnonrested stock grant was further amended in April 2007. In exchange for TBX dropping the three year service requirement, Mr. Burroughs agreed to forgo his eligibility to call for stock options for fiscal years 2005 and 2006. The Employment Agreement was again amended on December 1, 2010 wherein options were continued for an additional five years at an option price no greater than 50% of the closing price on December 1, 2010 or $0.015 per share (one-

F-7

$212,500.


half of the $0.03 closing bid price on December 1, 2010). Mr. Burroughs did not call any of his potential stock options as of August 31, 2011. In accordance with the terms of the Amended Employment Agreement, no compensation expense is recognized as of August 31, 2011 related to Mr. Burroughs’ potential common stock options.
The Company executed an amended Employment Agreement effective April 1, 2006 with our Vice President of Investor Relations, Dick O’Donnell, having a term of one year, which automatically renews unless otherwise terminated as provided in said agreement. Under the terms of the agreement the Company agreed to issue Mr. O’Donnell options to acquire 25,000 shares of common stock per quarter beginning April 1, 2006 for a period of up to three years at an exercise price of $0.15 per share. The option exercise period is one year from its date. Mr. O’Donnell’s options to acquire common stock expired on January 1, 2009.
Since February 2010 certain officers have agreed to forebear their salary until the Company’s cash flow improves. However, the Company may grant stock awards from time to time in recognition of the officer’s or employee’s forbearance.
8.FORFEITURE OF OIL AND GAS INTERESTS:
During

The Company was notified in the first quarter of this fiscal year, the Company was notified2011 that it had forfeited its interest in the Johnson #1-H and Johnson #2-H Joint Ventures effective September 7, 2010 for not paying a Special Assessment of $43,008 for estimated workover expenses. If the Company had known of the Special Assessment cash call it would have declined to participate because there was no assurance that the rework would be successful in increasing production to recoup the Special Assessment amount and extend the life of the wells. In addition, the Company no longer is obligated to pay the plug and abandonment costs for these wells.

As a result of the forfeiture the Company wrote-off the book value of the wells, asset retirement obligations, receivables and payables which resulted in a loss of $16,089.

9. SALE OF OFFICE FURNITURE AND FIXTURES:
The Company sold its furniture and fixtures to a third-party$16,089 in the previousfirst quarter for $2,220 and wrote-off the fully depreciated value of the related assets. The Company is currently utilizing furniture and fixtures supplied by its President, Tim Burroughs, at no cost to the Company.
2011.

10. 9.COMMITMENTS AND CONTINGENCIES:

The Company’s operating lease agreement for rent of its office space in Dallas, Texas was extended for thirty-nine months

a.The Company is obligated for $146,549 under an operating lease agreement for rent of its office space in Dallas, Texas. The term of the lease is from March 1, 2011 through May 31, 2014. The average monthly base lease payment over the remaining term of the lease is approximately $5,428. The base lease payment for the current fiscal year is $31,198. Following is a schedule of base lease payments by year:

Year

  Amount 

2012

  $47,823  

2013

   65,475  

2014

   33,251  
  

 

 

 
  $146,549  
  

 

 

 

Rent expense for first quarter of 2012 and 2011 was $9,772 and $16,990, respectively.

b.

The Company entered into two material contracts in September of 2011. On September 2, 2011 the Company entered into an Investment Agreement with LoneStar, a Texas limited liability company, an unrelated third party. The Investment Agreement provides that LoneStar will acquire up to 2,750,000 shares of Frontier’s 2011 Series A 8% Preferred Stock (the “Stock”) for the sum of

F-10


$5,500,000 contingent upon Frontier using the proceeds of the Stock to acquire a majority 51% membership interest in Frontier Income and Growth, LLC (“FIG”), a salt water transportation and disposal company. The Stock has the following attributes in its designation filed with the Texas Secretary of State:

1.Frontier will pay an annual dividend of eight percent (8%) on the principal value ($2.00) of each share.

2.Beginning twelve (12) months from the date of issuance, each share of preferred stock is convertible at the request of either the stockholder or Frontier into two (2) shares of common stock of Frontier and two (2) warrants that will allow the holder to acquire one additional share of Frontier common stock for each warrant at the purchase price of $3.50 per share. The warrants may be exercised in whole or in part at any time within three (3) years from the issue date of the warrant.

