TX Holdings, Inc. - Quarter Report: 2012 December (Form 10-Q)

t75575_10q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D. C. 20549

FORM 10-Q

x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December 31, 2012

o TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____to _____

Commission File No. 0-32335

TX HOLDINGS, INC.

(Exact name of small business issuer as specified in its charter)

	GEORGIA		58-2558702
(State or other jurisdiction of		(I.R.S. Employer Identification. No.)
incorporation or organization)

12080 Virginia Blvd.

Ashland, KY 41102

(Principal Address of Issuer)

(606) 928-1131

Issuer’s telephone number

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 issuer was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. YES x NO o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. Smaller reporting company x

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) YES o NO x

Transitional Small Business Disclosure Format (check one): YES o NO x

As of February 1, 2013 there were 48,053,084 shares of common stock outstanding.

TX Holdings, Inc.

Form 10-Q

For the Quarter Ended December 31, 2012

Table of Contents

PART 1-FINANCIAL INFORMATION
Item 1	Condensed Financial Statements
	Unaudited Balance Sheet as of December 31, 2012 and Audited Balance Sheet as of September 30, 2012	3
	Unaudited Statements of Operations for the Three Months Ended December 31, 2012 and 2011	4
	Unaudited Statement of Changes in Stockholders’ Deficit for the Three Months Ended December 31, 2012	5
	Unaudited Statements of Cash Flows for the Three Months Ended December 31, 2012 and 2011	6
	Notes to Unaudited Financial Statements	7
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	13
Item 3	Quantitative and Qualitative Disclosures about Market Risk	14
Item 4	Controls and Procedures	14
PART II-OTHER INFORMATION
Item 1	Legal Proceedings	16
Item 1A	Risk Factors	16
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	16
Item 3	Defaults upon Senior Securities	16
Item 4	Submission of Matters to a vote to Security Holders	16
Item 5	Other Information	16
Item 6	Exhibits	17
	SIGNATURES	18

TX Holdings, Inc.
BALANCE SHEETS
December 31, 2012 and September 30, 2012
	(Unaudited)
	December 31,			September 30,
	2012			2012
ASSETS

Current assets:
Cash and cash equivalents	$	16,681		$	3,135
Accounts receivable		322,618			200,275
Inventory		1,308,745			771,977
Commission advances		59,158			56,375
Notes receivable-current		10,000			10,000
Other current assets		15,000			43,771
Total current assets		1,732,202			1,085,533

Property and equipment, net		64,496			55,797
Notes receivable, less current portion		30,000			30,000
Other		50,200			50,200

Total Assets	$	1,876,898		$	1,221,530

LIABILITIES AND STOCKHOLDERS’ DEFICIT

Current liabilities:
Notes payable to a stockholder	$	1,351,997		$	1,351,997
Accrued liabilities		845,769			788,185
Accounts payable		670,686			279,655
Advances from stockholders/officers		301,082			307,082
Bank-Line of Credit		240,000		_
Total current liabilities		3,409,534			2,726,919

Asset retirement obligation		5,000			5,000
Total Liabilities		3,414,534			2,731,919

Commitments and contingencies

Stockholders’ deficit:
Preferred stock: no par value, 1,000,000 shares authorized no shares outstanding	–			–
Common stock: no par value, 250,000,000 shares authorized, 48,053,084 and 46,553,084 shares issued and outstanding at December 31, 2012 and September 30, 2012, respectively		9,293,810			9,233,810
Additional paid-in capital		4,304,280			4,304,280
Accumulated deficit		(15,135,726	)		(15,048,479	)
Total stockholders’ deficit		(1,537,636	)		(1,510,389	)

Total Liabilities and Stockholders’ Deficit	$	1,876,898		$	1,221,530

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

TX HOLDINGS, INC.
STATEMENTS OF OPERATIONS
For theThree Months ended December 31, 2012 and 2011
	Unaudited
	December 31,			December 31,
	2012			2011

Revenue	$	776,246		$	111,937

Cost of goods sold		(592,048	)		(93,897	)

Gross profit		184,198			18,040

Operating expenses, except items shown separately below		133,283			119,266
Commission expense		71,779			–
Professional fees		29,222			56,429
Loss on settlement of accounts payable		10,116			–
Depreciation expense		4,445			1,148
Total operating expenses		248,845			176,843

