U.S. SECURITIES AND EXCHANGE COMMISSION


WASHINGTON, D.C. 20549






FORM 10-K




Mark One


x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES


EXCHANGE ACT OF 1934




For the fiscal year ended February 28, 2011




o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES


EXCHANGE ACT OF 1934




For the transition period from ______ to _______





COMMISSION FILE NO. 000-52721





FOX PETROLEUM INC.(Name of small business issuer in its charter)





NEVADA

n/aother jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)





545 Eighth Avenue Suite 401


New York, NY 10018





212-560-5195(Issuer's telephone number)





Securities registered pursuant to Section 12(b) of the Act:

Name of each exchange on which registeredNONE











Securities registered pursuant to Section 12(g) of the Act:


COMMON STOCK, $0.001


(Title of Class)




Check whether the issuer is not required to file reports pursuant to Section 13




or 15(d) of the Exchange Act. o




Indicate by check mark if the registration is a well-known seasoned issuer as defined in Rule 403 of the Securities Act.  ̈ Yes     x No




Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. x Yes      ̈ No




Indicate by check mark whether the registrant has (i) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (ii) has been subject to such filing requirements for the past 90 days. x Yes      ̈ No




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




Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained in this form, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  ̈




Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated file, 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 filed
 ̈

Accelerated filer
 ̈Non-accelerated filer
 ̈

Smaller reporting company
x




Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  ̈ Yes     x No




State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was sold, or the average bid and asked price of such common equity, as of the last business of the registrant’s most recently completed second fiscal quarter: August 31, 20010: $308,588.86




ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS


N/A









Check whether the issuer has filed all documents and reports required to be filed by Section 12, 13 and 15(d) of the Securities Exchange Act of 1934 after the distribution of securities under a plan confirmed by a court).  ̈ Yes      ̈ No




APPLICABLE ONLY TO CORPORATE REGISTRANTS




State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date.




Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 122,174,997 shares of common stock outstanding as of June 14, 2011.




DOCUMENTS INCORPORATED BY REFERENCE




If the following documents are incorporated by reference, briefly describe them and identify the part of the Form 10-K (e.g., Part I, Part II, etc.) into which the document is incorporated: (i) any annual report to security holders; (ii) any proxy or information statement; and (iii) any prospectus filed pursuant to Rule 424(b) or (c) of the Securities Act of 1933 (the "Securities Act"). The listed documents should be clearly described for identification purposes (e.g. annual reports to security holders for fiscal year ended December 24, 1990).




N/A




Transitional Small Business Disclosure Format (Check one):  ̈ Yes     x No










FOX PETROLEUM INC.


FORM 10-K





INDEX





PAGEItem 1.
Business
2Item 1A.
Risk Factors
12Item 1B.
Unresolved Staff Comments
23Item 2.
Properties
23Item 3.
Legal Proceedings
23Item 4.
Removed and Reserved
23Item 5.
Market for Registrant's Common Equity,  Related Stockholder Matters and Issuer Purchases of Equity Securities
24Item 6.
Selected Financial Data
27Item 7.
Management's Discussion and Analysis of Financial Condition and Results of Operation
28Item 7A.
Quantity and Qualitative Disclosure About Market Risks
XItem 8.
Financial Statements and Supplemental Data
38Item 9.
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
66Item 9A.
Controls and Procedures
66Item 9B.
Other Information
67Item 10.
Directors, Executive Officers and Corporate Governance
67Item 11.
Executive Compensation
68Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
69Item 13.
Certain Relationships and Related Transactions and Director Independence
70Item 14.
Principal Accountant Fees and Services
70Item 15.
Exhibits and Financial Statement Schedules
71









Except for statements of historical fact, certain information contained herein constitutes “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are usually identified by our use of certain terminology, including “will,” “believes,” “may,” “expects,” “should,” “seeks,” “anticipates,” or “intends,” or by discussions of strategy or intentions. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause our actual results or achievements to be materially different from any future results or achievements expressed or implied by such forward-looking statements. Such factors include, among others, our history of operating losses and uncertainty of future profitability; our lack of working capital and uncertainty regarding our ability to continue as a going concern; uncertainty of access to additional capital; our future exploration programs and results; our future capital expenditures; our future financing; and our future investments in and acquisitions of oil and gas properties as well as those factors discussed in the sections entitled “Risk Factors,” “Business,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”  If one or more of these risks or uncertainties materializes, or if underlying assumptions prove incorrect, our actual results may vary materially from those expected, estimated, or projected. Forward-looking statements in this document are not a prediction of future events or circumstances, and those future events or circumstances may not occur. Given these uncertainties, users of the information included herein, including investors and prospective investors are cautioned not to place undue reliance on such forward-looking statements. We do not assume responsibility for the accuracy and completeness of these statements.




Although we believe that the expectations reflected in the forward looking statements are reasonable, we cannot guarantee future results, levels of activity or performance. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward looking statements to conform these statements to actual results.




All references in this Annual Report on Form 10-K to the terms “we,” “our,” “us,” “FXPT.OB,” and the “Company” refer to Fox Petroleum Inc. and/or its wholly owned subsidiaries, Fox Petroleum (Alaska) Inc., Fox Petroleum, Inc. (a Kansas corporation) and Fox Energy Exploration Limited, as the case may be.




AVAILABLE INFORMATION




Fox Petroleum Inc. files annual, quarterly, current reports, proxy statements, and other information with the Securities and Exchange Commission (the "Commission"). You may read and copy documents referred to in this Annual Report on Form 10-K that have been filed with the Commission at the Commission's Public Reference Room, 450 Fifth Street, N.W., Washington, D.C. You may obtain information on the operation of the Public Reference Room by calling the Commission at 1-800-SEC-0330. You can also obtain copies of our Commission filings by going to the Commission's website at http://www.sec.gov.




1




PART I




ITEM 1. BUSINESS




BUSINESS DEVELOPMENT




Fox Petroleum Inc. was incorporated under the laws of the State of Nevada on November 4, 2004 under the name of “Nova Resources Inc.” Subsequently, our Board of Directors decided to change our name to “Fox Petroleum Inc” to better reflect the new direction of our business of exploration and development activities to the oil and gas sectors. Therefore, on February 5, 2007, we changed our name to “Fox Petroleum Inc.”. The name change was accomplished through a merger with our wholly owned subsidiary, Fox Petroleum Inc., which was incorporated for the sole purpose of changing our name with our company carrying on as the surviving corporation under the new name of “Fox Petroleum Inc.” As of the date of this Annual Report, we are a development stage company engaged in the identification, acquisition, exploration and, if warranted, development of prospective oil and gas properties. We have oil and gas interests in a United Kingdom onshore license and joint venture interests in Texas. The company also engages in recycling operations are involved in the recycling of oil- based plastic compounds since June of 2010.  These operations are located in Hamilton, Ontario Canada.





Subsidiaries





1536692 Ontario Inc.


On July 15, 2010 we acquired the company 15336692 Ontario Inc.  This company comprised of one of the two operating plastics companies located in Hamilton, Ontario.  The company is comprised of assets involved in the production, execution and delivery of plastics recycling.  We acquired all related debts along with the company.  The company delivered a PCAOB audit in January 2011, finalizing the transaction.





Resource Polymers Inc.


On July 15, 2010 we entered into agreements to acquire the company Resource Poluymers  Inc.  This company comprised of one of the two operating plastics companies located in Hamilton, Ontario.  The company is comprised of operations involved in the recycling, extruding and development of oil based compounds used in manufacturing facilities.  The company has not yet completed its required PCAOB audit and the company is hoping to finalize the transaction imminently.





Fox Petroleum (Alaska) Inc.


On April 17, 2007, we incorporated a wholly owned subsidiary, Fox Petroleum (Alaska) Inc. (“Fox Petroleum Alaska”) under the laws of the State of Alaska in order to carry out our Alaska operations after completing a lease purchase and sale agreement with Fox Petroleum LLC. In order to hold Alaska oil and gas leases, we either had to be registered in Alaska or operate through an Alaska subsidiary.





Fox Energy Exploration Limited.


On May 17, 2007, we incorporated a wholly owned subsidiary, Fox Energy Exploration Limited (“Fox Energy Exploration Limited”), in England and Wales to hold assets in the United Kingdom under a farm-in agreement with Granby Enterprises Limited and Atlantic Petroleum UK Limited.


2





TRANSFER AGENT




Our transfer agent and registrar for our common stock is Empire Stock Transfer Inc., 2470 St. Rose Parkway, Suite 304, Henderson, Nevada 89074.




CURRENT BUSINESS OPERATIONS




As of the date of this Annual Report, we are in operations in  our recycling plant and we are development stage company engaged in the identification, acquisition, exploration and, if warranted, development of prospective oil and gas properties. Our properties are described below.





SHARE EXCHANGE AGREEMENTS





Ontario Share Exchange Agreement





Effective July 15, 2010, our Board of Directors authorized the execution of that certain share exchange agreement dated July 15, 2010 (the “Ontario Share Exchange Agreement”) among us, 1536692 Ontario Inc., a private corporation duly registered under the laws of the Province of Ontario, Canada (“Ontario”) and the shareholders of Ontario (the “Ontario Shareholders”). In accordance with the terms and provisions of the Ontario Share Exchange Agreement: (i) the Ontario Shareholders tendered all of their shares held of record, which constituted one hunred percent (100%) of the total issued and outstanding shares of Ontario, to us; (ii) we issued to the Ontario Shareholders 1,750,000 shares of our restricted common stock; and (iii) we assumed a debt due and owing by Ontario to Davfam Investments (1998) Ltd.  in the amount of $225,000, which debt was incurred by Ontario during fiscal years 1994 through 1995 . Ontario is the owner of a scrap plastic processing plant with certain equipment, fixtures and improvements and assets located in Hamilton, Ontario, Canada. Ontario is our wholly-owned subsidiary as a result of the Ontario Share Exchange Agreement.





Resource Share Exchange Agreement





Effective July 15, 2010, our Board of Directors further authorized the execution of that certain share exchange agreement dated July 15, 2010 (the “Resource Share Exchange Agreement”) among us, Resource Polymers Inc., a private corporation duly registered under the laws of the Province of Ontario, Canada (“Resource”) and the shareholders of Resource (the “Resource Shareholders”). In accordance with the terms and provisions of the Resource Share Exchange Agreement: (i) the Resource Shareholders tendered all of their shares held of record, which constituted one hunred percent (100%) of the total issued and outstanding shares of Resource, to us; (ii) we issued to the Resource Shareholders 1,750,000 shares of our restricted common stock; and (iii) ) we assumed a debt due and owing by Resource to Consolidated Recyclers Inc. in the amount of $350,000, which debt was incurred by Resource during fiscal years 1994 through 1997. Resource is also the owner of a scrap plastic processing plant with certain equipment, fixtures and improvements and assets located in Hamilton, Ontario, Canada. Resource is our wholly-owned subsidiary as a result of the Ontario Share Exchange Agreement.


3





NORTH SLOPE, ALASKA




North Slope Purchase Agreement




On October 10, 2007, our wholly owned subsidiary, Fox Petroleum Alaska, entered into a purchase agreement (the “North Slope Purchase Agreement”) with Daniel Donkel and Samuel Cade to acquire a 100% working interest on eight oil and gas leases located in the North Slope, Alaska in consideration for $250,000 and 80,000 shares of our common stock. On November 2, 2007, the North Slope Purchase Agreement was amended to add us as a party. These leases are subject to a total of 5% overriding royalty interests to Daniel Donkel and Samuel Cade and a royalty of 16.67% to the State of Alaska. Acquisitions of these eight oil and gas leases were completed effective March 1, 2008.




Lease Purchase and Sale Agreement




On August 14, 2007, we acquired eleven oil and gas leases in North Slope, Alaska under that certain lease purchase and sale agreement dated May 29, 2007 (the “Lease Purchase and Sale Agreement”) entered into with Fox Petroleum LLC, a Nevada limited liability company (“Fox Petroleum”). Effective March 1, 2008, we acquired an additional twelfth oil and gas lease under the Lease Purchase and Sale Agreement. These leases were previously assigned to our wholly owned subsidiary, Fox Petroleum Alaska. We had a combined 100% working interest in these twelve state-issued oil and gas leases subject to a royalty of 16.67% to the State of Alaska and a private royalty of 5%.




Cook Inlet Lease Purchase Agreement




On October 10, 2007, through our wholly owned subsidiary, Fox Petroleum Alaska, we entered into a lease purchase agreement (the “Cook Inlet Lease Purchase Agreement”) with Daniel Donkel and Samuel Cade to acquire six oil and gas leases located in the Cook Inlet, Alaska in consideration for $750,000. These leases are subject to a total of 5% overriding royalty interests to Daniel Donkel and Samuel Cade and a royalty of 16.67% to the State of Alaska. The six leases under the Cook Inlet Purchase Agreement comprise approximately 46,000 acres. All of these leases expire on September 30, 2013.




Rental Payment For Alaska Leases Agreement




On January 30, 2009, we entered into an agreement (the “Agreement”) with Daniel Donkel and Samuel Cade (collectively, the “Payors”) regarding the twelve oil and gas leases in the State of Alaska, which were sold by the Payors to us. Under the terms of the Agreement, the Payors agreed to use their best efforts to make, on our behalf, annual rental payments for the twelve leases totaling up to $64,980 on or before the due date of each payment. The payments were due on February 1, 2009 and were paid by the Payors on February 1, 2009.




We agreed to repay by March 2, 2009 any portion of the payments made by the Payors. The repayment amount is subject to an 18% interest rate per annum. We also granted the Payors a security interest in our right, title, and interest in the twelve leases. We further agreed to transfer and assign 25% of our right, title, and interest in the twelve leases to Mr. Donkel and 75% of our right, title, and interest in the twelve leases to Mr. Cade in the event of our failure to pay the repayment amount in a timely manner.




We were not in a position to reimburse the Payors. Before the end of May 2009, we entered into a further amendment to the Agreement with the Payors extending repayment deadline to August 14, 2009 within which we had to repay the annual rental payments made by the Payors on February 1, 2009 together with interest. In order to obtain the extension, we executed lease assignments for all of the above twelve oil and gas leases and delivered them into escrow with the attorney of the Payors. We also had lease payments unpaid totaling $25,126 for five leases which were due by March 1, 2009. We also had to further pay $25,790 for Alaska lease payments for three leases by June 1, 2009.




4





As of May 16, 2009 and May 29, 2009, we entered into further amendments to the Agreement with the Payors whereby the Payors paid lease rental fees of $25,126 for five leases which were due by March 1, 2009 and lease rental fees of $25,790 for three leases which were due by June 1, 2009, respectively, on our behalf. Under the amended Agreement, we had until August 14, 2009 to repay the Payors in full including any accrued interest. The amount paid on our behalf is subject to an 18% interest rate per annum. If we failed to repay the Payors, the leases would automatically be assigned to the Payors under the lease assignment agreements held in escrow.




We could not provide any assurance that we would be able to obtain financing arrangements to repay the Payors by August 14, 2009. Therefore, all costs incurred of $2,401,282 relating to the North Slope leases were written off on our statement of operations during fiscal year ended February 28, 2009. During fiscal year ended February 28, 2011, we failed to repay the Payors by the due date and assignment of the related leases to the Payors was triggered. Consequently, the fees are no longer payable and outstanding lease fees and accrued interest of $98,400 was recorded as a gain on recovery of payables.




Furthermore, all costs incurred of $1,061,727 relating to the Cook Inlet leases were written off on our statement of operations during fiscal year ended February 28, 2009. During fiscal year ended February 28, 2011, we failed to repay the Payors and the assignment of the related leases to the Payors was triggered. Consequently, outstanding lease fees and accrued interest of $26,743 was recorded as a gain on write off of amounts payable.