As of February 29, 2012 LoneStar tendered the nine months ended August 31,sum of $3,150,000 to purchase 1,575,000 shares of the Stock. As of the date of this report, the shares have not been issued.

On September 1, 2011 and August 31, 2010 is $31,809 and $51,826, respectively.

Trio Consulting & Management and Merritt Operating are the bonded operatorsFrontier entered into a Subscription Agreement with FIG to acquire a majority 51% membership interest in FIG for the Company’s former Denton and Wise County, Texas wells and is responsible for compliance with the laws and regulations relating to the protectionsum of the environment. While it is not possible to quantify with certainty the potential impact of actions regarding environmental matters, particularly any future remediation and other compliance efforts, in the opinion of management, compliance with the present environmental protection laws will not have a material adverse affect on the financial condition, competitive position or capital expenditures of TBX Resources. However, the Company’s cost to comply with increasingly stringent environmental regulations may have an adverse effect on the Company’s future earnings.
11. LAW SUIT SETTLEMENT:
On May 28, 2009 the Company, along with Grasslands I, L.P., intervened as third party plaintiffs in a lawsuit originally captioned as Clay Bain, et. al. v. Earthwise Energy, Inc. (EEI) which was filed in April 2009 in the 14th Judicial District, Dallas County Texas, Cause No. 095253. Our petition requested that we be given certain injunctive relief and be awarded unspecified damages for certain alleged causes of action including, but not limited to, fraud, conversion and violation of fiduciary duty against defendant Earthwise Energy, Inc. but also as against two individuals, Jeffery C. Reynolds and Steven C. Howard who were added to the lawsuit as third party defendants. Mr. Reynolds is a former member of our Board of Directors who resigned in July 2008. The lawsuit was settled on February 11, 2010 wherein it is acknowledged that the Company is the rightful owner of certain interests in the Wise

F-8

$5,046,000.


and Denton County, Texas. Gulftex Operating received $97,909 (net of expenses) on behalf of the Company for the Johnson Nos. 1 and 2 gas wells in Wise County, Texas covering the period March 1, 2008 through October 31, 2009. The $97,909 received by Gulftex Operating was used to pay down a portion of its loans to the Company. The Company’s also received $13,973 (net of expenses) for its overrides in nine gas wells in Denton County, Texas covering the period March 1, 2008 through October 31, 2009. It is intended that these payments fully resolve all claims by the Company against the defendants.
12. COURT ORDERED RESTITUTION:
On May 26, 2000 a former employee was sentenced to three years probation for forging Company checks. As part of the sentencing the former employee is required to make restitution to the Company in the amount of $152,915. Because of the uncertainty of collecting the amount owed, the Company has not recorded a receivable but instead is recording income as payments are received from the U.S. District Court of Dallas, Texas. The Company received $0 during the nine months ended August 31, 2011 and $99,126 during the same period last year. The balance outstanding as of August 31, 2011 is approximately $51,062.
13.10. INCOME TAXES:

The Company computes income taxes using the asset and liability.liability approach. The Company currently has no issue that creates timing differences that would mandate deferred tax expense. Due to the uncertainty as to the utilization of net operating loss carryforwards, an evaluation allowance has been made to the extent of any tax benefit that net operating losses may generate. No provision for income taxes has been recorded for the three and nine months ended August 31,February 29, 2012 and February 28, 2011 and 2010 due to either the Company’s net operating losses or the available tax loss carryforward.