Loss from operations		(64,647	)		(158,803	)

Other income and (expense):
Gain on disposal of fixed assets		500			–
Other income		–			3,638
Interest expense		(23,100	)		(32,574	)

Total other income and (expense), net		(22,600	)		(28,936	)

Net loss	$	(87,247	)	$	(187,739	)

Basic and diluted loss per common share	$	–		$	–

Weighted average of common shares outstanding-
Basic and Diluted		47,417,214			52,271,897

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

TX HOLDINGS, INC.
STATEMENT OF CHANGES IN STOCKHOLDER’S DEFICIT (UNAUDITED)
For the Three Months Ended December 31, 2012

									Additional
	Preferred Stock				Common Stock				Paid in		Accumulated
	Shares		Amount		Shares		Amount		Capital		Deficit			Total

Balance at September 30, 2012		–		–		46,553,084	$	9,233,810	$	4,304,280	$	(15,048,479	)	$	(1,510,389	)

Common stock issued for professional service						1,500,000		60,000							60,000

Net loss												(87,247	)		(87,247	)

Balance at December 31, 2012
		–		–		48,053,084	$	9,293,810	$	4,304,280	$	(15,135,726	)	$	(1,537,636	)

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

TX HOLDINGS, INC.
STATEMENTS OF CASH FLOWS
For the Three Months Ended December 31, 2012 and 2011
	Unaudited
	December 31,			December 31,
	2012			2011
Cash flows used by operating activities:
Net loss	$	(87,247	)	$	(187,739	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation expense		4,445			1,148
Loss on settlement of accounts payable		10,116			–
Gain on sale of equipment		(500	)		–

Changes in operating assets and liabilities:
Commission advances		(2,783	)		–
Finished goods inventory		(536,768	)		(13,224	)
Other current assets		28,771			(179,730	)
Accounts receivable		(122,343	)		(88,246	)
Accrued liabilities		57,584			68,514
Accounts payable		440,915			10,001
Stockholder advances for operations		6,000			–
Net cash used in operating activities		(201,810	)		(389,276	)

Cash flows used in investing activities:
Purchase of equipment		(13,144	)		–
Proceeds received on sale of equipment		500			–
Net cash used in investing activities		(12,644	)		–

Cash flows provided by financing activities:
Proceeds from line of credit		240,000			–
Proceeds from stockholder/officer advances		30,000			477,000
Payments of stockholders advances		(42,000	)		–
Net cash used in financing activities		228,000			477,000

Increase in cash and cash equivalents		13,546			87,724
Cash and cash equivalents at beginning of period		3,135			3,019

Cash and cash equivalents at end of period	$	16,681		$	90,743

Non-cash investing and financing activities:
Accounts payable exchanged for common stock	$	49,884		$	–

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

TX HOLDINGS, INC.

NOTES TO UNAUDITED FINANCIAL STATEMENTS

NOTE 1- BACKGROUND AND CRITICAL ACCOUNTING POLICIES

INTERIM FINANCIAL STATEMENTS

The accompanying interim unaudited financial statements included herein have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission. The financial statements reflect all adjustments that are, in the opinion of management, necessary to fairly present such information. All such adjustments are of a normal recurring nature. Although the Company believes that the disclosures are adequate to make the information presented not misleading, certain information and footnote disclosures, including a description of significant accounting policies normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”), have been condensed or omitted pursuant to such rules and regulations.

These financial statements should be read in conjunction with the audited financial statements and the notes thereto included in the Company’s 2012 Annual Report. The results of operations for interim periods are not necessarily indicative of the results for any subsequent quarter or the entire year ending September 30, 2013.

CAUTIONARY NOTE TO U.S. INVESTORS

THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION PERMITS OIL AND GAS COMPANIES, IN THEIR FILINGS WITH THE SEC, TO DISCLOSE ONLY PROVED RESERVES THAT A COMPANY HAS DEMONSTRATED BY ACTUAL PRODUCTION OR CONCLUSIVE FORMATION TESTS TO BE ECONOMICALLY AND LEGALLY PRODUCIBLE UNDER EXISTING ECONOMIC AND OPERATING CONDITIONS. WE USE CERTAIN TERMS HEREIN, SUCH AS “PROBABLE”, “POSSIBLE”, “RECOVERABLE”,AND “RISKED,” AMONG OTHERS, THAT THE SEC’S GUIDELINES STRICTLY PROHIBIT US FROM INCLUDING IN FILINGS WITH THE SEC. READERS ARE URGED TO CAREFULLY REVIEW AND CONSIDER THE VARIOUS DISCLOSURES MADE BY US WHICH ATTEMPT TO ADVISE INTERESTED PARTIES OF THE ADDITIONAL FACTORS WHICH MAY AFFECT OUR BUSINESS