ANGLESEY, NORTH SEA, UNITED KINGDOM




On July, 31, 2007, through our wholly owned subsidiary, Fox Energy Exploration Limited, we acquired a total of 33.33% interests in a United Kingdom petroleum production license under a farm-in agreement dated June 8, 2007 (the “Farm-In Agreement”) with Granby Enterprises Limited and Atlantic Petroleum UK Limited. The license P1211 covers blocks 14/9a and 14/14b located in the UK North Sea (the “License”). Under the terms and provisions of the Farm-In Agreement, and in consideration for the farm-in interest, we agreed to fund 100% of the high resolution 2D seismic survey and pseudo 3D processing over the License and our 33.33% share of the License budget costs from June 1, 2007. In addition to the acquisition of the 33.33% interest in the License, we obtained an exclusive, non-transferable option to acquire an additional 26.67% interest in the License. We declined to exercise the option.




Pursuant to the Farm-In Agreement, we paid more than $2,000,000 cost for the hi-density 2D seismic survey over the Anglesey prospect located in the License. We acquired the seismic data on the Anglesey prospect and further to analysis of all relevant data by the parties to the agreement, it was decided that economic viability of the project could not be proven, and we relinquished the License on February 1, 2009.




During fiscal year ended February 28, 2011, we returned the License to the United Kingdom government and consequently all costs incurred of $2,512,856 were written-off on the statement of operations during fiscal year ended February 28, 2011.




SPEARS GAS WELL, TEXAS




On October 9, 2007, we entered into a subscription agreement (the “Subscription Agreement”) with Trius Energy LLC (“Trius Energy”), pursuant to which we acquired a 22.5% joint venture interest in a gas well called the Spears Gas Unit 2, Well #1 in the Gomez Field, Pecos County, Texas in consideration for $500,000. The joint venture consists of Trius Energy’s 72.75% working interest in the Spears Gas Unit 2, Well #1 and was formed to reopen the gas well. Drilling activities commenced in November 2007 for the reworking of the gas well and initial test production from the gas well took place in early January 2008. The well has been dormant since then and is still shut in. Trius Energy is unable to finance the well further and is currently seeking additional finance/partners to continue works.




5





Therefore, as of the date of this Annual Report, the Spears Gas Unit 2, Well #1 is shut-in awaiting further financing.




BOURBON, NORTH SEA, UNITED KINGDOM




Farm-In Agreement




On November 8, 2007, through our wholly owned subsidiary, Fox Energy Exploration Limited, we entered into a farm-in agreement (the “Farm-In Agreement”) with Valiant North Sea Limited (“Valiant”) and Petrofac Energy Developments Limited (“Petrofac”). Pursuant to the terms and provisions of the Farm-In Agreement, Valiant and Petrofac agreed to assign a total of 46% interest in the southern part of block 211/17 located in the United Kingdom North Sea. In consideration for the 46% interest, we agreed to pay for 89% of the cost of drilling an exploration well on the southern part of the block and perform certain related works to the drilling an exploration well. Our primary target for the exploration well was the Bourbon prospect located in the southern part of block 211/17.




Aimwell Energy Agreement




Under a separate agreement with Aimwell Energy Ltd. (“Aimwell”), we agreed to transfer a 4.6% interest out of above 46% interest to Aimwell when we acquired the 46% interest from Valiant and Petrofac. Following the transfer of the 4.6% interest to Aimwell, we agreed to pay Aimwell’s share of all costs, expenses, liabilities, and obligations arising in respect of the operations on the southern part of block 211/17 until a field development plan is formally approved by the UK Secretary of State responsible for such matters, for the development of a discovery of petroleum in the block. Thereafter, we and Aimwell each agreed each to be responsible for its respective share of costs. Michael Rose and Robert Frost, who were our directors from May 5, 2008 to April 2, 2009, are the beneficial owners and directors of Aimwell.




Senergy Limited Letter of Commitment




On April 15, 2008, we signed a letter of commitment (the “Letter of Commitment”) with Senergy Limited, an international integrated oil services company (“Senergy”), to utilize the Byford Dolphin semi-submersible drilling rig to drill a well on our Bourbon prospect. On May 20, 2008, we signed a new Letter of Commitment with Senergy, which was countersigned by Senergy on May 21, 2008. We agreed to commit to the use of a drilling rig commencing no earlier than October 1, 2008 for a total rig cost of $8,910,000. We also committed to enter into a well project management and integrated services contract for the management of a well program on the rig. We are also obligated to pay a fee of $1.75% of the operating rig rate, for the duration of the use of the rig, if we use the rig, but not the integrated project management services of Senergy. We also committed to enter into a side letter agreement with Senergy and its other clients who will be using the rig to share any mobilization and demobilization or other costs that can be reasonably and equitably be shared on a pro-rata basis (based on days the rig is used).




On November 19, 2008, Blackhawk Investments Limited, a party related to Carbon Energy, agreed in a written commitment to irrevocably underwrite our commitment to Senergy in respect of all costs related to the drilling of the 211/17 Bourbon prospect in a sum not to exceed $30,000,000. The first tranche of $15,000,000 was to be transferred to us no later than November 30, 2008 with the balance arriving no later than March 2009. To date, we have received no funding whatsoever from either Carbon Energy or Blackhawk. We are currently reviewing our legal position and any associated remedies relating to this.




Effective February 27, 2009, Valiant and Petrofac terminated the Farm-In Agreement. Consequently all costs incurred of $1,419,627 were written off on the statement of operations during fiscal year ended February 28, 2009.




6





We have incurred substantial costs (approximately $10,910,000) under this Letter of Commitment, which was entered into to fulfill our obligations under the Farm-In Agreement, and may be liable to incur a further $2,000,000 in penalties for our failure to fulfill our commitment for the use of the rig. This additional amount has been accrued in full as at February 28, 2009. We are currently negotiating a memorandum of understanding with Senergy to convert this debt into a strategic alliance between the companies whereby we will contract to have Senergy as a preferred contractor and offer Senergy a revenue stream and an option to participate in our stock. There is no guarantee that we will negotiate and agree upon a binding agreement.




GENESEO-EDWARDS, KANSAS




On June 26, 2008, we purchased three leases comprising 320 acres and located in Ellsworth County, Kansas from Hodgden & Associates. Mr. Hodgden and Dr. Knight received the sum of $80,000 from us and Hodgden & Associates sold and assigned to us an 80% net revenue interest (100% working interest) in these three leases. The landowner royalty on each of these leases was 12.5% and Hodgden & Associates retained an overriding royalty interest of 7.5% in each lease. We were expected to drill a minimum of ten wells on these leases and we were to drill and establish production on each lease before the expiration date of each lease.




We commenced a 10-well drilling program for these leases in September 2008. We drilled four wells in Ellsworth, Kansas and received net sales proceeds of approximately $90,000 from “test” production of 2,620 barrels from two of these wells between October 2008 and January 2009. Since January 2009, operations (and therefore production) have been suspended due to the need for implementation of water disposal facilities for which further funding was not available.




On October 14, 2008, through our wholly owned subsidiary, Fox Petroleum, we entered into two oil and gas lease agreements with Bryant T. Wires and Rosalie Wires. Pursuant to the agreements, we acquired two oil and gas leases for the lands located in the county of Ellsworth in Kansas in consideration of $10 per acre for total consideration of $3,200. Each of these two leases contains about 160 acres. The leases will remain in force for a term of two years and, after the first two years, as long as oil or gas are or can be produced, if any. On October 21, 2008, we registered the above two leases with the Register of Deeds of Ellsworth County of State of Kansas. We were required to deliver Mr. and Mrs. Wires, as a royalty, 1/8th of part of all oil produced and saved from the leased premises, if any, or at our option may pay them for such 1/8th royalty the market price at the wellhead for oil of like grade and gravity prevailing on the day such oil is run into the pipeline or into storage tanks. We were also required to pay Mr. and Mrs. Wires, as a royalty, 1/8th of the proceeds received by us from the sale of gas produced from the lands leased, if any. The leases are paid-up leases and may be maintained during the first two years without further payments or drilling operations.




Under threat of immediate foreclosure, we sold and assigned to TCF Oil and Gas Corp., a Florida corporation (“TCF Oil and Gas”), all of our properties located in Ellsworth County, Kansas in consideration of the payment of $100 from TCF Oil and Gas to us and of the simultaneous execution by Trafalgar of a covenant not to sue us for an in personam judgment under the obligations evidenced or secured by the various loan documents between Trafalgar and us. Therefore, as of the date of this Annual Report, we do not own any oil and gas leases in Kansas. See “Item __.




UK ONSHORE, UNITED KINGDOM




On June 3, 2008, we acquired four 10 km x 10 km UK onshore license blocks in the south of England. The UK government made available this Petroleum Exploration and Development License and awarded the blocks totaling 400 km2 to us and Aimwell in the latest round of onshore licensing. In return for the license, we will have to shoot 60 km of 2D seismic within the 6-year term of the license. Interpretation and analysis of the seismic data acquired will help further define the prospect, after which we will have an option to drill a well, or simply relinquish the license. While the tendering process for the aforementioned seismic acquisition obligation has been put on hold we expect it to resume in the second half of 2009.




7





On September 5, 2008 our subsidiary, Fox Energy Exploration Limited, entered into a letter agreement (the “Letter Agreement”) with Aimwell. Two of our former directors, Michael Rose and Robert Frost, are the beneficial owners and directors of Aimwell. The Letter Agreement related to the participation in four UK onshore license blocks in the south of England, which have been awarded to both companies by the UK government in May 2008. Pursuant to the Letter Agreement, we have a 90% interest in the four blocks and Aimwell has a 10% interest. We will pay Aimwell’s 10% share of all costs, expenses, liabilities and obligations arising in respect of operations jointly conducted by us and Aimwell in respect of each license block until a filed development plan is formally approved by the UK Secretary of State responsible for such matters, for the development of a discovery of petroleum in the blocks. Thereafter, we and Aimwell will each be responsible for its respective share of costs, with us being responsible for 90% of the costs and Aimwell responsible for its 10% share of the costs. We agreed to be named as operator of all blocks (subject to the approval by the UK government) and to negotiate and execute a joint operating agreement in respects of the licenses no later than 6 months following the award of the licenses. We agreed to pay a consideration of £10,000 per block awarded (a total of £40,000 for all four blocks) to Aimwell on receipt of an appropriate invoice from Aimwell to cover past technical costs and an initial 3 months technical management of the blocks by Aimwell.




25th ROUND LICENSE BLOCKS 13/17 and 210/20e, UNITED KINGDOM




On November 12, 2008 we were formally notified by the UK Department of Energy and Climate Change of our success in the 25th Seaward Licensing Round Awards, the rights to explore and develop the block 13/17 concession in the North Sea by the UK government. License obligations were to obtain 3D seismic over the block and to carry out geological and seismic modeling before firming up a drilling location. We would have had four years in which to drill or drop the license.




On September 5, 2008 our subsidiary, Fox Energy Exploration Limited, entered into another letter agreement (the “Aimwell Letter Agreement”) with Aimwell relating to the participation in an application made for blocks 13/17 & 210/20e. Pursuant to the Aimwell Letter Agreement, we would have had a 90% interest in the blocks and Aimwell would have had a 10% interest. We would have paid Aimwell’s 10% share of all costs, expenses, liabilities and obligations arising in respect of operations jointly conducted by us and Aimwell in respect of each license block until a field development plan is formally approved by the UK Secretary of State responsible for such matters, for the development of a discovery of petroleum in the blocks. Thereafter, we and Aimwell each would be responsible for its respective share of costs, with us being responsible for 90% of the costs and Aimwell responsible for its 10% share of the costs. We agreed to be named as operator of all blocks (subject to the approval by the UK government) and to negotiate and execute a joint operating agreement in respects of the licenses no later than six months following the award of the licenses. We agreed to pay a consideration of £32,000 to Aimwell for preparation of the application documentation for the blocks. We also agreed to pay a further consideration of £50,000 to Aimwell per each block awarded to both companies by the UK government to cover an initial three months technical management of each block by Aimwell.




On May 1, 2009, we received notification from the UK Department of Energy and Climate Change that the offer of this license in the 25th round had been withdrawn due to the recognized failure of the subscription agreement and our inability to show real access to proper funding or any material change in the circumstances relating to our having adequate funding arrangements in place to perform the work programme attached to the license application. We are reviewing this withdrawal and we expect to appeal this decision based upon the understanding that a one year period was permitted under the award to procure such “adequate funding arrangements”. There is no guarantee that such appeal will be successful.




8





As of the date of this Annual Report, we intend to continue our efforts to fund the drilling program in the southern part of block 211/17. Should these efforts be successful, we intend to recommence discussions with Valiant and Petrofac with a view to putting in place a new agreement. There is no guarantee that such efforts will be successful and, if successful, that such a new agreement will be put in place.




Alaska Oil & Gas Resources Limited




On November 5, 2008, we entered into an purchase agreement (the “Purchase Agreement”) with Carbon Energy Inc. (“Carbon Energy”) to purchase shares in Alaska Oil & Gas Resources Limited (“Alaska Oil & Gas”) from Carbon Energy. Pursuant to the Purchase Agreement, we agreed to acquire 100% of the total issued and outstanding shares of Alaska Oil & Gas from Carbon Energy in consideration for $57,500,000, $250,000 of which was to be paid in cash and the remainder by the issuance of 57,250,000 shares of our common stock at a deemed price of $1.00 per share. In addition, Carbon Energy agreed to procure the directors of Alaska Oil & Gas to appoint Richard Moore (our prior chairman, president, chief executive officer and director) as director and another party as director and as secretary of Alaska Oil & Gas. On the same day, Mr. Moore and William MacNee (our prior chief operating officer and director) were appointed as directors of Alaska Oil & Gas.




On November 28, 2008, we entered into an amendment to the Purchase Agreement with Carbon Energy relating to purchase of Alaska Oil & Gas whereby it was agreed that the consideration to be paid pursuant to the amended Purchase Agreement was varied such that the consideration would amount to $57,500,000, payable by the issuance of 2,000,000 shares of our common stock within three business days of November 2008 and 55,500,000 shares on completion of the transaction, as described in the Purchase Agreement for the purchase of Alaska Oil & Gas, with all shares having a deemed price of $1.00 per share. On December 2, 2008, we issued 2,000,000 shares of our common stock to Carbon Energy pursuant to the terms of the amended Purchase Agreement.




On December 3, 2008, we also entered into a letter agreement (the “Letter Agreement”) with Carbon Energy whereby Carbon Energy agreed to return the 2,000,000 shares of our common stock to us upon demand unless certain conditions are fulfilled or waived. The conditions were, among others, that Carbon Energy must have completed in full the subscription agreement dated November 5, 2008 except that the first $20,000,000 must be paid to us on or before December 7, 2008 and that Carbon Energy must have sold to us Alaska Oil & Gas which must own North Alexander, Kitchen and East Kitchen oil and gas leases pursuant to the Purchase Agreement relating to the purchase of Alaska Oil & Gas.




To date, Carbon Energy has neither delivered on any part of the above transactions nor has it been able to demonstrate any ability to amend or extend the above transactions to our satisfaction. Therefore, having given due consideration to the above mentioned in light of market conditions and having discussed with Carbon Energy its financial capabilities, we are of the view that it is highly unlikely that Carbon Energy can fulfill any of the above mentioned transaction demands and as such we feel obliged to terminate all arrangements with Carbon Energy forthwith. This termination also annulled the appointments of Richard Moore and William MacNee as directors of Alaska Oil and Gas.




There is an unsigned version of an agreement dated April 15, 2009 between us and Carbon Energy relating to cancelling the original sale and purchase of shares in Alaska Oil & Gas, which was dated November 5, 2008 and the amendments to the Purchase Agreement. We only possess an unsigned version of the agreement dated April 15, 2009 and it remains unclear as to whether it was ever signed by both parties. We have taken steps to cancel all of the shares issued to Carbon Energy and have notified out transfer agent and Carbon Energy. As of the date of this Annual Report, the shares are not yet cancelled.




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EMPLOYEES




We have zero full-time employees. We have two executive officer, William Lieberman, who serves as our President/Chief Executive Officer and James Molloy Treasurer/Chief Financial Officer. We periodically hire independent contractors to execute our acquisition, exploration and development, if any, activities. We may hire additional employees when circumstances warrant.