14. SUBSEQUENT EVENTS
The Company has recently entered into three material contracts. On September 2, 2011 TBX Resources, Inc. (“TBX”) entered into an Investment Agreement with LoneStar Income and Growth, LLC, a Texas limited liability company, an unrelated third party. The Investment Agreement provides that LoneStar will acquire up to 2,750,000 shares of TBX’s 2011 Series A 8% Preferred Stock (the“Stock”) for the sum of $5,500,000 contingent upon TBX using the proceeds of the Stock to acquire a majority 51% membership interest in Frontier Income and Growth, LLC (“Frontier”), a salt water transportation and disposal company. The Stock has the following attributes in its designation filed with the Texas Secretary of State:
a.TBX will pay an annual dividend of eight percent (8%) on the principal value ($2.00) of each share.
b.Beginning twelve (12) months from the date of issuance, each share of preferred stock is convertible at the request of either the stockholder or TBX into two (2) shares of common stock of TBX and two (2) warrants that will allow the holder to acquire one additional share of TBX common stock for each warrant at the purchase price of $3.50 per share. The warrants may be exercised in whole or in part at any time within three (3) years from the issue date of the warrant.
As of the date hereof LoneStar has tendered the sum of $250,000 to purchase 125,000 shares of the Stock. As of the date hereof, the preferred shares have not been issued.
On September 1, 2011 TBX entered into a Subscription Agreement with Frontier to acquire a majority 51% membership interest in Frontier for the sum of $5,046,000.
TBX president, Tim Burroughs has currently an interest in 25% of the profits of Frontier through his one half ownership of Frontier Asset Management, LLC (“FAM”) which has a contractual agreement with Frontier for its management services. Once the investors in Frontier have been repaid 125% of their initial investment by Frontier, FAM’S share of the profit will increase to 50%. TBX, in a letter agreement executed on September 2, 2011, has agreed to acquire FAM’s contractual interest in the profits of Frontier for the issuance of 4,070,000 common shares to FAM. Given TBX’s current share price of $0.07 per share, as of August 31, 2011, the transaction is valued at an estimated $284,900.
Upon complete performance of each of the three contracts, TBX will own 51% of the voting interests and be entitled to receive 63.25% of the profits of Frontier.
losses.

F-9

F-11


TBX issued the following unregistered common stock shares effective September 1, 2011 for the purposes listed beside each issuance.
a.Gulftex Oil & Gas, LLC: 355,846 common shares in return for cancellation of a portion of the debt owed in the sum of $53,377.
b.Sherri Cecotti: 100,000 common stock shares as compensation for services rendered as Ms. Cecotti has not received compensation from TBX during the last two fiscal years. Ms. Cecotti is an officer of TBX and serves as Secretary.
c.James Somma: 100,000 common stock shares as compensation for services rendered as an accounting consultant for two years.
d.Bernard O’Connell: 200,000 common stock shares as compensation for services rendered as Mr. O’Donnell has not received compensation for his services as an officer of the Company, Vice President, for two or more years.

F-10


ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

CAUTIONARY STATEMENT

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

DESCRIPTION OF PROPERTIES

GENERAL: We currently have royalty interests in Denton and Wise Counties, Texas.

PROPERTIES

The following is a breakdown of our properties by field as of August 31, 2011:

         
  Gross  Net 
  Producing  Producing 
Name of Field or Well Well Count  Well Count 
Newark East, Override Interest 9   0.04 
February 29, 201:

Name of Field or Well

  Gross
Producing
Well Count
   Net
Producing
Well Count
 

Newark East, Override Interest

   9     0.04  

PRODUCTIVE WELLS AND ACREAGE:

The following is a breakdown of our productive wells and acreage as of August 31,February 28, 2011:

                         
                  Total    
      Net      Net  Gross  Total Net 
  Total Gross  Productive  Total Gross  Productive  Developed  Developed 
Geographic Area Oil Wells  Oil Wells  Gas Wells  Gas Wells  Acres  Acres 
Wise County        2   0.0360   224   8.06 
Denton County        7   0.0360   566   20.38 
Notes:

Geographic Area

  Total Gross
Oil Wells
   Net
Productive
Oil Wells
   Total Gross
Gas Wells
   Net
Productive
Gas Wells
   Total
Gross
Developed
Acres
   Total Net
Developed
Acres
 

Wise County

   —       —       2     0.0360     224     8.06  

Denton County

   —       —       7     0.0360     566     20.38  

Notes:

1.Total Gross Wells are those wells in which the Company holds an overriding interest in as of August 31, 2011.February 29, 2012.

2.Net Productive Wells was calculated by multiplying the overriding interest held by the Company in each of the 9 Gross Wells and adding the resulting products.

3.Total Gross Developed Acres is equal to the total surface acres of the properties in which the Company holds a royaltyan overriding interest.