OVERVIEW OF BUSINESS

TX Holdings, Inc. (“TX Holdings” or the “Company”), formerly named R Wireless, Inc. (“RWLS”) and HOM Corporation (“HOM”), is a Georgia corporation incorporated on May 4, 2000. In December 2004 the Company began to structure itself into an oil and gas exploration and production company. The Company acquired oil and gas leases and began development of a plan for oil and gas producing operations in April 2006.

On December 10, 2011 the Board of directors approved the expansion of the Company’s business to include retail and wholesale mining supplies. In support of the mining supplies business, TX Holdings signed contracts with two companies which will procure sales on behalf of the Company and earn a commission based on the gross profit generated by the sales. TX Holdings’ Chairman, William Shrewsbury, has committed to finance the new business expansion with his personal loan, up to the amount of $1,062,000. The new venture financing will be secured by a lien on the Company’s assets.

The Company continues to be actively engaged in the development of crude oil and natural gas. In November 2006, the Company entered into a Purchase and Sale Agreement with Masada Oil & Gas, Inc. (“Masada).The Parks lease covers 320 acres in which the company previously owned a 75% working interest and Masada owned the remaining 25%. The land owners of this lease have a 12.5% royalty interest in the production. TX Holdings was the lease operator of the lease and the lease has 22 wells which may be capable of minimal production rates. (2 to3 bbls- per-day). On January 28, 2011, the company purchased from Masada Oil the remaining 25% working interest and thereby increasing the Company working interest on the Parks lease to 100%. In addition to the 25% working interest, the Company purchased 2 acres of land and a 1,400 square foot storage building on the property. In consideration for the purchase, the Company paid $10,400 cash, relinquished an 8.5% working interest on the Contract Area 1 (non-producing ) lease with a book Value of $0 and, assumed a $17,000 liability previously owed by the 25% prior lease owner. The Company also adjusted the ARO by $27,969 for the release of the liability for Contract Area 1 and the increase in the liability for the Parks lease.

TX HOLDINGS, INC.

NOTES TO UNAUDITED FINANCIAL STATEMENTS

NOTE 1- BACKGROUND AND CRITICAL ACCOUNTING POLICIES- CONT’D

OVERVIEW OF BUSINESS-CONT’D

On May 30, 2012, the Company sold 100% of the interest on the Parks lease for $80,000. The Company received a down payment of $40,000 and a note for the balance of $40,000. The Note is secured by future Park’s lease production.

The Company had an estimated 8% working interest on the Perth lease which was under litigation. On May 18, 2012, the Company reached an agreement regarding the on-going litigation whereby all interest in the Perth lease was relinquished. The Perth lease was fully impaired at September 30, 2011.

The Company owned a 100% working interest and was the operator of the 843 acre Williams Lease. An on-going dispute with the land owner of the lease has prevented the Company from operating or reporting any production on this lease. On September 30, 2009, the Company elected to cease operation of the Williams lease resulting in impairment of the lease. The Company recorded an impairment loss of $68,222 for the year ended September 30, 2009 related to this lease.

The Company plans to continue using a combination of debt and equity financing to acquire new oil fields and to develop those fields. Currently, management cannot provide any assurance regarding the successful acquisition and development of any future fields.

After the recent business expansion into wholesale and retail mining supplies, the Company has generated enough revenue to no longer be considered a development stage Company. To enter into the retail and wholesale of mining supplies, TX Holdings signed contracts with two companies which will procure sales on behalf of the Company and earn a commission based on the gross profit generated by the sales.

REVENUE RECOGNITION

The Company recognizes revenue from direct sales of our products to our customers, including shipping fees. When title passes to the customer which usually occurs upon shipment or delivery, depending upon the terms of the sales order, when persuasive evidence of an arrangement exists; when sales amounts are fixed or determinable; and when collectability is reasonably assured. The Company expenses shipping and handling costs as incurred which are included in cost of sales on the statements of operations.