GOVERNMENT REGULATION




The production and sale of oil and gas are subject to various federal, state and local governmental regulations, which may be changed from time to time in response to economic or political conditions and can have a significant impact upon overall operations. Matters subject to regulation include discharge permits for drilling operations, drilling bonds, reports concerning operations, the spacing of wells, unitization and pooling of properties, taxation, abandonment and restoration and environmental protection. These laws and regulations are under constant review for amendment or expansion. From time to time, regulatory agencies have imposed price controls and limitations on production by restricting the rate of flow of oil and gas wells below actual production capacity in order to conserve supplies of oil and gas. Changes in these regulations could require us to expend significant resources to comply with new laws or regulations or changes to current requirements and could have a material adverse effect on our business operations.




If we proceed with the development of our current and future properties, we anticipate that we will be subject to increased governmental regulation. Matters subject to regulation include discharge permits for drilling operations, drilling and abandonment bonds, reports concerning operations, the spacing of wells, and pooling of properties and taxation. From time to time, regulatory agencies have imposed price controls and limitations on production by restricting the rate of flow of oil and gas wells below actual production capacity in order to conserve supplies of oil and gas. The production, handling, storage, transportation and disposal of oil and gas, by-products thereof, and other substances and materials produced or used in connection with oil and gas operations are also subject to regulation under federal, state, local and foreign laws and regulations relating primarily to the protection of human health and the environment. As we are still in the development stage, we do not anticipate that we will incur any expenditures related to complying with such laws, or for remediation of existing environmental contamination in the foreseeable future. The requirements imposed by such laws and regulations are frequently changed and subject to interpretation,




REGULATION OF OIL AND NATURAL GAS PRODUCTION




Our oil and natural gas exploration, production and future related operations are subject to extensive rules and regulations promulgated by federal, state and local authorities and agencies. Failure to comply with such rules and regulations can result in substantial penalties. The regulatory burden on the oil and natural gas industry increases our cost of doing business and affects our profitability. Although we believe we are in substantial compliance with all applicable laws and regulations, because such rules and regulations are frequently amended or reinterpreted, we are unable to predict the future cost or impact of complying with such laws.




Many states require permits for drilling operations, drilling bonds and reports concerning operations and impose other requirements relating to the exploration and production of oil and natural gas. Such states also have statutes or regulations addressing conservation matters, including provisions for the unitization or pooling of oil and natural gas properties, the establishment of maximum rates of production from wells, and the regulation of spacing, plugging and abandonment of such wells.




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FEDERAL REGULATION OF NATURAL GAS




The Federal Energy Regulatory Commission ("FERC") regulates interstate natural gas transportation rates and service conditions, which affect the marketing of natural gas produced by us, as well as the revenues received by us for sales of such production. Since the mid-1980's, FERC has issued a series of orders that have significantly altered the marketing and transportation of natural gas. These orders mandate a fundamental restructuring of interstate pipeline sales and transportation service, including the unbundling by interstate pipelines of the sale, transportation, storage and other components of the city-gate sales services such pipelines previously performed. One of FERC's purposes in issuing the orders was to increase competition within all phases of the natural gas industry. Certain aspects of these orders may be modified as a result of various appeals and related proceedings and it is difficult to predict the ultimate impact of the orders on us and others. Generally, the orders eliminate or substantially reduce the interstate pipelines' traditional role as wholesalers of natural gas in favor of providing only storage and transportation service, and have substantially increased competition and volatility in natural gas markets.




The price, which we may receive for the sale of oil and natural gas liquids, would be affected by the cost of transporting products to markets. FERC has implemented regulations establishing an indexing system for transportation rates for oil pipelines, which, generally, would index such rates to inflation, subject to certain conditions and limitations. We are not able to predict with certainty the effect, if any, of these regulations on any future operations. However, the regulations may increase transportation costs or reduce wellhead prices for oil and natural gas liquids.




ENVIRONMENTAL MATTERS




Our operations and properties will be subject to extensive and changing federal, state and local laws and regulations relating to environmental protection, including the generation, storage, handling, emission, transportation and discharge of materials into the environment, and relating to safety and health. The recent trend in environmental legislation and regulation generally is toward stricter standards, and this trend will likely continue. These laws and regulations may (i) require the acquisition of a permit or other authorization before construction or drilling commences and for certain other activities; (ii) limit or prohibit construction, drilling and other activities on certain lands lying within wilderness and other protected areas; and (iii) impose substantial liabilities for pollution resulting from our operations. The permits required for several of our operations are subject to revocation, modification and renewal by issuing authorities. Governmental authorities have the power to enforce their regulations, and violations are subject to fines or injunctions, or both. In the opinion of management, we are in substantial compliance with current applicable environmental laws and regulations, and we have no material commitments for capital expenditures to comply with existing environmental requirements. Nevertheless, changes in existing environmental laws and regulations or in interpretations thereof could have a significant impact on our business operations, as well as the oil and natural gas industry in general.




The Comprehensive Environmental, Response, Compensation, and Liability Act ("CERCL ") and comparable state statutes impose strict, joint and several liabilities on owners and operators of sites and on persons who disposed of or arranged for the disposal of "hazardous substances" found at such sites. It is not uncommon for the neighboring landowners and other third parties to file claims for personal injury and property damage allegedly caused by the hazardous substances released into the environment. The Federal Resource Conservation and Recovery Act ("RCRA") and comparable state statutes govern the disposal of "solid waste" and "hazardous waste" and authorize the imposition of substantial fines and penalties for noncompliance. Although CERCLA currently excludes petroleum from its definition of "hazardous substance," state laws affecting our operations impose clean-up liability relating to petroleum and petroleum related products. In addition, although RCRA classifies certain oil field wastes as "non-hazardous," such exploration and production wastes could be reclassified as a hazardous wastes, thereby making such wastes subject to more stringent handling and disposal requirements.




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We intend to acquire leasehold interests in properties that for many years have produced oil and natural gas. Although the previous owners of these interests may have used operating and disposal practices that were standard in the industry at the time, hydrocarbons or other wastes may have been disposed of or released on or under the properties. In addition, some of our properties may be operated in the future by third parties over which we have no control. Notwithstanding our lack of control over properties operated by others, the failure of the operator to comply with applicable environmental regulations may, in certain circumstances, adversely impact our business operations.




The National Environmental Policy Act ("NEPA") is applicable to many of our planned activities and operations. NEPA is a broad procedural statute intended to ensure that federal agencies consider the environmental impact of their actions by requiring such agencies to prepare environmental impact statements ("EIS") in connection with all federal activities that significantly affect the environment. Although NEPA is a procedural statute only applicable to the federal government, a portion of our properties may be acreage located on federal land. The Bureau of Land Management's issuance of drilling permits and the Secretary of the Interior's approval of plans of operation and lease agreements all constitute federal action within the scope of NEPA. Consequently, unless the responsible agency determines that our drilling activities will not materially impact the environment, the responsible agency will be required to prepare an EIS in conjunction with the issuance of any permit or approval.




The Endangered Species Act ("ESA") seeks to ensure that activities do not jeopardize endangered or threatened animals, fish and plant species, nor destroy or modify the critical habitat of such species. Under ESA, exploration and production operation, as well as actions by federal agencies, may not significantly impair or jeopardize the species or their habitat. ESA provides for criminal penalties for willful violations of the Act. Other statutes that provide protection to animal and plant species and that may apply to our operations include, but are not necessarily limited to, the Fish and Wildlife Coordination Act, the Fishery Conservation and Management Act, the Migratory Bird Treaty Act and the National Historic Preservation Act. Although we believe that our operations are in substantial compliance with such statutes, any change in these statutes or any reclassification of a species as endangered could subject us to significant expense to modify our operations or could force to discontinue certain operations altogether.




Management believes that we are in substantial compliance with current applicable environmental laws and regulations.




COMPETITION




We operate in a highly competitive industry, competing with major oil and gas companies, independent producers and institutional and individual investors, which are actively seeking oil and gas properties throughout the world together with the equipment, labor and materials required to operate properties. Most of our competitors have financial resources, staff and facilities substantially greater than ours. The principal area of competition is encountered in the financial ability to acquire good acreage positions and drill wells to explore for oil and gas, then, if warranted, drill production wells and install production equipment. Competition for the acquisition of oil and gas wells is intense with many oil and gas properties and/or leases or concessions available in a competitive bidding process in which we may lack technological information or expertise available to other bidders. Therefore, we may not be successful in acquiring and developing profitable properties in the face of this competition. No assurance can be given that a sufficient number of suitable oil and gas wells will be available for acquisition and development.




ITEM 1A. RISK FACTORS




An investment in our common stock involves a number of very significant risks. You should carefully consider the following risks and uncertainties in addition to other information in evaluating our company and its business before purchasing shares of our common stock. Our business, operating results and financial condition could be seriously harmed due to any of the following risks. The risks described below are all of the material risks that we are currently aware of that are facing our company. Additional risks not presently known to us may also impair our business operations. You could lose all or part of your investment due to any of these risks.




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RISKS RELATED TO OUR BUSINESS AND THE OIL AND GAS INDUSTRY




Our financial condition is precarious and we have no access to capital to repay our debt or fund our current or ongoing operations. Unless we can secure additional capital and renegotiate the terms of our outstanding debts, we may be required to discontinue our operations at any time.




As of February 28, 2011, we had cash of $-0- and had a working capital deficit of $23,717,040. We do not have any credit available to us nor have we identified other sources of capital and it is unlikely, given our current financial condition and the ongoing global financial crisis, that we will secure any additional credit or capital. Unless we can secure additional capital and renegotiate the terms of our outstanding debts, we may be required to discontinue our operations at any time. If we discontinue our operations, our stockholders will lose the entire amount of their investments in our company.




Our independent auditors have expressed substantial doubt about our ability to continue as a going concern, which may hinder our ability to obtain future financing.




We incurred net losses of $7,781,827 and $32,209,932 for the fiscal years ended February 28, 2011 and February 28, 2011, respectively. At February 28, 2011, we had accumulated a deficit of $42,739,253 and had a working capital deficit of $23,717,040.




Because we are in the development stage, have not yet achieved profitable operations and are dependent on our ability to raise capital from stockholders or other sources to meet our obligations and repay our liabilities arising from normal business operations when they come due, in their report on our audited financial statements for the years ended February 28, 2011 and February 28, 2009, our independent auditors included an explanatory paragraph regarding concerns about our ability to continue as a going concern. Our financial statements contain additional note disclosure describing the circumstances that led to this disclosure by our independent auditors.




If we are required for any reason to repay our outstanding secured convertible debentures or any other indebtedness, we would be required to deplete our working capital, if available, or raise additional funds. Our failure to repay the convertible debentures or any other indebtedness, if required, could require the sale of substantial assets of our company in addition to legal action against our company.




If we are required to repay the secured convertible debentures or any other indebtedness for any reason, we would be required to use our limited working capital and raise additional funds. If we are unable to repay the secured convertible debentures or any other indebtedness when required, we may be required to sell substantial assets of our company. In addition, the lenders could commence legal action against our company and foreclose on all of our assets to recover the amounts due. Any such sale or legal action would require our company to curtail or possibly cease our operations.




We have had a history of losses and no revenue to date, which trend may continue and may negatively impact our ability to achieve our business objectives.




We have experienced net losses since inception, and expect to continue to incur substantial losses for the foreseeable future. To date, we have not generated any significant revenues from our operations. We will not be able to generate significant revenues in the immediate future. As a result, our management expects the business to continue to experience negative cash flow for the foreseeable future and cannot predict when, if ever, our business might become profitable. We need to raise additional funds, and such funds may not be available on commercially acceptable terms, if at all. If we are unable to raise funds on acceptable terms, we may not be able to execute our business plan, take advantage of future opportunities, or respond to competitive pressures or unanticipated requirements. This may seriously harm our business, financial condition and results of operations.




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We are a development stage company with a limited operating history, which may hinder our ability to successfully meet our objectives.




We are a development stage company with only a limited operating history upon which to base an evaluation of our current business and future prospects. We have only begun engaging in the oil and gas exploration and development business since February 2007 and our company does not have an established history of locating and developing properties that have oil and gas reserves. As a result, the revenue and income potential of our business is unproven. In addition, because of our limited operating history, we have limited insight into trends that may emerge and affect our business. Errors may be made in predicting and reacting to relevant business trends and we will be subject to the risks, uncertainties and difficulties frequently encountered by early-stage companies in evolving markets. We may not be able to successfully address any or all of these risks and uncertainties. Failure to adequately do so could cause our business, results of operations and financial condition to suffer.




Market conditions or operation impediments may hinder our access to oil and gas markets or delay our potential production.




The marketability of potential production from our properties depends in part upon the availability, proximity and capacity of pipelines, natural gas gathering systems and processing facilities. This dependence is heightened where this infrastructure is less developed. Therefore, even if drilling results are positive in certain areas of our oil and gas properties, a new gathering system may need to be built to handle the potential volume of oil and gas produced. We might be required to shut in wells, at least temporarily, for lack of a market or because of the inadequacy or unavailability of transportation facilities. If that were to occur, we would be unable to realize revenue from those wells until arrangements were made to deliver production to market.




Even if we are able to establish any oil or gas reserves on our properties, our ability to produce and market oil and gas is affected and also may be harmed by: (i) inadequate pipeline transmission facilities or carrying capacity; (ii) government regulation of natural gas and oil production; (iii) government transportation, tax and energy policies; (iv) changes in supply and demand; and (v) general economic conditions.




Our future performance is dependent upon our ability to identify, acquire and develop oil and gas properties, the failure of which could result in under use of capital and losses.




Our future performance depends upon our ability to identify, acquire and develop oil and gas reserves that are economically recoverable. Our success will depend upon our ability to acquire working and revenue interests in properties upon which oil and gas reserves are ultimately discovered in commercial quantities, and our ability to develop prospects that contain proven oil and gas reserves to the point of production. Without successful acquisition and exploration activities, we will not be able to develop oil and gas reserves or generate revenues. We cannot provide you with any assurance that we will be able to identify and acquire oil and gas reserves on acceptable terms, or that oil and gas deposits will be discovered in sufficient quantities to enable us to recover our exploration and development costs or sustain our business.




The successful acquisition and development of oil and gas properties requires an assessment of recoverable reserves, future oil and gas prices and operating costs, potential environmental and other liabilities, and other factors. Such assessments are necessarily inexact and their accuracy inherently uncertain. In addition, no assurance can be given that our exploration and development activities will result in the discovery of any reserves.




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We have a very small management team and the loss of any member of our team may prevent us from implementing our business plan in a timely manner.




We currently have one executive officer and a limited number of full time employees and consultants upon whom our success largely depends. We do not maintain key person life insurance policies on our executive officers or consultants, the loss of which could seriously harm our business, financial condition and results of operations. In such an event, we may not be able to recruit personnel to replace our executive officers or consultants in a timely manner, or at all, on acceptable terms.




If we are unable to successfully recruit qualified managerial and field personnel having experience in oil and gas exploration, we may not be able to continue our operations.




In order to successfully implement and manage our business plan, we will depend upon, among other things, successfully recruiting qualified managerial and field personnel having experience in the oil and gas exploration business. Competition for qualified individuals is intense. We may not be able to find, attract and retain qualified personnel on acceptable terms. If we are unable to find, attract and retain qualified personnel with technical expertise, our business operations could suffer.




We will have substantial capital requirements that, if not met, may hinder our growth and operations.




Our future growth depends on our ability to make large capital expenditures for the exploration and development of our natural gas and oil properties. Future cash flows and the availability of financing will be subject to a number of variables, such as: (i) the success of our planned projects; (ii) success in locating and producing reserves; and (iii) prices of natural gas and oil.




Financing might not be available in the future, or we might not be able to obtain necessary financing on acceptable terms, if at all. If sufficient capital resources are not available, we might be forced to curtail our drilling and other activities or be forced to sell some assets on an untimely or unfavorable basis, which would have an adverse affect on our business, financial condition and results of operations.




If we obtain additional financing, our existing stockholders may suffer substantial dilution or we may not have sufficient funds to pay the interest on our current or future debt.




Additional financing sources will be required in the future to fund developmental and exploratory drilling. Issuing equity securities to satisfy our financing requirements could cause substantial dilution to our existing stockholders.