4.Net Developed Acres is equal to the Total Gross Developed Acres multiplied by the percentage of the total royaltyoverriding interest held by the Company in the respective properties.

5.All acreage in which we hold a royaltyan overriding interest as of August 31, 2011February 29, 2012 have or had existing wells located thereon; thus all acreage leased by the Company may be accurately classified as developed.
6.Acreage that has existing wells and may be classified as developed may also have additional development potential based on the number of producible zones beneath the surface acreage. A more comprehensive study of all properties currently leased by us would be required to determine precise developmental potential.

3


OIL AND GAS PARTNERSHIP INTERESTS

We currently own a 0.4% overriding interest in the Grasslands L. P. We did not acquire any additional partnership interests in the current quarter.

3


CRITICAL ACCOUNTING POLICIES

A summary of significant accounting policies is included in Note 2 to the audited financial statements included on Form 10-K for the year ended November 30, 20102011 as filed with the United States Securities and Exchange Commission. Management believes that the application of these policies on a consistent basis enables the Company to provide useful and reliable financial information about our operating results and financial condition.

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

OVERVIEW
Going Concern and Liquidity Problems
Our auditors have included an explanatory paragraph in their audit opinion with respect to our financial statements at November 30, 2010. The paragraph states that our recurring losses from operations and resulting continued dependence on access to external financing raise substantial doubts about our ability to continue as a going concern. Furthermore, the factors leading to and the existence of the explanatory paragraph may adversely affect our relationship with customers and suppliers and have an adverse effect on our ability to obtain financing.
Our company has experienced operating losses over the past several years. We do not have sufficient working capital to sustain our operations. We have been unable to generate sufficient revenues to sustain our operations. If no additional funds are received, we will be forced to rely on existing oil and gas revenue and upon additional funds which may or may not be loaned by an affiliate to preserve the integrity of the corporate entity. No formal commitments or arrangements currently exist with the affiliate to advance or loan funds to the Company. In the event we are unable to acquire sufficient funds, the Company’s ongoing operations will be negatively impacted and we may not be able to continue as a going concern and we may have to curtail or terminate our operations and liquidate our business.
Sale of Office Furniture and Fixtures
The Company sold its furniture and fixtures in the second quarter of 2011 for $2,220 and wrote-off the fully depreciated value of the related assets.

RESULTS OF OPERATIONS

For the third quarter ended August 31, 2011February 29, 2012 we reportedhad a net loss of $8,923$647,622 as compared to a net loss of $18,194$51,744 for the same quarter last year. For the nine months ended August 31, 2011, we reported a net loss of $80,677 as compared to net income of $5,795 for the same period last year. The components of these results are explained below.

Revenues-Oilin the following revenue and gasexpenses explanations.

Revenue-Total revenue increased $119, 8.0%, from $1,490 for the three months ended August 31,February 28, 2011 was $3,505, a decrease of 84.5%, as compared to $22,557$1,609 for the three months ended August 31, 2010. Oil and gas revenue for the nine months ended August 31, 2011 was $5,927, a decrease of 89.9%, as compared to $58,666 for the nine months ended August 31, 2010. February 29, 2012.

The decreaseincrease in revenue for the quarter and year-to-date is primarily attributable to an increase in production.

Expenses-The components of our expenses for the first quarter ended February 29, 2012 and February 28, 2011 are as follows:

    2012   2011   %
Increase
(Decrease)
 

Lease operating and taxes

   1,524     372     309.68

General and administrative

   496,662     36,773     1250.62

Depreciation, depletion, amortization., & accretion

   87     —       —    

Loss on forfeiture of oil and gas properties

   —       16,089     —    
  

 

 

   

 

 

   

 

 

 

Total expenses

  $498,273    $53,234     866.23
  

 

 

   

 

 

   

 

 

 

Lease operating expenses increased $1,152 which is primarily attributable to additional charges for compression and marketing fees.

General and administrative expenses increased $459,889. The increase is attributable to higher salaries and benefits of $128,815, stock compensation expense of $168,313, legal and professional fees of $170,513 offset by a decrease in all other expenses totaling $7,752.

Depreciation for the current quarter is $87. There is no deprecation charge in the first quarter of the previous fiscal year.