Currently, the Company has limited revenue from oil and gas operations. Revenue from oil and gas operations is recognized upon delivery of the oil and gas to the purchaser of the oil and gas.

GOING CONCERN CONSIDERATIONS

The Company has suffered recurring losses while devoting substantially all of its efforts to raising capital and identifying and pursuing advantageous business opportunities. Management currently believes that its best opportunities lie in the oil and gas industry and the wholesale and retail sale of mining supplies. The Company’s total liabilities exceed its total assets and the Company’s liquidity has depended on raising new capital. TX Holdings’ Chairman, William Shrewsbury, has committed to finance the new business expansion with his personal loan, up to the amount of $1,062,000. The new venture financing will be secured by a lien on the Company’s assets.

TX HOLDINGS, INC.

NOTES TO UNAUDITED FINANCIAL STATEMENTS

NOTE 1- BACKGROUND AND CRITICAL ACCOUNTING POLICIES- CONT’D

GOING CONCERN CONSIDERATIONS-CONT’D

These factors raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying financial statements have been prepared on a going concern basis, which contemplates continuing operations and realization of assets and liquidation of liabilities in the ordinary course of business. The Company’s ability to continue as a going concern is dependent upon its ability to raise sufficient capital and to implement a successful business plan to generate profits sufficient to become financially viable. The financial statements do not include adjustments relating to the recoverability of recorded assets nor the implications of associated bankruptcy costs should the Company be unable to continue as a going concern.

NOTE 2 – STOCKHOLDERS’ EQUITY

In May 2012, 6,718,813 shares of the Company’s common stock were returned to the Company as part of a legal settlement. See Note 3.

On November 9, 2012 1,500,000 shares of common stock were issued by the Company as payment for legal fee obligation arising from the May 18, 2012 legal settlement with the prior Company’s CEO and several other co-defendants. The Company recognized a loss on settlement of accounts payable of $10,116.

POTENTIALLY DILUTIVE OPTIONS AND WARRANTS

At December 31, 2012, the Company has outstanding 1,350,000 warrants which were not included in the three months ended December 31, 2012 calculation of diluted net loss per share since their inclusion would be anti-dilutive.

On May 16, 2012 the Board of Directors approved 400,000 warrants to be issued to Tom Chafin, a sales agent. Over a period of four years, Tom will receive every six months, 50,000 warrants convertible to common stock for a total of 400,000 warrants. The warrants are convertible at $0.10 per share, exercisable upon issuance, and expire two years after date of issuance with the first 50,000 warrants to be issued July 1, 2012. On January 1, 2013 an additional 50,000 warrants were issued to Tom Chafin pursuant to the agreement.

NOTE 3 – RELATED PARTY TRANSACTIONS

ADVANCES FROM STOCKHOLDER/OFFICER

As of December 31, 2012, the Company has an outstanding note payable to Mr. Shrewsbury, the Company’s Chairman and CEO, for the amount of $289,997, the note bears a 10% interest and is payable on demand. Interest has been accrued on the notes payables at a rate of 10%.

Included in the financial statements at December 31, 2012 are advances from stockholder/officer of $301,082.

In the three months ended December 31, 2012 interest expense of $23,100, in the accompanying statement of operations, relates to the promissory notes.

TX HOLDINGS, INC.

NOTES TO UNAUDITED FINANCIAL STATEMENTS

NOTE 3 – RELATED PARTY TRANSACTIONS-CONT’D

PARK’S LEASE

On January 28, 2011 TX Holdings, Inc. entered into an agreement with Masada Oil & Gas Inc. to acquire the remaining 25% working interest in the Park’s lease which the Company currently owns a 75% working interest. As part of the agreement, the Company also acquired a storage building and approximately two acres of land. In return, the Company will relinquish an 8.5% working interest which it currently holds in the Contract Area 1 lease, pay the sum of $10,000 and, assume the current 25% lease owners’ liability in the amount of $17,000. On May 30, 2012, the Company sold 100% of the interest on the Parks lease for $80,000. The Company received a down payment of $40,000 and a note for the balance of $40,000. The Note will be secured by future Park’s lease production.