Additional debt financing could lead to: (i) a substantial portion of operating cash flow being dedicated to the payment of principal and interest; (ii) being more vulnerable to competitive pressures and economic downturns; and (iii) restrictions on our operations.




If we incur indebtedness, our ability to meet our debt obligations and reduce our level of indebtedness depends on future performance. General economic conditions, oil and gas prices and financial, business and other factors affect our operations and future performance. Many of these factors are beyond our control. We cannot assure you that we will be able to generate sufficient cash flow to pay the interest on our current or future debt or that future working capital, borrowings or equity financing will be available to pay or refinance such debt. Factors that will affect our ability to raise cash through an offering of our capital stock or a refinancing of our debt include financial market conditions, the value of our assets and performance at the time we need capital. We cannot assure you that we will have sufficient funds to make such payments. If we do not have sufficient funds and are otherwise unable to negotiate renewals of our borrowings or arrange additional financing, we might have to sell significant assets. Any such sale could have a material adverse effect on our business and financial results.




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We may not be able to determine reserve potential or identify liabilities associated with our existing properties and/or other future properties. We may also not be able to obtain protection from vendors against possible liabilities, which could cause us to incur losses.




Although we have reviewed and evaluated our existing properties, such review and evaluation might not necessarily reveal all existing or potential problems. This is also true for any future acquisitions made by us. Inspections may not always be performed on every well, and environmental problems, such as groundwater contamination, are not necessarily observable even when an inspection is undertaken. Even when problems are identified, a vendor may be unwilling or unable to provide effective contractual protection against all or part of those problems, and we may assume environmental and other risks and liabilities in connection with the acquired properties.




If we or our operators fail to maintain adequate insurance, our business could be materially and adversely affected.




Our operations are subject to risks inherent in the oil and gas industry, such as blowouts, cratering, explosions, uncontrollable flows of oil, gas or well fluids, fires, pollution, earthquakes and other environmental risks. These risks could result in substantial losses due to injury and loss of life, severe damage to and destruction of property and equipment, pollution and other environmental damage, and suspension of operations. We could be liable for environmental damages caused by previous property owners. As a result, substantial liabilities to third parties or governmental entities may be incurred, the payment of which could have a material adverse effect on our financial condition and results of operations.




Any prospective drilling contractor or operator which we hire will be required to maintain insurance of various types to cover our operations with policy limits and retention liability customary in the industry. Therefore, we do not plan to acquire our own insurance coverage for such prospects. The occurrence of a significant adverse event on such prospects that is not fully covered by insurance could result in the loss of all or part of our investment in a particular prospect which could have a material adverse effect on our financial condition and results of operations.




The oil and gas industry is highly competitive, and we may not have sufficient resources to compete effectively.




The oil and gas industry is highly competitive. We compete with oil and natural gas companies and other individual producers and operators, many of which have longer operating histories and substantially greater financial and other resources than we do, as well as companies in other industries supplying energy, fuel and other needs to consumers. Our larger competitors, by reason of their size and relative financial strength, can more easily access capital markets than we can and may enjoy a competitive advantage in the recruitment of qualified personnel. They may be able to absorb the burden of any changes in laws and regulation in the jurisdictions in which we do business and handle longer periods of reduced prices for oil and gas more easily than we can. Our competitors may be able to pay more for oil and gas leases and properties and may be able to define, evaluate, bid for and purchase a greater number of leases and properties than we can. Further, these companies may enjoy technological advantages and may be able to implement new technologies more rapidly than we can. Our ability to acquire additional properties in the future will depend upon our ability to conduct efficient operations, evaluate and select suitable properties, implement advanced technologies and consummate transactions in a highly competitive environment.




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Exploration and production activities are subject to certain environmental regulations which may prevent or delay the commencement or continuance of our operations.




In general, our exploration and production activities are subject to certain federal, state, local, and foreign laws and regulations relating to environmental quality and pollution control. Such laws and regulations increase the costs of these activities and may prevent or delay the commencement or continuance of a given operation. Specifically, we are subject to legislation regarding emissions into the environment, water discharges and storage and disposition of hazardous wastes. In addition, legislation has been enacted which requires well and facility sites to be abandoned and reclaimed to the satisfaction of state authorities. However, such laws and regulations are frequently changed and any such changes may have material adverse effects on our activities. We are unable to predict the ultimate cost of compliance with such laws and regulations. Generally, environmental requirements do not appear to affect us any differently or to any greater or lesser extent than other companies in the industry. To date we have not been required to spend any material amount on compliance with environmental regulations. However, we may be required to do so in future and this may affect our ability to expand or maintain our operations.




Any change to government regulation/administrative practices may have a negative impact on our ability to operate and our profitability.




The business of oil and gas exploration and development is subject to substantial regulation under federal, state, local and foreign laws relating to the exploration for, and the development, upgrading, marketing, pricing, taxation, and transportation of oil and gas and related products and other matters. Amendments to current laws and regulations governing operations and activities of oil and gas exploration and development operations could have a material adverse impact on our business. In addition, there can be no assurance that income tax laws, royalty regulations and government incentive programs related to our oil and gas properties and the oil and gas industry generally, will not be changed in a manner which may adversely affect our progress and cause delays, inability to explore and develop or abandonment of these interests.




Permits, leases, licenses, and approvals are required from a variety of regulatory authorities at various stages of exploration and development. There can be no assurance that the various government permits, leases, licenses and approvals sought will be granted in respect of our activities or, if granted, will not be cancelled or will be renewed upon expiry. There is no assurance that such permits, leases, licenses, and approvals will not contain terms and provisions which may adversely affect our exploration and development activities.




Shortages of rigs, equipment, supplies and personnel could delay or otherwise adversely affect our cost of operations or our ability to operate according to our business plans.




If drilling activity increases worldwide, a shortage of drilling and completion rigs, field equipment and qualified personnel could develop. These costs have recently increased sharply and could continue to do so. The demand for and wage rates of qualified drilling rig crews generally rise in response to the increasing number of active rigs in service and could increase sharply in the event of a shortage. Shortages of drilling and completion rigs, field equipment or qualified personnel could delay, restrict or curtail our exploration and development operations, which could in turn harm our operating results.




The geographic concentration of certain of our properties may subject us to an increased risk of loss of revenue or curtailment of production from factors affecting those areas.




The geographic concentration of certain of our leasehold interests may mean that our properties could be affected by the same event should the regions experience: (i) severe weather; (ii) delays or decreases in production, the availability of equipment, facilities or services; (iii) delays or decreases in the availability of capacity to transport, gather or process production; or (iv) changes in the regulatory environment.




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The oil and gas exploration and production industry is historically a cyclical industry and market fluctuations in the prices of oil and gas could adversely affect our business.




Prices for oil and gas tend to fluctuate significantly in response to factors beyond our control. These factors include: (i) weather conditions in the United States and wherever our property interests are located; (ii) economic conditions, including demand for petroleum-based products, in the United States and the rest of the world; (iii) actions by OPEC, the Organization of Petroleum Exporting Countries; (iv) political instability in the Middle East and other major oil and gas producing regions; (v) governmental regulations, both domestic and foreign; (vi) domestic and foreign tax policy; (vii) the pace adopted by foreign governments for the exploration, development, and production of their national reserves; (viii) the price of foreign imports of oil and gas; (ix) the cost of exploring for, producing and delivering oil and gas; (x) the discovery rate of new oil and gas reserves; (xi) the rate of decline of existing and new oil and gas reserves; (xii) available pipeline and other oil and gas transportation capacity; (xiii) the ability of oil and gas companies to raise capital; (xiv) the overall supply and demand for oil and gas; and (xv) the availability of alternate fuel sources.




Changes in commodity prices may significantly affect our capital resources, liquidity and expected operating results. Price changes will directly affect revenues and can indirectly impact expected production by changing the amount of funds available to reinvest in exploration and development activities. Reductions in oil and gas prices not only reduce revenues and profits, but could also reduce the quantities of reserves that are commercially recoverable. Significant declines in prices could result in non-cash charges to earnings due to impairment.




Changes in commodity prices may also significantly affect our ability to estimate the value of producing properties for acquisition and divestiture and often cause disruption in the market for oil and gas producing properties, as buyers and sellers have difficulty agreeing on the value of the properties. Price volatility also makes it difficult to budget for and project the return on acquisitions and the development and exploitation of projects. We expect that commodity prices will continue to fluctuate significantly in the future.




Exploratory drilling involves many risks that are outside our control which may result in a material adverse effect on our business, financial condition or results of operations.




The business of exploring for and producing oil and gas involves a substantial risk of investment loss. Drilling oil and gas wells involves the risk that the wells may be unproductive or that, although productive, the wells may not produce oil or gas in economic quantities. Other hazards, such as unusual or unexpected geological formations, pressures, fires, blowouts, power outages, sour gas leakage, loss of circulation of drilling fluids or other conditions may substantially delay or prevent completion of any well. Adverse weather conditions can also hinder drilling operations. A productive well may become uneconomic if water or other deleterious substances are encountered that impair or prevent the production of oil or gas from the well. In addition, production from any well may be unmarketable if it is impregnated with water or other deleterious substances. There can be no assurance that oil and gas will be produced from the properties in which we have interests.




We are dependent upon the efforts of various third parties that we do not control and, as a result, we may not be able to control the timing of development efforts, associated costs, or the rate of production of reserves (if any).




The success of our business depends upon the efforts of various third parties that we do not control. At present, we act as the operator for several of our projects, but we may also need to contract many service providers such as rig and drilling contractors. As a result, we may have limited ability to exercise influence over the operations of the properties or their associated costs. Our dependence on the operator and, where applicable, other working interest owners for these projects and our limited ability to influence operations and associated costs could prevent the realization of our targeted returns on capital in drilling or acquisition activities. The success and timing of development and exploitation activities on properties operated by others depend upon a number of factors that will be largely outside of our control, including: (i) the timing and amount of capital expenditures; (ii) the operator’s expertise and financial resources; (iii) approval of other participants in drilling wells; (iv) selection of technology; (v) the rate of production of the reserves; and (vi) the availability of suitable drilling rigs, drilling equipment, production and transportation infrastructure, and qualified operating personnel.




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We will rely upon various companies to provide us with technical assistance and services. We will also rely upon the services of geologists, geophysicists, chemists, engineers and other scientists to explore and analyze oil and gas prospects to determine a method in which the oil and gas prospects may be developed in a cost-effective manner. Although our management has relationships with a number of third-party service providers, we cannot assure you that we will be able to continue to rely on such persons. If any of these relationships with third-party service providers are terminated or are unavailable on commercially acceptable terms, we may not be able to execute our business plan.




We may be unable to retain our leases or licenses and working interests in our leases or licenses, which would result in significant financial losses.




In general, our properties are held under oil and gas leases or licenses. If we fail to meet the specific requirements of each lease or license, such lease or license may terminate or expire. We cannot assure you that any of the obligations required to maintain each lease or license will be met. The termination or expiration of our leases or licenses will harm our business. Our property interests will terminate unless we fulfill certain obligations under the terms of our leases or licenses and other agreements related to such properties. If we are unable to satisfy these conditions on a timely basis, we may lose our rights in these properties. The termination of our interests in these properties will harm our business. In addition, we will need significant funds to meet capital requirements for the exploration activities that we intend to conduct on our properties




Title deficiencies could render our leases worthless which could have adverse effects on our financial condition or results of operations.




The existence of a material title deficiency can render a lease worthless and can result in a large expense to our business. It is our practice in acquiring oil and gas leases or undivided interests in oil and gas leases to forgo the expense of retaining lawyers to examine the title to the oil or gas interest to be placed under lease or already placed under lease. Instead, we rely upon the judgment of oil and gas landmen who perform the field work in examining records in the appropriate governmental office before attempting to place under lease a specific oil or gas interest. We do not anticipate that we, or the person or company acting as operator of the wells located on the properties that we lease or may lease in the future, will obtain counsel to examine title to the lease until the well is about to be drilled. As a result, we may be unaware of deficiencies in the marketability of the title to the lease. Such deficiencies may render the lease worthless.




RISKS RELATING TO OUR COMMON STOCK




The trading price of our common stock on the OTC Bulletin Board will fluctuate significantly and stockholders may have difficulty reselling their shares.




As of the date of this Annual Report, our common stock trades on the Over-the-Counter Bulletin Board. There is a volatility associated with Bulletin Board securities in general and the value of your investment could decline due to the impact of any of the following factors upon the market price of our common stock: (i) disappointing results from our exploration or development efforts; (ii) failure to meet our revenue or profit goals or operating budget; (iii) decline in demand for our common stock; (iv) downward revisions in securities analysts' estimates or changes in general market conditions; (v) technological innovations by competitors or in competing technologies; (vi) lack of funding generated for operations; (vii) investor perception of our industry or our prospects; and (viii) general economic trends; and (ix) commodity price fluctuation




19





In addition, stock markets have experienced price and volume fluctuations and the market prices of securities have been highly volatile. These fluctuations are often unrelated to operating performance and may adversely affect the market price of our common stock. As a result, investors may be unable to sell their shares at a fair price and you may lose all or part of your investment.




If we fail to file our required filings with the Securities and Exchange Commission in an accurate and timely manner, our common stock may be no longer quoted on the OTC Bulletin Board. If this happens, our stockholders would have difficulty in reselling any of their shares.




If we fail to file our required filings with the Securities and Exchange Commission in an accurate and timely manner, the Financial Industry Regulatory Authority may determine that our common stock is no longer eligible for quotation on the OTC Bulletin Board and remove our common stock from the OTC Bulletin Board quotations. If this happens, then market makers would no longer be able to enter quotations for our common stock through the OTC Bulletin Board and our stockholders would have difficulty in reselling any of their shares.




A prolonged decline in the price of our common stock could affect our ability to raise further working capital and adversely impact our ability to continue operations.




A prolonged decline in the price of our common stock could reduce liquidity of our common stock and reduce our ability to raise capital. Because a significant portion of our operations have been and will be financed through the sale of equity securities, a decline in the price of our common stock could be especially detrimental to our liquidity and our operations. Such reductions may force us to reallocate funds from other planned uses and may have a significant negative effect on our business plan and operations, including our ability to continue our current operations. If our stock price declines, we can offer no assurance that we will be able to raise additional capital or generate funds from operations sufficient to meet our obligations. If we are unable to raise sufficient capital in the future, we may not be able to have the resources to continue our normal operations.




The market price for our common stock may also be affected by our ability to meet or exceed expectations of analysts or investors. Any failure to meet these expectations, even if minor, may have a material adverse effect on the market price of our common stock.




If we issue additional shares in the future, it will result in the dilution of our existing shareholders.




Our articles of incorporation authorize the issuance of up to 90,000,000 shares of common stock with a par value of $0.001 per share and we plan to increase our authorized capital from 90,000,000 shares of common stock with a par value of $0.001 to 500,000,000 shares of common stock with a par value of $0.001. Our board of directors may choose to issue some or all of such shares to acquire one or more businesses or to provide additional financing in the future. The issuance of any such shares will reduce the book value and market price of the outstanding shares of our common stock. If we issue any such additional shares, such issuance will reduce the proportionate ownership and voting power of all current shareholders. Further, such issuance may result in a change of control of our corporation.




20





Trading of our stock may be restricted by the Securities Exchange Commission’s penny stock regulations, which may limit a stockholder’s ability to buy and sell our common stock.




The Securities and Exchange Commission has adopted regulations which generally define “penny stock” to be any equity security that has a market price (as defined) less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions. Our securities are covered by the penny stock rules, which impose additional sales practice requirements on broker-dealers who sell to persons other than established customers and “accredited investors”. The term “accredited investor” refers generally to institutions with assets in excess of $5,000,000 or individuals with a net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouse. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document in a form prepared by the Securities and Exchange Commission, which provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction and monthly account statements showing the market value of each penny stock held in the customer’s account. The bid and offer quotations, and the broker-dealer and salesperson compensation information, must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing before or with the customer’s confirmation. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from these rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for the stock that is subject to these penny stock rules. Consequently, these penny stock rules may affect the ability of broker-dealers to trade our securities. We believe that the penny stock rules discourage investor interest in and limit the marketability of our common stock.