Loss on the forfeiture of the Johnson #1-H and Johnson a#2-H Joint Ventures.

Expenses-The components of our expenses forVentures totaled $16,089 in the three and nine months ended August 31, 2011 and 2010 are as follows:

4


                         
          %          % 
  Three Months Ended  Increase  Nine Months Ended  Increase 
  Aug. 31, 2011  Aug. 31, 2010  (Decrease)  Aug. 31, 2011  Aug. 31, 2010  (Decrease) 
Expenses :
                        
Lease operating and taxes $337  $8,064   - 95.82% $4,517  $27,641   -83.66%
General and administrative  12,091   32,841   -63.18%  68,218   113,918   -40.12%
Depreciation, depl, amort., & accretio     4,908   0.00%     10,438   0.00%
Loss on forfeiture of properties           16,089      0.00%
                   
Total expenses $12,428  $45,813   -72.87% $88,824  $151,997   41.56%
                   
Lease operating expenses decreased $7,727 for thefirst quarter ended August 31, 2011 and $23,124 for the nine months ended August 31, 2011 over the same periods last year. The decrease in quarterly and year-to-date operating expenses is primarily attributable to the forfeiture of the Johnson #1-H and Johnson a#2-H Joint Ventures.
General and administrative expenses decreased $20,750 for the three months ended August 31, 2011 as compared to the same period lastprevious fiscal year. The decrease in general and administrative expensesThere is attributable to lower professional fees of $26,854, lower rent of $14,649 and expenses in all other categories totaling $99 offset by lower G&A cost allocations of $20,852 . For the nine months ended August 31, 2011, general and administrative expenses decreased $45,700 as compared to the same period last year. The decrease in general and administrative expenses is attributable to lower professional fees of $21,042, salaries and wages of $44,815, rent of $20,017 and expenses in all other categories totaling $2,252, offset by lower G&A cost allocations of $42,426.
Depreciation and depletion expense totaled $0 for the three months ended August 31, 2011 and $4,853 for the three months ended August 31, 2010. Depreciation and depletion expense totaled $0 for the nine months ended August 31, 2011 and $9,672 for the nine months ended August 31, 2010. Accretion expense totaled $0 for the three months ended August 31, 2011 and $255 for the three months ended August 31, 2010. Accretion expense totaled $0 for the nine months ended August 31, 2011 and $766 for the six months ended August 31, 2010. The decrease in depreciation, depletion, amortization and accretion expense is attributable to the write-off of the Johnson #1-H and Johnson and #2-H Joint Ventures.
The Company forfeited its interest in Johnson #1-H and Johnson and #2-H Joint Ventures and wrote-off the book value of the wells, asset retirement obligations, receivables and payables which resulted in ano comparable loss of $16,089 in the current fiscal year.
quarter.

Other incomeexpense of $150,958 in the current fiscal year consists of the Company’s sale of all furnitureunrealized loss on its equity investment in Frontier Income and fixturesGrowth, LLC. Other expense for $2,220 with the resulting write-off of the fully depreciated values of the related assets. Other income in the previous fiscal year consists of a partial recovery of losses sustained when a former employee forged Company checks for personal use. On May 26, 2000 the former employee was sentenced to three years’ probation. As part of the sentencing the former employee is required to make restitution to the Company.

$0.

We have not recorded any income taxes for the ninethree months ended August 31,February 29, 2012and February 28, 2011 and 2010 because of our accumulatedcontinued operating losses. Also, since there is continued uncertainty as to the realization of a tax asset, we have not recorded any tax benefit.

4


LIQUIDITY AND CAPITAL RESOURCES

As of February 29, 2012, we had total assets of $3,158,832 of which investments in our unconsolidated affiliated company amounted to $3,135,595 or 96.2% of the total. Our revenues for the current fiscal quarter totaled $1,609 while the revenues for the same quarter last year totaled $1,490. Our accumulated losses as of February 29, 2012 totaled $12,538,341. The Company had a cash balance of $531$3,767 as of August 31, 2011.February 29, 2012. Our current ratio at August 31, 2011February 29, 2012 was .04:.02:1 and we had no long-term debt. As of August 31, 2011,February 29, 2012 our stockholders’ deficitequity was $82,919. Net$244,393. Our cash used forin operations totaled $47,410$370,604 for the nine months ended August 31, 2011 andcurrent quarter while cash provided byused in operations totaled $82,713$31,800 for the nine monthsquarter ended August 31, 2010.February 28, 2011. This represents an increase of $130,123$338,804 in cash used forin operating activities.