NOTES PAYABLE TO A STOCKHOLDER AND OFFICER

On April 30, 2012 TX Holdings, Inc issued for value received a Revolving Promissory Demand Note to Mr. Shrewsbury, the Company’s Chairman and CEO for the amount of $1,062, 000. The note earns a 5% interest per annum and becomes due and payable on demand or on April 30, 2015 whichever shall first occur.

CONVERTIBLE DEBT TO STOCKHOLDER AND FORMER OFFICER

Mark Neuhaus, the former Chairman of the Board of Directors and former Chief Executive Officer of the Company caused the company in September 2007 to issue to him a convertible promissory note in the amount of $1,199,886 bearing interest at 8% per annum and due and payable within two years for payments in cash and common stock made on behalf of the Company through that date. The conversion price was $0.28 per common share (the market price of the Company’s common stock on the date of the note) which would have automatically converted on the two-year anniversary of the note if not paid in full by the Company. The conversion price was subject to adjustments for anti-dilution. The Company disputed that the note was not supported by consideration and that it was not properly authorized under Georgia law.

On November 17, 2009 the Company filed a legal claim in the Miami Circuit Court against Mark Neuhaus (prior CEO), Michael Cederstrom (Prior CFO), Dexter & Dexter , Hewitt Energy and Doug Hewitt for alleged services and reimbursed expenses paid by the Company. The claim stipulates that the defendants did not perform any services on TX Holdings behalf which would have entitled them to receive compensation in the form of the convertible promissory note for reimbursement of expenses.

During the first half of calendar 2012, the Company retained new legal counsel to represent the Company on current litigation against the defendants listed above. The firm of Kluger, Kaplan, Silverman, Katzen & Levine, P.L. represented TX Holdings in Miami Florida and the firm of Winder & Counsel continues to represent the Company in Salt Lake City, Utah.

On May 10, 2012, The Company reached a settlement agreement with Mark Neuhaus, M A &N, Nicole Bloom Neuhaus, Hewitt Energy and Doug Hewitt. Pursuant to the settlement agreement, Mark Neuhaus returned to the Company 6,718,813 shares previously issued to him and the convertible promissory note previously issued to him in the amount of $1,199,886 plus accrued interest along with any other liability owed to him, was cancelled. In return, the Company paid $100,000 cash. The returned shares were subsequently canceled.

The Company accounted for the settlement as a “multiple element” transaction consisting of a debt extinguishment element and a stock repurchase element. The $100,000 cash payment was apportioned based on the relative fair value of the debt and repurchased shares. The difference between the cash portion for the debt extinguishment was credited to “additional paid-in capital” pursuant to ASC 470-50-40-2. The difference between the stated value of the repurchased shares and the cash portion paid to repurchase the shares was credited to “additional paid-in capital” pursuant to ASC 505-30-30-9.

TX HOLDINGS, INC.

NOTES TO UNAUDITED FINANCIAL STATEMENTS

NOTE 4 – NOTES PAYABLE TO THIRD PARTY

On November 7, 2012 the Company signed a promissory note for a $250,000 loan. The loan is secured by the Company’s inventory and, matures on 11/7/2013. Interest on the loan is payable monthly and is an indexed calculated variable interest rate which is currently 3.250% per annum.

NOTE 5 – SEGMENT INFORMATION

	Unaudited December 31, 2012			Unaudited December 31, 2011
Revenues to unafilliated customers:
Mining	$	776,246		$	103,042
Oil and Gas	–				8,895
	$	776,246		$	111,937

Operating profit or loss:
Mining	$	(64,647	)	$	(121,361	)
Oil and Gas	–				(37,442	)
	$	(64,647	)	$	(158,803	)
Other income (expense), net		(22,600	)		(28,936	)
Net loss	$	(87,247	)	$	(187,739	)

TX HOLDINGS, INC.