The FINRA sales practice requirements may also limit a stockholder’s ability to buy and sell our stock.




In addition to the “penny stock” rules described above, Financial Industry Regulatory Authority or FINRA has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low priced securities will not be suitable for at least some customers. The FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell our stock and have an adverse effect on the market for our shares.




Our common stock is illiquid and the price of our common stock may be negatively impacted by factors which are unrelated to our operations.




Our common stock currently trades on a limited basis on the OTC Bulletin Board. Trading of our stock through the OTC Bulletin Board is frequently thin and highly volatile. There is no assurance that a sufficient market will develop in our stock, in which case it could be difficult for stockholders to sell their stock. The market price of our common stock could fluctuate substantially due to a variety of factors, including market perception of our ability to achieve our planned growth, quarterly operating results of our competitors, trading volume in our common stock, changes in general conditions in the economy and the financial markets or other developments affecting our competitors or us. In addition, the stock market is subject to extreme price and volume fluctuations. This volatility has had a significant effect on the market price of securities issued by many companies for reasons unrelated to their operating performance and could have the same effect on our common stock.




21





Because of the early stage of development and the nature of our business, our securities are considered highly speculative.




Our securities must be considered highly speculative, generally because of the nature of our business and the early stage of our development. We are engaged in the business of identifying, acquiring, exploring and, if warranted, developing commercial reserves of oil and gas. Our properties are in the exploration stage only and are without known reserves of oil and gas. Accordingly, we have not generated any revenues nor have we realized a profit from Our operations to date and there is little likelihood that we will generate any revenues or realize any profits in the short term. Any profitability in the future from our business will be dependent upon locating and developing economic reserves of oil and gas, which itself is subject to numerous risk factors as set forth herein. Since we have not generated any revenues, we will have to raise additional monies through the sale of our equity securities or debt in order to continue our business operations.




We do not intend to pay dividends on any investment in the shares of stock.




We have never paid any cash dividends and currently do not intend to pay any dividends for the foreseeable future. To the extent that we require additional funding currently not provided for in our financing plan, our funding sources may prohibit the payment of a dividend. Because we do not intend to declare dividends, any gain on an investment in our company will need to come through an increase in the stock’s price. This may never happen and investors may lose all of their investment.




Carbon Energy and/or Trafalgar’s control may prevent our other stockholders from causing a change in the course of our operations and may affect the price of our common stock.




As long as Carbon Energy and/or Trafalgar controls more than 50% of our common stock, they will be able to elect our entire board of directors, control all matters that require a shareholder vote (such as mergers, acquisitions and other business combinations, and the future issuance of our shares) and exercise a significant amount of influence over our management and operations. Therefore, the ability of our other stockholders to cause a change in the course of our operation is eliminated. As such, the value attributable to the right to vote is limited.




RISKS RELATED TO OUR COMPANY




Our disclosure controls and procedures and internal control over financial reporting are not effective, which problem may cause our financial reporting to be unreliable and lead to misinformation being disseminated to the public.




Our management evaluated our disclosure controls and procedures as of February 28, 2011 and concluded that as of that date, our disclosure controls and procedures and our internal control over financial reporting were not effective. If such ineffective controls are not promptly corrected in the future, our ability to report quarterly and annual financial results or other information required to be disclosed on a timely and accurate basis may be adversely affected. Also such ineffective controls could cause our financial reporting to be unreliable and lead to misinformation being disseminated to the public. Investors relying upon this misinformation may make an uninformed investment decision.




Our by-laws contain provisions indemnifying our officers and directors.




Our by-laws provide the indemnification of our directors and officers to the fullest extent legally permissible under the Nevada corporate law against all expenses, liability and loss reasonably incurred or suffered by him in connection with any action, suit or proceeding. Furthermore, our by-laws provide that our board of directors may cause our company to purchase and maintain insurance for our directors and officers, and we have implemented director and officer insurance coverage.




22





Our by-laws do not contain anti-takeover provisions and thus our management and directors may change if there is a take-over.




We do not currently have a shareholder rights plan or any anti-takeover provisions in our by-laws. Without any anti-takeover provisions, there is no deterrent for a take-over. If there is a take-over, our management and directors may change.




Because most of our directors and officers are residents of other countries other than the United States, investors may find it difficult to enforce, within the United States, any judgments obtained against our directors and officers.




Most of our directors and officers are nationals and/or residents of countries other than the United States, and all or a substantial portion of such persons’ assets are located outside the United States. As a result, it may be difficult for investors to enforce within the United States any judgments obtained against our officers or directors, including judgments predicated upon the civil liability provisions of the securities laws of the United States or any state thereof.




ITEM 1B. UNRESOLVED STAFF COMMENTS




The company is currently working to deal with comments from SEC letters, February 28, 2011, March 9, 2011 and June 6, 2011.  The company expects this letters to be dealt with in the upcoming time frame quickly.




ITEM 2. PROPERTY




Our executive and head offices are located at 545 Eighth Avenue Suite 401  New York, NY. We lease our offices on a virtual basis only paying  500 per year including tax. The company's Canadian operations work out of 119 Princess Street Hamilton, Ontario Canada.




Oil and Gas Properties




We have no reserves on any of our oil and gas properties.




ITEM 3. LEGAL PROCEEDINGS




Except for claims, if any, arising out of our letter of commitment with Senergy Limited (as disclosed elsewhere in this Annual Report) and trade creditor related debt for our operations in Kansas (as disclosed elsewhere in this Annual Report), we know of no material, existing or pending legal proceedings to which we are a party or of which any of our property is the subject.




Management is not aware of any other legal proceedings contemplated by any governmental authority or any other party involving us or our properties. As of the date of this Annual Report, no director, officer or affiliate is (i) a party adverse to us in any legal proceeding, or (ii) has an adverse interest to us in any legal proceedings. Management is not aware of any other legal proceedings pending or that have been threatened against us or our properties.




ITEM 4.  REMOVED AND RESERVED





23





PART II





ITEM 5. MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES





MARKET FOR COMMON EQUITY




Our common stock is quoted on the OTC Bulletin Board under the symbol “FXPT.OB”. On February 5, 2007, we changed our name to “Fox Petroleum Inc.” upon completion of our merger with our wholly owned subsidiary, “Fox Petroleum Inc.” and our trading symbol was changed to “FXPE.OB”. On April 21, 2008, we effected a 1-for-5 reverse stock split of our authorized, issued and outstanding common stock and our trading symbol was changed to “FXPT.OB”.




The market for our common stock is limited, and can be volatile. The following table sets forth the high and low bid prices relating to our common stock on a quarterly basis for the periods indicated as quoted by the NASDAQ stock market. These quotations reflect inter-dealer prices without retail mark-up, mark-down, or commissions, and may not reflect actual transactions.




Fiscal Quarter
High Bid
Low Bid2011Fourth Quarter 12-01-10 to 02-28-11
$0.066
$0.04Third Quarter 09-01-10 to 11-30-10
$0.23
$0.086Second Quarter 06-01-10 to 08-31-10
$0.25
$0.086First Quarter 03-01-10 to 05-31-10
$0.395
$0.18Fiscal Quarter
High Bid
Low Bid2010Fourth Quarter 12-01-08 to 02-28-09
$0.066
$0.04Third Quarter 09-01-08 to 11-30-08
$0.23
$0.086Second Quarter 06-01-08 to 08-31-08
$0.25
$0.086First Quarter 03-01-08 to 05-31-08
$0.395
$0.18





As of June 14, 2011, we had approximately 68 shareholders of record, which does not include shareholders whose shares are held in street or nominee names.




DIVIDENDS




We have never declared or paid any cash dividends or distributions on our capital stock. We currently intend to retain our future earnings, if any, to support operations and to finance expansion and therefore we do not anticipate paying any cash dividends on our common stock in the foreseeable future.




24





There are no restrictions in our articles of incorporation or bylaws that prevent us from declaring dividends. The Nevada Revised Statutes, however, do prohibit us from declaring dividends where, after giving effect to the distribution of the dividend, we would not be able to pay our debts as they become due in the usual course of business, or our total assets would be less than the sum of our total liabilities plus the amount that would be needed to satisfy the rights of shareholders who have preferential rights superior to those receiving the distribution.




SECTION 15(g) OF THE SECURITIES EXCHANGE ACT OF 1934




Our shares are covered by section 15(g) of the Securities Exchange Act of 1934, as amended that imposes additional sales practice requirements on broker/dealers who sell such securities to persons other than established customers and accredited investors (generally institutions with assets in excess of $5,000,000 or individuals with net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouses). For transactions covered by the Rule, the broker/dealer must make a special suitability determination for the purchase and have received the purchaser's written agreement to the transaction prior to the sale. Consequently, the Rule may affect the ability of broker/dealers to sell our securities and also may affect your ability to sell your shares in the secondary market.




Section 15(g) also imposes additional sales practice requirements on broker/dealers who sell penny securities. These rules require a one page summary of certain essential items. The items include the risk of investing in penny stocks in both public offerings and secondary marketing; terms important to in understanding of the function of the penny stock market, such as “bid” and “offer” quotes, a dealers “spread” and broker/dealer compensation; the broker/dealer compensation, the broker/dealers duties to its customers, including the disclosures required by any other penny stock disclosure rules; the customers rights and remedies in causes of fraud in penny stock transactions; and, the FINRA's toll free telephone number and the central number of the North American Administrators Association, for information on the disciplinary history of broker/dealers and their associated persons.




SECURITIES AUTHORIZED FOR ISSUANCE UNDER COMPENSATION PLANS




We do not have an equity compensation plan.




RECENT SALES OF UNREGISTERED SECURITIES




As of the date of this Annual Report and during fiscal year ended February 28, 2011, we issued stock pursuant to contractual agreements as set forth below.




Trafalgar Capital Specialized Investment Fund, Luxembourg




We failed to make most payments due to Trafalgar Capital Specialized Investment Fund, Luxembourg (“Trafalgar”) under certain loan arrangements (approximately $196,000 in scheduled principal, premium and interest repayments at February 28, 2009). We later were not in a position to repay the $1,250,000 principal due at the end of April 2009 under a loan agreement with Trafalgar (which would have left $2,250,000 principal outstanding).




25





Subsequently, we commenced negotiations with Trafalgar to amend the various loan arrangements to avoid default notices and legal action having to be taken. In principle, we have assigned to Trafalgar our leases in Kansas in return for a loan rescheduling, Trafalgar’s realizing the 15,000,000 shares of our common stock pledged under an earlier loan document with Trafalgar and a covenant not to sue by Trafalgar.




As a result, on April 30, 2009, we entered into amendment to the securities purchase agreement, secured debenture, registration rights agreement and security agreement with Trafalgar whereby Trafalgar agreed to extend the maturity date of a secured debenture in the principal amount of $1,250,000 until October 31, 2009 from April 30, 2009. In consideration for Trafalgar’s agreeing to extend the maturity date of that secured debenture, we released 15,000,000 shares of our common stock from escrow to Trafalgar as payment of an extension fee. These shares were originally intended to serve as additional pledged property under the security agreement that we entered into with Trafalgar in connection with the sale of the debentures to Trafalgar.




26





ITEM 6. SELECTED FINANCIAL DATA




The following selected financial information is qualified by reference to, and should be read in conjunction with our consolidated financial statements and the notes thereto, and “Management’s Discussion and Analysis of Financial Condition and Results of Operation” contained elsewhere herein. The selected consolidated income statement data for fiscal years ended February 28, 2011 and 2009 and the selected consolidated balance sheet data as of February 28, 2011 and 2009 are derived from our audited consolidated financial statements which are included elsewhere herein.




STATEMENT OF OPERATIONS

Years Ended February 28,

2011 and 2010


For the
Period from
November 4, 2004
(inception)
to February 28, 2011ExpensesAccounting and audit fees


85,226



157,725



338,381Accretion of convertible note


-0-



2,575,492



2,575,492Advertising and public relations


286



300,384



2,01,045Bank charges


9,856



9,690



29,868Consulting fees


119,909



426,532



755,239Filing and transfer agent


7,352



25,653



49,690Finance fees


5,275,703



4,437,101



9,712,804Foreign exchange


488,381



(73,073
)


415,308Impairment of oil and gas assets


588,270



9,458,413



10,046,683Insurance


-0-



52,955



72,590Interest on notes payable


664,737



652,245



1,316,982Legal fees


42,922



361,068



567,848License fees


67,328



-0-



67,328Loss on failure to perform obligations under oil and gas commitments


-0-



12,910,000



12,910,000Management fees


528,725



642,021



1,380,186Mineral property acquisition and exploration costs


-0-



-0-



17,000Office and miscellaneous


28,275



221,037



426,556Travel and entertainment


-0-



131,770



260,758Loss for the Period Before Other Item


(7,906,970
)


(32,289,013
)


(42,952,833
)Other ItemsGain on recovery of VAT receivable


-0-



78,451



78,451Gain on recovery of payables


125,143



-0-



125,143Interest and other income


-0-



630



9,986Net Loss From Period


(7,781,827
)


(32,29,932
)


(42,739,253
)BALANCE SHEET DATATotal Assets


-0-



772,193Total Liabilities


23,717,040



21,357,406Total Stockholders’ Equity


(23,717,040
)


(20,585,213
)





27





ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULT OF OPERATION




The summarized financial data set forth in the table below is derived from and should be read in conjunction with our audited financial statements for the period from inception (November 4, 2004)  through February 28, 2011, including the notes to those financial statements which are included in this Annual Report. The following discussion should be read in conjunction with our audited financial statements and the related notes that appear elsewhere in this Annual Report. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward looking statements. Factors that could cause or contribute to such differences include, but are not limited to those discussed below and elsewhere in this Annual Report, particularly in the section entitled "Risk Factors." Our audited financial statements are stated in United States Dollars and are prepared in accordance with United States Generally Accepted Accounting Principles.




We are a developmental stage company and have not generated any revenue to date. The following table sets forth selected financial information for the periods indicated. We have incurred recurring losses to date. Our financial statements have been prepared assuming that we will continue as a going concern and, accordingly, do not include adjustments relating to the recoverability and realization of assets and classification of liabilities that might be necessary should we be unable to continue in operation.




We expect we will require additional capital to meet our long term operating requirements. We expect to raise additional capital through, among other things, the sale of equity or debt securities.




Amendment to Articles of Incorporation




Effective August 31, 2010, Fox Petroleum, Inc., a corporation organized under the laws of the State of Nevada (the “Company”) filed an amendment to its Articles of Incorporation (the “Amendment”) to increase the Company’s authorized capital structure to 500,000,000 shares consisting of 450,000,000 shares of common stock, par value $0.001, and 50,000,000 shares of preferred stock, par value $0.001.




The Amendment was approved by the Board of Directors by unanimous written consent resolutions dated August 31, 2010 signed by all the members of the Board of Directors. The Amendment was subsequently approved by certain shareholders of the Company holding a majority of the total issued and outstanding shares of common stock of the Company by written consent resolutions dated August 31, 2010




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RESULTS OF OPERATION




Fiscal Year Ended February 28, 2011 Compared to Fiscal Year Ended February 28, 2010.




Our net loss for fiscal year ended February 28, 2011 was ($7,781,827) compared to a net loss of ($32,209,932) during fiscal year ended February 28, 2010, a decrease of $24,428,105. During fiscal years ended February 28, 2011 and 2010, we did not generate any revenue from operations.