For There were no cash flows from investment activities for the nine months ended August 31, 2011, net cash provided by investingcurrent quarter of this year and last year. Cash flows from financing activities was $2,220 as a resultfor the current quarter consisted of ourthe sale of office furniturepreferred stock subscriptions totaling $3,000 and fixtures. For the nine months ended August 31, 2010, net cash provided by investing activities was $0.

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Net cash provided by financing activities totaled $45,056 for the nine months ended August 31, 2011 while net cash used for financing activities totaled $80,609 for the nine months ended August 31, 2010. Financing activities relate to advances from and payments to Gulftex.
FIG totaling $357,500. During the same period last year, we received advances from Gulftex totaling $31,576.

PLAN OF OPERATION FOR THE FUTURE

TBX Resources, Inc. was incorporated

We have funded operations from cash generated from the sale of preferred stock, revenue from oil and gas sales, partial recovery of a previous loss and loans/advances from affiliates. We expect that the principal source of funds in the statenear future will be from the sale of Texaspreferred stock, oil and gas revenues and advances from an affiliate. Management’s plan is to seek additional equity and/or debt financing. Any such additional funding will be done on an “as needed” basis and will only be done in March 1995. those instances in which we believe such additional expenditures will increase our profitability. However, actual results may differ from management’s plan and the amount may be material.

In the past we have primarily focused our business efforts on acquiring oil and gas production properties and leases. We did this because we believed that the major oil companies were leaving the US domestic oil and gas market due to domestic oil and gas exploration properties being significantly depleted. However this trend has changed and major oil companies are again acquiring domestic properties primarily in fields where natural gas is prevalent. This has increased the competition and prices for oil properties and management believes, due to our current financial condition, that we will not be able to compete for and purchaseacquired producing oil and gas properties as effectively as we have in the past. In responsewith opportunities for future development and contracted well operations to this trend management has recently initiated changes to the Company’s business plan.contractors. Currently, our primary focus is to secure additional capital through business alliances with third parties or other debt/equity financing arrangements to acquire oil field service companies andand/or assets.

Our ability to secure additional capital through business alliances with third parties or other debt/equity financing arrangements to acquire companies and/or assets which will allow the companyCompany to further operate in the oil field services industry with an emphasis on acquiring companies involved in salt water and drilling fluid disposal. Secondarily we will continue to seek out and acquire producing oil and gas leases and wells. At this time we have no specific acquisition targets identified but we are actively engaged generally in such a search.

We have explored and will continue to explore all avenues possible to raise the funds required. However, there is no assurance that we will be able to raise sufficient funds to execute our plans or that if successful in securing the funds our actual financial results will improve.
Our ability to acquire additional properties or equipment is strictly contingent upon our ability to locate adequate financing or equity to pay for these additional properties companies and/or equipment.assets. There can be no assurance that we will be able to obtain the opportunity to buy properties companies and/or equipmentassets that are suitable for our investment or that we may be able to obtain financing or equity to pay for the costs of these additional properties companies and/or equipmentassets at terms that are acceptable to us. Additionally, if economic conditions justify the same, we may hire additional employees although we do not currently have any definite plans to make additional hires. However, in

The oil and gas industry is subject to various trends including the event, weavailability of capital for drilling new wells, prices received for crude oil and natural gas, sources of crude oil outside our area of operations, interest rates, and the overall health of the economy. We are successful in makingnot aware of any acquisitions, it is likelyspecific trends that existing employees currently employed will remain withare unusual to our company, as compared to the acquisition(s) .

rest of the oil and gas industry.

ITEM 3. QUANTITATIVE AND QUALITATIVEQUALATIVE DISCLOSURES ABOUT MARKET RISK.

Not required for smaller reporting companies.