NOTES TO UNAUDITED FINANCIAL STATEMENTS

NOTE 5 – SEGMENT INFORMATION-CONT’D

	Unaudited December 31, 2012		September 30, 2012
Identifiable assets:
Mining	$	1,718,665	$	1,072,398
Oil and Gas		90,200		90,200
Total segment assets	$	1,808,865	$	1,162,598
Total general corporate assets		83,033		58,932
Total Assets	$	1,876,898	$	1,221,530

	Unaudited December 31, 2012		Unaudited December 31, 2011
Capital expenditures:
Mining	$	13,144	$	–
Oil and Gas		–		–
	$	13,144	$	–

Depreciation, Depletion and amortization:
Mining	$	4,445	$	–
Oil and Gas		–		1,148
	$	4,445	$	1,148

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

INTRODUCTION

The following discussion is intended to facilitate an understanding of our business and results of operations and includes forward-looking statements that reflect our plans, estimates and beliefs. It should be read in conjunction with our audited consolidated financial statements and the accompanying notes to the consolidated financial statements included herein. Our actual results could differ materially from those discussed in these forward-looking statements. On December 2011, the Company expanded its business to include the retail and wholesale of mining supplies. The Company has contracted with two independent Companies who will provide assistance in carrying–out the new venture sales program. If the new venture sales projections materialize, the Company is optimistic that the new venture will bring a significant profit contribution during the current year.

The Company’s success is dependent on if and, how quickly it can grow the new venture to become a positive contributor. The Company plans to use all revenues for general corporate purposes as well as future acquisitions of new oil and gas properties. There is no certainty that the Company can be successful in the new venture. TX Chairman and CEO, William Shrewsbury, has committed to advance capital in the amount of $1,062,000.

RESULTS OF OPERATIONS

THREE MONTHS ENDED DECEMBER 31, 2012 COMPARED TO THREE MONTHS ENDED DECEMBER 31, 2011

REVENUES FROM OPERATIONS

Revenues for the three months ended December 31, 2012 and 2011 were $776,246 and $111,937 respectively. On December, 2011, the Company entered into a new business venture as a retailer and wholesaler of mining supplies. The $664,309 increase in revenue from the same period the prior year is attributed to the mining supplies business.

EXPENSES

During the quarter ended December 31, 2012 the Company incurred cost of goods sold in the amount of $592,048. as compared with cost of goods sold of $93,897 for the quarter ended December 31, 2011. The increase in cost of goods sold resulted from higher sales of retail and wholesale mining products during the quarter ended December 31, 2012. Operating expenses for the three months ended December 31, 2012 were $248,845 as compared to $176,843 for the three months ended December 31, 2011 an increase of $72,002. The increase in Operating expenses resulted primarily from higher commission expense ($72k) and higher contract labor ($22k), partially offset by lower legal fees ($17k).

NET INCOME/LOSS

For the quarter December 31, 2012, the Company had a Net Loss of $87,247 representing a favorable variance of $100,492 when compared to a Net Loss of $187,739 for the quarter ended December 31, 2011. The favorable variance in the current quarter resulted primarily from higher gross profit generated by higher sales of mining supplies, over the same period the prior year.

LIQUIDITY

At December 31, 2012 the Company had a cash balance of $16,681. As of September 30, 2012 the Company had a cash balance of $3,135. Property and equipment was $64,496 as of December 31, 2012 compared to $55,797 as of September 30, 2012. The Company has been able to borrow money from William Shrewsbury primarily to resolve the Company’s liquidity needs. The Company is currently generating greater revenue beginning in the first quarter of 2012 from the sales of mining products, associated with the new venture the Company entered during December 2012. The Company expectations are that the higher sales of mining products will be sufficient to meet all of the Company’s liquidity needs.

As a result of the new venture the Company entered during December 2011, the Company currently requires operating capital of approximately $50,000 per month to meet current obligations. The Company is optimistic that the revenue increase generated by the new venture will enable the Company to meet its current obligations. In the past, the Company has been able to raise capital from its shareholders/officers through stock-based compensation and advances. The Company’s primary challenge is to generate higher revenue from the new venture.

LEGAL PROCEEDINGS

Management is currently aware of no pending, past or present litigation involving the Company which management believes could have a material adverse effect on the Company.

On November 17, 2009 the Company filed a legal claim in the Miami Circuit Court against Mark Neuhaus (prior CEO), Michael Cederstrom (Prior CFO), Dexter & Dexter , Hewitt Energy and Doug Hewitt for alleged services and reimbursed expenses paid by the Company. The claim stipulated that the defendants did not perform any services on TX Holdings behalf which would have entitled them to receive compensation in the form of the convertible promissory note for reimbursement of expenses.

During the first half of calendar 2012, the Company retained new legal counsel to represent the Company on current litigation against the defendants listed above The firms of Kluger, Kaplan. Silverman, Katzen & Levine, P.L. represented TX Holdings in Miami Florida and, the firm of Winder & Counsel continues to represent the Company in Salt Lake City, Utah.