During fiscal year ended February 28, 2011, we incurred operating expenses of $7,906,970 compared to $32,289,013 (offset by $73,073 for foreign exchange) incurred during fiscal year ended February 28, 2011, a decrease of $24,382,043. The decrease in operating expenses was primarily attributable to the following items: (i) impairment of oil and gas assets of $588,270 (2011: $9,458,413); (ii) accretion of convertible note of $-0- (2010: $2,575,492); and (iii) loss on failure to perform obligations under oil and gas commitments of $-0- (2011: $12,910,000). The decrease in accretion of convertible note for fiscal year ended February 28, 2011 as compared to fiscal year ended February 28, 2009 was primarily due to our default during the 2009 fiscal year end of repayments on notes resulting in an immediate accretion of the entire discount of the notes during the 2011 year end. During the year ended February 28, 2011, we incurred substantial costs (approximately $10,910,000) under the Letter of Commitment with Senergy, which was entered into to fulfill our obligations under the Farm-In Agreement with Valiant and Petrofac and a further $2,000,000 in penalties (which was also expensed and accrued during the year) for our failure to fulfill our commitment for the use of the rig. The write down of oil and gas properties during the year ended February 28, 2010 consisted of the following write downs: North Slope, Alaska; $2,401,282 (2008 - $Nil), Anglesey, UK; $2,512,856 (2008 - $Nil), Cook Inlet, Alaska; $1,061,727 (2008 - $Nil), South Bourbon, UK; $1,419,627 (2008 - $Nil), Genesco-Edwards, Kansas; $1,975,567 (2008 - $Nil); 25th Round License Blocks 13/17 & 210/20e and UK; $87,354 (2008 - $Nil). General and administrative expenses generally include corporate overhead, financial and administrative contracted services, marketing, and consulting costs.




Other items incurred during fiscal year ended February 28, 2011 was gain on recovery of payables of $125,143 (2011: $-0-), gain on recovery of VAT receivable of $-0- (2011: $78,451) and interest and other income of $-0- (2011: $630).




During fiscal year ended February 28, 2011, we incurred a loss for the period of ($7,781,827) or ($0.32) per share as compared to a loss for the period of ($32,209,932) or ($2.03) per share during fiscal year ended February 28, 2011. The basic weighted average number of shares outstanding was 117,974,997 for fiscal year ended February 28, 2011 compared to 84,776,053 for fiscal year ended February 28, 2010.




29






LIQUIDITY AND CAPITAL RESOURCES




Fiscal Year Ended February 28, 2011




As at February 28, 2011, our current assets were $-0- and our current liabilities were $23,717,040, which resulted in a working capital deficit of $23,717,040. As of February 28, 2011, current liabilities were comprised of: (i) $18,360,246 in accounts payable and accrued liabilities; and (ii) $5,312,333 in notes payable. See “ – Material Commitments.”




As of February 28, 2011, our total assets were $-0-. The decrease in total assets during fiscal year ended February 28, 2011 from fiscal year ended February 28, 2010 was primarily due to our decrease in cash and the VAT refund and other receivable.




As at February 28, 2011, our total liabilities were $23,717,040 comprised entirely of current liabilities. The increase in liabilities during fiscal year ended February 28, 2011 from fiscal year ended February 28, 2010 was primarily due to the increase in accounts payable and accrued liabilities.




Stockholders’ deficit increased from ($20,585,213) for fiscal year ended February 28, 2011 to ($23,717,040) for fiscal year ended February 28, 2011.




30





Cash Flows from Operating Activities




We have not generated positive cash flows from operating activities. For fiscal year ended February 28, 2011, net cash flows used in operating activities was $7,795 consisting primarily of a net loss of ($7,781,827) adjusted by finance fee paid in stock and warrants of $4,634,037, impairment of oil and gas assets of $588,270, fees payable in stock and warrants ($7,407) and gain on settlement of amounts payable of ($125,143). Net cash flows used in operating activities was further affected by changes of $157,718 in VAT refund and other receivables and $2,542,147 in accounts payable and accrued liabilities.




Cash Flows from Investing Activities




For fiscal year ended February 28, 2011, net cash flows provided by investing activities was $0.




Cash Flows from Financing Activities




We have financed our operations primarily from debt or the issuance of equity instruments. For the fiscal year ended February 28, 2011, net cash flows provided from financing activities was ($34,000). Cash flows from financing activities for fiscal year ended February 28, 2010 consisted of ($34,000) in repayment of advances from related parties.




PLAN OF OPERATION AND FUNDING




A substantial portion of fiscal year ended February 28, 2011 was dedicated to the North Slope and Cook Inlet projects. As at February 28, 2011, our cash and cash equivalents were $-0-. For fiscal year ended February 28, 2011, we incurred a net loss of $7,781,827. Net cash used by financing activities for fiscal year ended February 28, 2011 of ($34,000) was attributable to repayment of advances from related parties. The accumulated deficit increased by $7,781,827 as at February 28, 2011 due to loss on failure to perform obligations under oil and gas commitments and increases in finance fees, impairment of oil and gas assets and accretion of convertible note.  As such, during fiscal years ended February 28, 2011 and 2010, we entered into various loan agreements to finance our acquisitions and operations, which increased our finance fees.




We have no access to capital to repay our debt or fund our current or ongoing operations. Unless we can secure additional capital and renegotiate the terms of our outstanding debts, we may be required to discontinue our operations at any time. We will need additional further advances and issuance of debt instruments to fund our operations over the next six months. In connection with our future business plan, management anticipates additional increases in operating expenses and capital expenditures relating to acquisition of further interests in gold mining concessions. We would finance these expenses with further issuances of securities and debt issuances. We expect we would need to raise additional capital and generate revenues to meet long-term operating requirements. Additional issuances of equity or convertible debt securities would result in dilution to our current shareholders. Further, such securities may have rights, preferences or privileges senior to our common stock. Additional financing may not be available upon acceptable terms, or at all. If we are not able to obtain additional financing on a timely basis, we will be unable to conduct our operations as planned, and we will not be able to meet our other obligations as they become due. In such event, we will be forced to scale down or perhaps even cease our operations.




31





MATERIAL COMMITMENTS




As of the date of this Annual Report, we have the following material commitments as described below.




Financing from EuroEnergy Growth Capital S.A.




On May 17, 2007, we entered into a share issuance agreement (the “Share Issuance Agreement”) with EuroEnergy Growth Capital S.A. (“EuroEnergy”), whereby EuroEnergy agreed to advance up to $8,000,000 to us under our drawdown requests, in exchange for units of our common stock. Pursuant to the agreement, the price of a unit is equal to 80% of the volume weighted average of the closing price of common stock as quoted on Yahoo! Finance for the ten banking days immediately preceding the date of our drawdown request. Each unit consists of one common share and one warrant. One warrant will entitle EuroEnergy to purchase one additional common share at an exercise price equal to 125% of the unit price. The warrants will be exercisable for three years from the date of issue. For the fiscal year ended February 29, 2008, we received the funds from EuroEnergy in the aggregate amount of $6,050,000 after giving EuroEnergy a total of fourteen drawdown requests.




Subsequent to the fiscal year ended February 29, 2008, EuroEnergy requested its financing to us to be debt financing instead of equity financing because of changes in market conditions. As a result, we obtained funds from EuroEnergy by issuing promissory notes and entering into a loan agreement.




We issued a total of three promissory notes dated April 1, 2008, May 1, 2008, and May 23, 2008 to EuroEnergy for the loans in the principal amounts of $250,000, $150,000, and $50,000, respectively. The principal amounts of the loans were to be paid on the earlier of (i) the date that we obtain equity financing from a third party in the minimum amount of $1,000,000 net to our company, or (ii) one year anniversary of the date of the promissory notes. For the period from the date of advance of the loan up to and including the date that we repay the loan, interest will accrue on the loan on the balance of principal outstanding at the rate of 10% per annum, calculated and compounded monthly not in advance, until paid. Interest will be payable in a balloon payment on the date that we repay the loan.




On June 12, 2008, we entered into a loan agreement (the “Loan Agreement”) with EuroEnergy for the $450,000 loan that EuroEnergy provided us on May 30, 2008. Pursuant to the terms and provisions of the Loan Agreement, we agreed to pay the principal and interest to EuroEnergy in full by August 31, 2008. However, if we have cash available from our operations or raise funds from any third party in a private placement of equity or debt of at least $1,000,000, we agreed to use the net proceeds from such events to repay the principal and interest then outstanding. The loan bears interest at 12% per annum, calculated annually. The loan is secured by all of our assets. On June 23, 2008, pursuant to the Loan Agreement, we issued 150,000 shares of our restricted common stock to EuroEnergy as additional compensation for the loan.




Under the Share Issuance Agreement with EuroEnergy, we may not obtain financing from anyone other than EuroEnergy for 24 months from the date of the Share Issuance Agreement with EuroEnergy, without the prior written consent of EuroEnergy. EuroEnergy also retains first right of refusal, relating to any future financing of our company. On April 22, 2008, EuroEnergy gave us a written consent to seek alternative financing and on June 18, 2008, EuroEnergy accepted the terms of the debenture issued to Trafalgar Capital Specialized Investment Fund, Luxembourg, discussed below.




32





EuroEnergy has agreed, in light of the current market climate, to extend the term of the Share Issuance Agreement until we are able to raise further financing. Other terms of loans remain.




Financing from Trafalgar Capital Specialized Investment Fund, Luxembourg




On June 24, 2008, we entered into a securities purchase agreement (the “Securities Purchase Agreement”) with Trafalgar Capital Specialized Investment Fund, Luxembourg (“Trafalgar”) pursuant to which we sold to Trafalgar $2,500,000 of a senior secured convertible redeemable debenture. Pursuant to the terms of the Securities Purchase Agreement, we agreed to pay to Trafalgar a legal and documentation review fee of $17,500, a due diligence fee of $10,000, a warrant to purchase 500,000 shares of our common stock for five years at an exercise price of $2.9851 (issued), a commitment fee equal to 7% of the principal amount of the debenture, a facility fee equal to 2% of the principal amount of the debenture, and 200,000 restricted shares of our common stock (issued). In connection with the Securities Purchase Agreement, we executed a nonbinding term sheet to enter into a committed equity facility with Trafalgar, which would be entered into upon the debenture being repaid in full by us.




Effective October 31, 2008 we amended the Securities Purchase Agreement and related transaction documents dated June 24, 2008 (collectively, the “Original Transaction Documents”) between us and Trafalgar. The amendment and certain related transaction documents (collectively, the “Amended Transaction Documents”) are dated October 31, 2008 and were executed and delivered to us by Trafalgar on November 11, 2008.




Under the Amended Transaction Documents, we sold to Trafalgar $3,500,000 of secured convertible redeemable debentures consisting of: (i) the original debenture sold to Trafalgar under the Original Transaction Documents in the principal amount of $2,500,000, which was amended and extended such that the debenture was separated into two debentures, each of which are for a total principal amount of $1,250,000 (the “Amended Debentures”); and (ii) a new debenture in the total principal amount of $1,000,000 (the “New Debenture” and together with the Amended Debentures, the “Debentures”).




The Amended Debentures mature as to $1,250,000 on April 30, 2009 (later extended to October 31, 2009) and $1,250,000 on April 30, 2010 and bear an annual interest rate of 10% compounded monthly until the unpaid principal is paid. Trafalgar is entitled, at its option, to convert and sell the principal amount of the Amended Debenture plus accrued interest into shares of our common stock at the price per share equal to the lesser of: (i) 100% of the volume weighted average price as quoted by Bloomberg L.P. on October 31, 2008, or (ii) 80% of the lowest daily closing volume weighted average price as quoted by Bloomberg L.P. during the 5 trading days immediately preceding the date of conversion. In no event will Trafalgar be entitled to convert the Amended Debentures for a number of shares of our common stock in excess of that number of shares of our common stock, upon giving effect to such conversion, would cause the aggregate number of shares of our common stock beneficially owned by Trafalgar and its affiliates to exceed 9.99% of the outstanding shares of our common stock following such conversion without our approval. We may redeem the Amended Debentures provided that our common stock is trading below 100% of the volume weighted average price as quoted by Bloomberg L.P. on October 31, 2008 at the time we give Trafalgar the redemption notice, by paying the unpaid principal and interest accrued to such date and a prepayment premium of 15% redemption premium on the amount redeemed. We must redeem the entire principal amount outstanding on only one of the Amended Debentures on April 30, 2009 at a 15% redemption premium; there is no mandatory redemption requirement for the other Amended Debenture.




33





The New Debenture matures on October 31, 2010 and bears an annual interest rate of 10% compounded monthly until the unpaid principal is paid. An event of default occurs if: (i) we fail to pay amounts due under the New Debenture, (ii) our transfer agent fails to issue freely tradeable common stock to Trafalgar within three days of our receiving a notice of conversion or exercise after our registration statement is declared effective, (iii) we fail to comply with any of our other agreements in the New Debenture for five business days after receiving notice to comply, (iv) we enter into bankruptcy or become insolvent, or (v) we breach any of covenants under the securities purchase agreement and do not cure within five business days of receiving a written notice of the breach. Upon an event of default, Trafalgar may accelerate full repayment of the New Debenture outstanding and accrued interest thereon. Also, Trafalgar is entitled, at its option, to convert and sell the principal amount of the New Debenture plus accrued interest into shares of our common stock at the price per share equal to the lesser of (i) 100% of the volume weighted average price as quoted by Bloomberg L.P. on October 31, 2008, or (ii) 80% of the lowest daily closing volume weighted average price as quoted by Bloomberg L.P. during the five trading days immediately preceding the date of conversion. However, if we issue or sell shares of our common stock without consideration or for a consideration per share less than the bid price of our common stock determined immediately prior to its issuance, the conversion price will be reset to 85% of such sales price if the reset price is lower than the conversion price. In no event will Trafalgar be entitled to convert the New Debenture for a number of shares of our common stock in excess of that number of shares of our common stock, upon giving effect to such conversion, would cause the aggregate number of shares of our common stock beneficially owned by Trafalgar and its affiliates to exceed 9.99% of the outstanding shares of our common stock following such conversion without our approval. We may redeem the debentures provided that our common stock is trading below 100% of the volume weighted average price as quoted by Bloomberg L.P. on October 31, 2008 at the time we give Trafalgar the redemption notice, by paying the unpaid principal and interest accrued to such date and a prepayment premium of 15% redemption premium on the amount redeemed. We must begin redeeming the New Debenture monthly beginning on January 31, 2009 by making equal payments of principal over the term of the New Debenture plus any outstanding interest payments and at a 15% redemption premium on the principal redeemed each month. So long as any of the principal of or interest on the New Debenture remains unpaid, we may not, without the prior consent of Trafalgar: (i) issue or sell shares of our common stock without consideration or for a consideration per share less than the bid price of our common stock determined immediately prior to its issuance, (ii) issue or sell any warrant, option, right, contract, call, or other security instrument granting the holder thereof, the right to acquire our common stock without consideration or for a consideration less than our common stock’s bid price value determined immediately prior to its issuance, (iii) enter into any security instrument granting the holder a security interest in any of our or our subsidiary’s assets, (iv) permit any of our subsidiaries to enter into any security instrument granting the holder a security interest in any assets of such subsidiary, (v) file any registration statement on Form S-8, or (vi) incur any additional debt or permit any of our subsidiaries to incur any additional debt without Trafalgar’s prior written consent.




Our use of the $1,000,000 received pursuant to the New Debenture will require the prior written approval of Trafalgar. Upon the disbursement of the $1,000,000 relating to the purchase of the New Debenture, we paid to Trafalgar one interest payment due on each of the three Debentures, which was paid directly from the proceeds of the closing for the Amended Transaction Documents.




We agreed to enter into a “lock box” agreement covering revenue generated by us which shall be executed prior to November 21, 2008. Failure by our company to execute such “lock box” agreement is deemed an event of default under Amended Transaction Documents including the Debentures and the Pledge and Escrow Agreement. We have negotiated the terms of this agreement with Trafalgar and we expect that the “lock box” agreement will be in place to receive first revenue.




The original warrant issued by us to Trafalgar was amended and replaced such that it is exercisable for a total of 2,000,000 shares of common stock at an exercise price of $0.001 per share. Also, we agreed to register the shares of common stock into which the warrant is exercisable within thirty days of October 31, 2008, subject to compliance with Rule 415 as promulgated under the Securities Act of 1933, as amended, or any Rule 415 comments or restrictions placed by the Securities and Exchange Commission on the registration statement for the shares underlying the warrant.




34





We agreed to issue to Trafalgar 2,500,000 shares of common stock (issued). Also, we agreed to register such shares of common stock within thirty days of October 31, 2008, subject to compliance with Rule 415 as promulgated under the Securities Act of 1933, as amended, or any Rule 415 comments or restrictions placed by the Securities and Exchange Commission on the registration statement for such shares.