ITEM 4T. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Our management evaluated, with the participation of Tim Burroughs our Chief Executive Officer (CEO)/ and Chief Financial Officer (CFO), the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) as of the end of the quarter covered by this quarterly report on Form 10-Q. Based on this evaluation, management has concluded that, as of August 31, 2011February 29, 2012 our disclosure controls and procedures were effective to ensure that the information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported. Management is currently looking for a professional accounting person to become part of its management team in an effort to provide not only complete but timely reports to the Securities and Exchange Commission as required by its rules and forms.

5


Internal Control Over Financial Reporting

There have not been any changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. As a result, no corrective actions were required or undertaken.

6


Limitations on the Effectiveness of Controls.The Company’sOur management, including the CEO/CEO and CFO, does not expect that it’s Disclosure Controlsits disclosure controls or its Internal Controlsinternal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Companycompany have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple errorerrors or mistake.mistakes. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

PART II. OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS

None.

Item 1A. RISK FACTORS.
     Not required for smaller reporting companies.

Item 2. UNREGISTERED SALES OFEQUITY SECURITIES AND USE OF PROCEEDS

None.

Item 3. DEFAULTS UPON SENIOR SECURITIES

None.

Item 5. OTHER INFORMATION

          Due to the current financial condition

On April 12, 2012 our Board of the Company, two of our officers, TimDirectors approved employment contracts for three executives; Timothy Burroughs, CEO and Sherri Cecotti have agreed, effective February 16, 2010, to draw no salary until such time as the revenues of the Company are sufficient to sustain the operations of the Company including the payment of their salaries. The forbearance of the above officer’s salary is a complete forbearance and not a deferral. However, the Company may grant stock awards from time to time in recognition of the officer’s or employee’s forbearance.

Item 6. EXHIBITS AND REPORTS ON FORM 8-K
     (a) EXHIBITS:
     31.1 Certification of Chief Executive Officer/President, Kenneth Conte, Chief Financial Officer pursuant to 18 U.S.C. Section 1350,and Bernard R. O’Donnell, Executive Vice President. The contracts for Burroughs and O’Donnell were made effective as adopted pursuant to Section 302of December 1, 2011 and the contract for Conte was made effective January  1, 2012. A conformed copy of each of the Sarbanes-Oxley Act of 2002.
     32.1 Certification of Chief Executive Officer/Chief Financial Officer pursuantemployment agreements is attached to 18 U.S.C. Section 1350,this Form as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.Exhibits 10.1 through 10.3.

Item 6. EXHIBITS

(a) EXHIBITS:

Description
10.1Employment agreement between the corporation and Timothy Burroughs, President
10.2Employment agreement between the corporation and Kenneth Conte, Chief Financial Officer
10.3Employment agreement between the corporation and Bernard R. O’Donnell Executive Vice President

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31.1Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2Certification 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
101101.INS XBRL Instance Document

101.SCH XBRL Taxonomy Schema

101.CAL XBRL Taxonomy Calculation Linkbase

101.LAB XBRL Taxonomy Label Linkbase

101.PRE XBRL Taxonomy Presentation Linkbase

(b) REPORTS ON FORM 8-K

     1. Form 8-K, current report, items 1.01, 3.02, 5.02, 7.01, and 9.01 filed on September 6, 2011
8-K:

      None

7


SIGNATURES


SIGNATURES
In accordance with the requirementsSection 13 or 15(d) of the Exchange Act, the registrant has caused this report to be signed on its behalf by the undersigned, hereuntothereunto duly authorized.
authorized, on the 16th day of April, 2012

TBX RESOURCES,FRONTIER OILFIELD SERVICES, INC.

DATE: October 14, 2011
SIGNATURE: /s/ Tim Burroughs
TIM BURROUGHS,
PRESIDENT/ CHIEF FINANCIAL OFFICER 
 

Tim Burroughs, President and

Chief Executive Officer

In accordance with the Exchange Act, this report has been signed by the following persons on behalf of the registrant and in the capacities indicated, on the 16th day of April, 2012.

Signatures  Capacity

/s/ Tim Burroughs

President and Chief Executive Officer

/s/ Kenneth K. Conte

Chief Financial Officer

/s/ Bernard R. O’Donnell

Executive Vice President, Director

/s/ Daniel R. Robinson

Director

/s/ Donald Ray Lawhorne

Director

8