On May 18, 2012, The Company reached a settlement agreement with Mark Neuhaus, M A &N, Nicole Bloom Neuhaus, Hewitt Energy and Doug Hewitt. Pursuant to the settlement agreement, Mark Neuhaus returned to the Company 6,718,813 shares previously issued to him and the convertible promissory note previously issued to him in the amount of $1, 199,886 plus accrued interest along with any other liability owed to him, was cancelled. In return, the company paid $100,000 cash. The returned shares were subsequently canceled.

The legal firm of Winder & Counsel will continue representing the Company in Utah regarding the on-going litigation with Michael Cederstrom (prior CFO) and the law firm of Dexter & Dexter.

Except as disclosed above, the Company has no material legal proceedings in which any director, officer or affiliate of the Company, any owner of record or beneficially of more than 5% of any class of voting securities of the Company, or security holder is a party adverse to the Company or has a material interest adverse to the Company.

ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is a “smaller reporting Company” as defined by Rule 12b-2 of the Exchange Act, and as such, is not required to provide the information required under this Item.

ITEM 4 CONTROLS AND PROCEDURES

Management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) of the Company. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America.

The Company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management, under the supervision of the Company’s Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of internal control over financial reporting based on the framework in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on that evaluation, management concluded that the Company’s internal control over financial reporting were effective as of December 31, 2012 under the criteria set forth in the Internal Control—Integrated Framework. The determination was made based on improvement to the control environment resulting from enhanced segregation of duties by adding new staff and overall improvement of control processes. The Company will continue to review and implement control processes to mitigate the control weaknesses that are present in a small Company with very few employees.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

There was no change in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) identified in connection with management’s evaluation during our last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1 LEGAL PROCEEDINGS

Management is currently aware of no pending, past or present litigation involving the Company which management believes could have a material adverse effect on the Company.

During the first half of calendar 2012, the Company retained new legal counsel to represent the Company on current litigation against the defendants listed above. The firms of Kluger, Kaplan. Silverman, Katzen & Levine, P.L. represented TX Holdings in Miami Florida and, the firm of Winder & Counsel continues to represent the Company in Salt Lake City, Utah.

On May 18, 2012, The Company reached a settlement agreement with Mark Neuhaus, M A &N, Nicole Bloom Neuhaus , Hewitt Energy and Doug Hewitt. Pursuant to the settlement agreement, Mark Neuhaus returned to the Company 6,718,813 shares previously issued to him and the convertible promissory note previously issued to him in the amount of $1,199,886 plus accrued interest along with any other liability owed to him, was cancelled. In return, the company paid $100,000 cash. The returned shares were subsequently canceled.

The legal firm of Winder & Counsel will continue representing the Company in Utah regarding the on-going litigation with Michael Cederstrom (prior CFO) and the law firm of Dexter & Dexter.

ITEM 1A RISK FACTORS

The Company is a “smaller reporting Company” as defined by Rule 12b-2 of the Exchange Act, and as such, is not required to provide the information required under this Item.

ITEM 2 UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3 DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4 SUBMISSION OF MATTERS TO A VOTE TO SECURITY HOLDERS

None.

ITEM 5 OTHER INFORMATION

None.

ITEM 6 EXHIBITS

Exhibit 31.1	Section 302 Certification of Chief Executive Officer

Exhibit 31.2	Section 302 Certification of Chief Financial Officer

Exhibit 32.1	Section 906 Certification of Chief Executive Officer

Exhibit 32.2	Section 906 Certification of Chief Financial Officer

SIGNATURES

In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

TX HOLDINGS, INC.

By: /s/ William “Buck” Shrewsbury

Chief Executive Officer

Dated: February 11, 2013

In accordance with the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

/s/ William “Buck” Shrewsbury		Chairman of the Board of Directors and
William “Buck” Shrewsbury:		Chief Executive Officer
February 11, 2013

/s/ Richard (Rick) Novack		President and Director
Richard (Rick) Novack
February 11, 2013

/s/ Jose Fuentes		Chief Financial Officer
Jose Fuentes
February 11, 2013

/s/ Bobby G. Fellers		Director
Bobby G. Fellers
February 11, 2013

/s/ Martin Lipper		Director
Martin Lipper
February 11, 2013