We entered into a Pledge and Escrow Agreement with Trafalgar and James G. Dodrill II, P.A. as escrow agent, whereby we agreed to issue to Trafalgar an additional 15,000,000 shares of common stock (the “Pledged Shares”), which shall serve as additional pledged property under the Security Agreement, as amended, between us and Trafalgar. The Pledged Shares were to be held by the escrow agent until the full payment of all amounts due to Trafalgar under the Debentures or the termination or expiration of the Pledge and Escrow Agreement. Upon the occurrence of an event of default under the Debentures, the Securities Purchase Agreement, the Pledge and Escrow Agreement, the Security Agreement and all other contracts between us and Trafalgar, Trafalgar will be entitled to receive physical delivery of the Pledged Shares, vote the Pledged Shares, to receive dividends and other distributions thereon, to sell the Pledged Shares, and to enjoy all other rights and privileges incident to the ownership of the Pledged Shares. Upon full payment of all amounts due to Trafalgar under the Debentures, the Pledge Agreement and Trafalgar’s security interest and rights in and to the Pledged Shares will terminate.




Also in connection with the Amended Transaction Documents: (i) we gave Trafalgar the first right of refusal to provide additional funding to us; (ii) we agreed to enter into an exclusive investment banking agreement with Trafalgar Capital Advisors, an affiliate of Trafalgar, within ten business days of October 31, 2008, and as of the date of this quarterly report, we are currently negotiating the terms of this agreement with Trafalgar Capital Advisors; (iii) we agreed to pay a legal and documentation review fee to James G. Dodrill II, P.A. of $7,500, which was paid directly from the proceeds of the closing for the Amended Transaction Documents; (iv) we entered into a side letter agreement whereby we agreed to redeem all of the Debentures if we successfully complete an equity financing for gross amounts of a minimum of $5 million; and (v) we entered into irrevocable transfer agent instructions with our transfer agent.




We failed to make most payments due to Trafalgar Capital Specialized Investment Fund, Luxembourg under the various loan arrangements (approximately $196,000 in scheduled principal, premium and interest repayments at February 28, 2009). We later were not in a position to repay the $1,250,000 principal due at the end of April 2009 under a loan agreement with Trafalgar (which would have left $2,250,000 principal outstanding). We have also incurred trade creditor and direct salary related debt of over $1,000,000 to date for our operations in Kansas. Several of these key trade creditors have issued mechanical liens against our facilities in Kansas.




As a result, in April 30, 2009, we and Trafalgar entered into amendment to the securities purchase agreement, secured debenture, registration rights agreement and security agreement, whereby Trafalgar agreed to extend the maturity date of a secured debenture in the principal amount of $1,250,000 until October 31, 2009 from April 30, 2009. In consideration for Trafalgar’s agreeing to extend the maturity date of that secured debenture, we released 15,000,000 shares of our common stock from escrow to Trafalgar as payment of an extension fee. These shares were originally intended to serve as additional pledged property under the security agreement that we entered into with Trafalgar in connection with the sale of the debentures to Trafalgar and in fact were described by Trafalgar as being made available for a CEF type arrangement to repay creditors. This was later reneged on by Trafalgar.




In addition, pursuant to the bill of sale and assignment in lieu of foreclosure and the certificate of seller, we sold and assigned to TCF Oil and Gas Corp., a Florida corporation owned by Trafalgar, all of our properties located in Ellsworth County, Kansas, including three oil and gas leases located in Ellsworth County, Kansas in consideration of the payment of $100 from TCF Oil and Gas to us and of the simultaneous execution by Trafalgar of a covenant not to sue us for an in personam judgment under the obligations evidenced or secured by the various loan documents between Trafalgar and us. TCF Oil and Gas did not assume our obligations and liabilities under the loan documents between Trafalgar and us and such obligations and liabilities remain our responsibility. In addition, this bill of sale and assignment does not restrict the right of Trafalgar as holder of such loan documents to enforce the same or to institute or proceed with foreclosure or any other remedial proceedings under the same. We also released Trafalgar from any claims arising out of the loans from Trafalgar




35





In consideration of the simultaneous execution by our company of the bill of sale and assignment in lieu of foreclosure and the certificate of seller, Trafalgar, FIS entered into the covenant not to sue. Pursuant to this covenant, Trafalgar agreed not to sue for an in personam judgment against our company under the various loan documents between our company and Trafalgar. Nevertheless, in connection with the enforcement of its rights under such loan documents, Trafalgar reserved the right to sue our company in rem.




In addition, Trafalgar expressly reserved all rights of action, claims, and demands against any and all persons or entities, including without limitation any guarantor of any of the loans, indebtedness or obligations evidenced or secured by such loan documents other than our company, and expressly reserved all rights of action, claims and demands against and all persons or entities including our company under or arising out of or related to any mechanics’ liens and/or mechanics’ lien claims filed on, asserted against or related to any of the mortgaged properties (mostly three oil and gas leases in Ellsworth County, Kansas and related properties) from our company to Trafalgar. This instrument was not a release and does not operate to discharge any of the loans, indebtedness or obligations evidenced or secured by the loan documents.




On September 20,2010 the companyissued an 8% convertible note to Asher Enterprises Inc.in the aggregate principal amount of $45,000.




Partners Consulting, Inc.




On May 8, 2008 we entered into a consulting agreement (the “Consulting Agreement”) with Partners Consulting, Inc., a Florida corporation (“Partners Consulting”), with a view to introducing us to potential new investors. We engaged Partners Consulting on a 90 day exclusive basis commencing on May 8, 2008. The consideration payable is 6% of the gross proceeds from any financing whose funding source is introduced by Partners Consulting payable in cash and by issuance of share purchase warrants equal to 6% of the gross proceeds. The warrants will have a cashless exercise and will be priced at market value as of the date of the financing and with a minimum expiry period of three years. In addition, if the financing is facilitated through an investment banker introduced by Partners Consulting, the consideration payable is reduced to 3% of the gross proceeds for cash and 3% of the gross proceeds for share purchase warrants. We also agreed to pay Partners Consulting share purchase warrants equal to 50,000 shares of our common stock for the services of Partners Consulting relating to the assembling, formatting, and compiling certain presentation documentation. These warrants will have a cashless exercise and will be priced at the market value as of May 8, 2008, exercisable in 90 days, and have a minimum expiry period of three years. In the event that Partners Consulting introduces us to potential new investors for successful financing, Partners Consulting has the right to represent us as a finder in all subsequent equity or debt financing undertaken by us, for two years from May 8, 2008, on an exclusive basis for a 180 day period from formal engagement of Partners Consulting in respect of each such subsequent financing round. The consulting agreement is for a period of one year. On June 27, 2008, we paid $150,000 to Partners Consulting for financing from Trafalgar. In addition, we are required to issue warrants for financing from Trafalgar pursuant to the Consulting Agreement.




Pollard Financial Ltd.




On September 25, 2008, our wholly owned subsidiary, Fox Energy Exploration Limited, entered into a letter agreement (the “Letter Agreement”) with Pollard Financial Ltd. (“Pollard Financial”) pursuant to which Pollard Financial agreed to provide general corporate finance services with respect to Fox Energy Exploration Limited’s financing needs and listing on the TSX Venture Exchange via entering into definitive and binding agreement with a capital pool company in Canada. The term of the Letter Agreement was for a period of twelve months, and thereafter, renewable monthly at the option of Fox Energy Exploration Limited. In consideration for the services of Pollard Financial, Fox Energy Exploration Limited agreed to: (i) pay an engagement fee of 25,000 shares of our common stock payable upon signing of the Letter Agreement; (ii) pay 7% in cash of the gross proceeds of the financing, to be deducted from the gross proceeds, and paid upon the closing of each and any portion of the financing; (iii) issue common stock warrants equal to 7% of the gross proceeds, with the warrants having a cashless exercise and being priced as mutually agreed upon by us and Pollard Financing Ltd. at the time of each closing and having a term of two years; and (iv) pay a corporate finance fee of 100,000 shares of our common stock payable upon completion of the qualifying transaction with the capital pool company. Any amounts due and payable under the letter agreement and outstanding for in excess of 45 calendar days will accrue interest at the rate of 1.5% per month, compounding on a monthly basis. Fox Energy Exploration Limited also agreed to reimburse all reasonable out of pocket costs, charges and expenses, including travel, incurred by Pollard Financial in the performance of its obligations under the Letter Agreement.




36




PURCHASE OF SIGNIFICANT EQUIPMENT




We do not intend to purchase any significant equipment during the next twelve months.




OFF-BALANCE SHEET ARRANGEMENTS




As of the date of this Annual Report, we do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.




GOING CONCERN




The independent auditors' report accompanying our February 28, 2011 and February 28, 2010 financial statements contains an explanatory paragraph expressing substantial doubt about our ability to continue as a going concern. The financial statements have been prepared "assuming that we will continue as a going concern," which contemplates that we will realize our assets and satisfy our liabilities and commitments in the ordinary course of business.




RECENT ACCOUNTING PRONOUNCEMENTS




In June 2009 the FASB established the Accounting Standards Codification ("Codification" or "ASC") as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in accordance with generally accepted accounting principles in the United States ("GAAP"). Rules and interpretive releases of the Securities and Exchange Commission ("SEC") issued under authority of federal securities laws are also sources of GAAP for SEC registrants. Existing GAAP was not intended to be changed as a result of the Codification, and accordingly the change did not impact our financial statements. The ASC does change the way the guidance is organized and presented.




Statement of Financial Accounting Standards ("SFAS") SFAS No. 165 (ASC Topic No. 855), "Subsequent Events," SFAS No. 166 (ASC Topic No. 810), "Accounting for Transfers of Financial Assets-an Amendment of FASB Statement No. 140,"SFAS No. 167 (ASC Topic No. 810), "Amendments to FASB Interpretation No. 46(R)," and SFAS No. 168 (ASC Topic No. 105), "The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles-a replacement of FASB Statement No. 162," were recently issued. SFAS No. 165, 166, 167, and 168 have no current applicability to the Company or their effect on the financial statements would not have been significant.




37





Accounting Standards Update ("ASU") ASU No. 2009-05 (ASC Topic No. 820), which amends Fair Value Measurements and Disclosures - Overall, ASU No. 2009-13 (ASC Topic No. 605), Multiple-Deliverable Revenue Arrangements, ASU No. 2009-14 (ASC Topic No. 985), Certain Revenue Arrangements that include Software Elements, and various other ASU's No. 2009-2 through ASU No. 2009-15 which contain technical corrections to existing  guidance or affect guidance to specialized industries or entities were recently issued. These updates have no current applicability to the Company or their effect on the financial statements would not have been significant.




Currency Risk and Foreign Currency Translations




The functional currency of the Company is the United States Dollar (USD).  In accordance with ASC Topic No. 830, realized gains or losses on expenses incurred in denominations other than USD are recognized in earnings on the transaction date.  At such time as there are any foreign denominated assets or liabilities, the Company will report changes in valuation in a Statement of Other Comprehensive Income or (Loss) due to the changes in cumulative adjustments from foreign currency translation.   The company holds an investment and a note payable denominated in the Great Britain Pound (GBP).  The Company reported changes in the value of the investment due to a foreign currency adjustment of $96,000 as of December 31, 2009, which is offset by the same adjustment to the note payable.  The Company is required to pay interest in GBP on the note payable.  As of December 31, 2011 the Company accrued net interest of $143,325 after an adjustment of $5,787 in currency translation recorded in Accumulated Other Comprehensive Income.




ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA




38




Consolidated Balance Sheets(unaudited)





ASSETSFebruary 28,


February 28,2011


2010CURRENT ASSETSCash and cash equivalents

$
-


$
4,870VAT refund and other receivables


-



139,894-



-Total Current Assets


-



144,764Oil and Gas Interests – Note 4






588,270-



-TOTAL ASSETS

$
-


$
733,034CURRENT LIABILITIESAccounts payable and accrued liabilities – Notes 4 and 5 and 8(c)

$
18,360,246


$
17,272,502Due to related parties – Note 6


-



17,500Notes payable – Note 5


5,312,333



4,885,33323,672,579



22,175,335Fees payable in stock and warrants – Notes 5(e), 8(b), (d) and (e)


44,461



75,672TOTAL LIABILITIES


23,717,040



22,251,007STOCKHOLDERS' EQUITYCapital stock – Notes 4, 5, 6, 7, and 8 Authorized:450,000,000 common shares, par value $0.001 per share


-



-117,974,997 common shares (February 28, 201: )


84,818



84,818Additional paid-in capital


44,937,395



44,937,395Subscriptions receivable


(26,000,000
)


(26,000,000
)Deficit accumulated during the development stage


( 42,739,253
)


(40,540,186
)-Total Dolat Ventures, Inc. Stockholders' Equity


--


$
733,034





Ability to Continue as a Going Concern – Note 2


Commitments – Notes 4, 5, 6, 7, and 8





The accompanying notes are a integral part of these consolidated financial statements.


39





Fox Petroleum, Inc.(A Development Stage Company)INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS





Period from04-Nov-04Year Ended


(inception)February 28,


to February 28,2011


2010


2011REVENUESSales revenues

$
-


$
-


$
-Cost of revenues


-



-



-Gross Profit


-



-



-OPERATING EXPENSESAccounting and Audit Fees


16,000



29,967



338,381Accretion of convertible note


-



-



2,575,492Advertising and public relations


-



-



2,001,045Bank charges


-



4,306



29,868Consulting fees – Note 6


-



86,657



755,239Filing and transfer agent


-







49,690Finance fees – Notes 5 and 8(c)


-



4,870,617



9,712,804Foreign exchange


-



243,989



415,308Insurance


-



-



72,590Impairment of oil & gas assets


-



-



10,046,683Legal fees


-



10,300



567,848Loss on failure to perform obligations under oil and gas commitments – Note 8(c)


-



-



12,910,000License fees


-



25,126



67,328Management fees – Note 6


-



188,956



1,380,186Mineral property acquisition and exploration costs


-



-



17,000Office and miscellaneous – Note 6


-



16,133



426,556Travel and Entertainment


-



-



260,758Loss for the period before other items


-



(5,582,760
)


(42,952,833
)Other items:Gain on recovery of VAT receivable










78,451Interest and other income


-



-



9,986Gain on recovery of payables


-



-



125,143Net loss for the period

$
(16,000
)

$
(5,582,760
)


(42,739,253
)Basic and diluted loss per share


-



(0.20
)Weighted average number of shares outstanding


24,063,670



27,763,897





The accompanying notes are a integral part of these consolidated financials statements.


40




Fox Petroleum, Inc.(A Development Stage Company)Consolidated Statements of Cash Flows for the three months





Period from
November 4, 2006Three Months Ended


(inception)February 28


to February 28,2011


2010


2011CASH FLOWS FROM OPERATING ACTIVITIESNet income (loss)

$
-


$
(5,582,760
)

$
(42,739,253
)Donated services and rent


-







21,000Amortization of deferred financing costs


-Accretion of convertible debt discount


-



-



2,575,492Fees payable in stock and warrants


-



2,090



37,087Finance fee paid in stock and warrants


-



4,870,671



8,270,294Gain on settlement of amounts payable


-







(125,143
)Impairment of oil and gas assets


-







10,046,683Gain of VAT receivable written off


-







(78,451
)Change in non-cash working capital balances related to operations:VAT refund and other receivables


-



17,824



78,451Prepaid expenses


-Accounts payable and accrued liabilities


-



687,394



19,019,627Net cash used in operating activities


-



(4,835
)


(2,894,213
)Investing ActivitiesProceeds (investment) in oil and gas interests


-



20,000



(7,702,687
)Decrease (increase) in restricted cash


-



5,468Net Cash Used in Investing Activities


-



25,468



(7,702,687
)CASH FLOWS FROM FINANCING ACTIVITIESProceeds from issuance of common stock


-



-



6,196,900Proceeds from related party advances


-



(16,500
)


-Proceeds from notes payable










4,400,000Net Cash Provided (Used) in Financing Activities


-



(16,500
)


10,598,900-NET INCREASE IN CASH


-



4133



-CASH AT BEGINNING OF PERIOD


-



737



-CASH AT END OF PERIOD

$
-


$
4870


$


Non-cash transactions – Note 9


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


41





FOX PETROLEUM INC.


(A Development Stage Company)


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


February 28, 2011


(Stated in US Dollars)


(Unaudited)








Note 1             Nature of Operations and Ability to Continue as a Going Concern





The Company was incorporated in the State of Nevada on November 4, 2004 and is in the development stage.  The Company has oil and gas interests in the North Sea and Texas and has not yet determined whether these properties contain reserves that are economically recoverable.  The recoverability of amounts from the properties will be dependent upon the discovery of economically recoverable reserves, confirmation of the Company’s interest in the underlying properties, the ability of the Company to obtain necessary financing to satisfy the expenditure requirements under the property agreements and to complete the development of the properties and upon future profitable production or proceeds for the sale thereof.





These financial statements have been prepared in accordance with generally accepted accounting principles applicable to a going concern, which assumes that the Company will be able to meet its obligations and continue its operations for its next twelve months.  Realization values may be substantially different from carrying values as shown and these financial statements do not give effect to adjustments that would be necessary to the carrying values and classification of assets and liabilities should the Company be unable to continue as a going concern.  At February 28, 2011, the Company has a working capital deficiency of $23,672,579, has not yet achieved profitable operations, has accumulated losses of $42,739,253 since its inception and expects to incur further losses in the development of its business, all of which casts substantial doubt about the Company’s ability to continue as a going concern.  The Company’s ability to continue as a going concern is dependent upon its ability to generate future profitable operations and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due.  Management has no formal plan in place to address this concern but considers that the Company will be able to obtain additional funds by equity financing and/or related party advances, however there is no assurance of additional funding being available or on acceptable terms, if at all.





42





Note 2             New Accounting Standards





In June 2008, the FASB ratified EITF Issue No. 07-5, Determining Whether an Instrument (or an Embedded Feature) is Indexed to an Entity’s Own Stock(“EITF07-5”). EITF07-5 provides that an entity should use a two step approach to evaluate whether an equity-linked financial instrument (or embedded feature) is indexed to its own stock, including evaluating the instrument’s contingent exercise and settlement provisions.  It also clarifies on the impact of foreign currency denominated strike prices and market-based employee stock option valuation instruments on the evaluation.  EITF07-5 is effective for fiscal years beginning after December 15, 2008.  The adoption of this standard did not have a material impact on the consolidated financial statements of the Company.





In May 2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted Accounting Principles (“SFAS No. 162”). SFAS No. 162 is intended to improve financial reporting by identifying a consistent framework, or hierarchy, for selecting accounting principles to be used in preparing financial statements that are presented in conformity with U.S. generally accepted accounting principles for nongovernmental entities. SFAS No. 162 is effective 60 days following the SEC's approval of the Public Company Accounting Oversight Board Auditing amendments to AU Section 411, The Meaning of Present Fairly in Conformity with Generally Accepted Accounting Principles. The adoption of this standard did not have a material impact on the consolidated financial statements of the Company.





In May 2008, the FASB issued FSP No. APB 14-1, “Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement)” (“FSP APB 14-1”). FSP APB 14-1 applies to convertible debt instruments that, by their stated terms, may be settled in cash (or other assets) upon conversion, including partial cash settlement, unless the embedded conversion option is required to be separately accounted for as a derivative under SFAS 133. Convertible debt instruments within the scope of FSP APB 14-1 are not addressed by the existing APB 14. FSP APB 14-1 requires that the liability and equity components of convertible debt instruments within the scope of FSP APB 14-1 be separately accounted for in a manner that reflects the entity’s nonconvertible debt borrowing rate. This requires an allocation of the convertible debt proceeds between the liability component and the embedded conversion option (i.e., the equity component). The difference between the principal amount of the debt and the amount of the proceeds allocated to the liability component will be reported as a debt discount and subsequently amortized to earnings over the instrument’s expected life using the effective interest method. The FSP APB 14-1 is effective for the Company’s fiscal year beginning March 1, 2011 and has been applied retrospectively to all periods presented.





The adoption of this standard did not have a material impact on the consolidated financial statements of the Company.


43





Note 3             New Accounting Standards– (cont’d)





In April 2008, the FASB issued FSP 142-3, “Determination of the Useful Life of Intangible Assets.” This FSP amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under FASB Statement No. 142, “Goodwill and Other Intangible Assets.” The intent of this FSP is to improve the consistency between the useful life of a recognized intangible asset under Statement 142 and the period of expected cash flows used to measure the fair value of the asset under FASB Statement No. 141 (Revised 2007), “Business Combinations,” and other U.S. generally accepted accounting principles (GAAP). This FSP is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. Early adoption is prohibited. The adoption of this standard did not have a material impact on the consolidated financial statements of the Company.





In March 2008, the FASB issued Statement of Financial Accounting Standards (“SFAS”) No. 161, “Disclosures about Derivative Instruments and Hedging Activities”, an amendment of FASB Statement No. 133, which requires additional disclosures about the objectives of the derivative instruments and hedging activities, the method of accounting for such instruments under SFAS No. 133 and its related interpretations, and a tabular disclosure of the effects of such instruments and related hedged items on our financial position, financial performance, and cash flows. SFAS No. 161 is effective for fiscal years and interim periods beginning after November 15, 2008.  The adoption of this standard did not have a material impact on the consolidated financial statements of the Company.





In January 2008, Staff Accounting Bulletin (“SAB”) 110, “Share-Based Payment” was issued.  Registrants may continue, under certain circumstances, to use the simplified method in developing estimates of the expected term of share options as initially allowed by SAB 107, “Share-Based Payment”. The adoption of this standard did not have a material impact on the consolidated financial statements of the Company.





In December 2007, the FASB issued SFAS No. 141 (Revised) “Business Combinations”. SFAS 141 (Revised) establishes principles and requirements for how the acquirer of a business recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any non-controlling interest in the acquired. The statement also provides guidance for recognizing and measuring the goodwill acquired in the business combination and determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination.  The guidance will become effective for the first fiscal year beginning after December 15, 2008. The adoption of this standard did not have a material impact on the consolidated financial statements of the Company.


44





Note 3             New Accounting Standards– (cont’d)





In December 2007, the FASB issued SFAS No. 160 “Noncontrolling Interests in Consolidated Financial Statements-an amendment of ARB No. 51”. SFAS 160 establishes accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. The guidance is effective for the first fiscal year beginning after December 15, 2008. The adoption of this standard did not have a material impact on the consolidated financial statements of the Company.





In December 2007, the Emerging Issues Task Force (“EITF”) reached a consensus on EITF No. 07-01, Accounting for Collaborative Arrangements Related to the Development and Commercialization of Intellectual Property (“EITF 07-01”). EITF 07-01 discusses the appropriate income statement presentation and classification for the activities and payments between the participants in arrangements related to the development and commercialization of intellectual property. The sufficiency of disclosure related to these arrangements is also specified. EITF 07-01 is effective for fiscal years beginning after December 15, 2008. As a result, EITF 07-01 was effective for the Company as of March 1, 2009. The adoption of this standard did not have a material impact on the consolidated financial statements of the Company.





In April 2009, the FASB issued FASB Staff Position (FSP) FAS 141(R)-1, Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies (FSP 141(R)-1), to amend and clarify the initial recognition and measurement, subsequent measurement and accounting, and related disclosures arising from contingencies in a business combination under SFAS 141(R). Under the new guidance, assets acquired and liabilities assumed in a business combination that arise from contingencies should be recognized at fair value on the acquisition date if fair value can be determined during the measurement period. If fair value cannot be determined, companies should typically account for the acquired contingencies using existing guidance. The adoption of this standard did not have a material impact on the consolidated financial statements of the Company.





In April 2009, the FASB issued FSP SFAS No. 107-1, Interim Disclosures about Fair Value of Financial Instruments, which amends SFAS No. 107, Disclosures about Fair Value of Financial Instruments, and APB Opinion No. 28, Interim Financial Reporting. FSP SFAS No. 107-1 will require disclosures about fair value of financial instruments in financial statements for interim reporting periods and in annual financial statements of publicly-traded companies. This FSP also will require entities to disclose the method(s) and significant assumptions used to estimate the fair value of financial instruments in financial statements on an interim and annual basis and to highlight any changes from prior periods. The effective date for this FSP is interim and annual periods ending after June 15, 2009. As a result, the FSP was effective for the Company as of June 1, 2009. The adoption of this standard did not have a material impact on the consolidated financial statements of the Company.


45





Note 3             New Accounting Standards– (cont’d)





In April 2009, the FASB issued FSP No. FAS 115-2 and FAS 124-2, Recognition and Presentation of Other-Than-Temporary Impairments. The FSP amends the other-than-temporary impairment guidance for debt securities to make the guidance more operational and to improve the presentation and disclosure of other-than-temporary impairments on debt and equity securities. The FSP is effective for interim and annual periods ending after June 15, 2009. As a result, the FSP was effective for the Company as of June 1, 2009. The adoption of this standard did not have a material impact on the consolidated financial statements of the Company.





In April 2009, the FASB issued FSP No. FAS 157-4, Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly" The FSP provides additional guidance for estimating fair value when the market activity for an asset or liability has declined significantly. The FSP is effective for interim and annual periods ending after June 15, 2009. As a result, the FSP was effective for the Company as of June 1, 2009. The adoption of this standard did not have a material impact on the consolidated financial statements of the Company.





In June 2009, the FASB issued FSP No. FAS 167, Amendments to FASB Interpretation No. 46(R).  The FSP significantly changes the consolidation model for variable interest entities. This statement requires companies to qualitatively assess the determination of the primary beneficiary of a variable interest entity (“VIE”) based on whether the entity (1) has the power to direct matters that most significantly impact the activities of the VIE, and (2) has the obligation to absorb losses or the right to receive benefits of the VIE that could potentially be significant to the VIE. The new accounting statement is effective March 1, 2011 and will be applied retrospectively. As a result, the Company is evaluating the impact on the consolidated financial statements.





In June 2009, the FASB issued FAS No. 168 The FASB Accounting Standards Codification, which establishes the FASB’s Accounting Standards Codification as the exclusive authoritative reference for nongovernmental U.S. GAAP for use in financial statements issued for interim and annual periods ending after September 15, 2009, except for SEC rules and interpretative releases, which are also authoritative for SEC registrants. As a result, FAS 168 replaces FAS 162 and provides guidance that all codification standards will carry the same level of authority. The Company is currently evaluating the impact of this FSP, but would not expect it to have a material impact on the Company’s consolidated financial statements.


46





Note 4                 Oil and Gas Interests





February 28, 2011United


UnitedStates


Kingdom


TotalUnproved properties- acquisition costs

$
3,701,871


$
23,439


$
3,725,310- exploration costs


2,347,394



4,084,668



6,432,0626,049,265



4,108,107



10,157,372Less: Write-down of oil & gas interests


(5,938,576
)


(4,108,107
)


(10,046,683
)Less: Incidental revenue


(110,689
)


-



(110,689
)$
-


$
-


$
-





February 28, 2011United


UnitedStates


Kingdom


TotalUnproved properties- acquisition costs

$
3,701,871


$
23,439


$
3,725,310- exploration costs


2,347,394



4,084,668



6,432,0626,049,265



4,108,107



10,157,372Less: Write-down of oil & gas interests


(5,438,576
)


(4,019,837
)


(9,458,413
)Less: Incidental revenue


(90,689
)


-



(90,689
)$
520,000


$
88,270


$
608,270





a)
North Slope, Alaska


On May 29, 2007, the Company entered into a Lease Purchase and Sale Agreement with a company to acquire a combined 100% working interest in 12 state-issued oil and gas leases in the North Slope of Alaska.  These leases are subject to a royalty of 16.66667% to the State of Alaska and a private royalty equal to 5% of net revenue.  In consideration for the oil and gas leases, the Company issued 4,000,000 restricted common shares of the Company valued at $1,001,702, the transferor’s historical cost.  The valuation is based the SEC Staff Accounting Bulletin, Topic 5, G.





Pursuant to underlying agreements on the property, the Company is obligated to drill one test well to at least 10,000 feet on or before November 14, 2011, four test wells to at least 4,000 feet on or before February 20, 2012, and one test well to at least 4,000 feet on or before January 16, 2012.  The Company is currently unable to quantify an estimate of the cost of these wells.


47








Note 4
Oil and Gas Interests – (cont’d)





a)
North Slope, Alaska – (cont’d)





By a purchase agreement dated October 10, 2007 and amended November 2, 2007, the Company acquired 8 additional oil and gas leases in the North Slope of the State of Alaska for $850,000 including cash of $250,000 and $600,000 paid by the issuance of 80,000 common shares of the Company.  The fair value of the shares issued was $964,000 (based on the quoted market price of the Company’s common shares on the transaction date) and consequently a further $364,000 has been recorded for this portion of the purchase agreement.  These leases are subject to a royalty of 16.66667% to the State of Alaska and a private royalty equal to 5%.  Two of the leases acquired pursuant to this agreement are part of the Cook Inlet project described below.





On January 30, 2009, the Company entered into an agreement with the original lease vendors (the “Payers”) regarding twelve of the North Slope oil and gas leases (the “Twelve Leases”). Under the terms of the Agreement, the Payers agreed to use their best efforts to make, on the Company's behalf, annual rental payments for the Twelve Leases totaling up to $64,980 on or before the February 1, 2009 due date.





The Company agreed to repay to the Payers by March 2, 2009 any portion of the Payments made by the Payers (the "Repayment Amount"). The Repayment Amount is subject to an 18% interest rate per annum. The Company also granted the Payers a security interest in the Company's right, title, and interest in the Twelve Leases. The Company further agreed to transfer and assign its right, title, and interest in the Twelve Leases to the Payers in the event of the Company's failure to pay the Repayment Amount in a timely manner.


The Company failed to pay the Repayment Amount and by an agreement dated May 14, 2009, the Payers agreed to extend the repayment date until August 14, 2009 in return for the lease assignment documents for the Twelve Leases being executed and delivered into escrow.





The Company entered into an agreement dated May 16, 2009 with the Payers in respect of five of the remaining North Slope oil and gas leases (the “Five Leases”).  Pursuant to this agreement, the Payers made annual lease payments totaling $25,126 for the Five Leases on behalf of the Company.  The amount paid on behalf of the Company is subject to an 18% interest rate per annum. The Company also executed an assignment to the Payers of the Company's right, title, and interest in the Five Leases to be delivered into escrow in the event the Company fails to repay the payers by August 14, 2009.


The Company could provide no assurance that it would be able to obtain financing arrangements to repay the Payers by August 14, 2009 and consequently, all costs incurred of $2,401,282 were written off on the statement of operations during the year ended February 28, 2009.  During the years ended February 28, 2011, the Company failed to repay the Payers by the due date and assignment of the related leases to the Payers was triggered. Consequently, the fees were no longer payable and outstanding lease fees and accrued interest of $98,400 were recorded as a gain on recovery of payables.





48








Note 4
Oil and Gas Interests – (cont’d)





b)
Anglesey, North Sea, United Kingdom





Pursuant to a farm-in agreement dated June 8, 2007, the Company agreed to acquire a 33.33% interest in two UK petroleum production licenses (“Licenses”).  The Licenses are located in the UK North Sea and have since been merged into one traditional license.  As consideration for the Licenses, the Company agreed to fund 100% of the seismic costs and its 33.33% share of the License budget costs as agreed by the parties.  The Company also has the option to acquire an additional 26.67% interest in the Licenses by paying an additional 46.67% of the dry-hole costs of an exploration well.





The option is effective from completion of the transfer of the assigned interest to the Company and shall continue to be valid and exercisable until 28 days after receipt by the Company of the processed seismic data and final interpretation.





During the year ended February 28, 2010, the Company returned the Licenses to the UK government and consequently all costs incurred of $2,512,856 were written-off on the statement of operations during the year ended February 28, 2011.





c)
Spears Gas Well, Texas, United States





Pursuant to a subscription agreement dated October 9, 2007, the Company acquired a 22.5% joint venture interest in a gas well called the Spears Gas Unit 2, Well #1 in the Gomez Field, Pecos County, Texas in consideration for US$500,000.





As at February 28, 2011, the gas well is shut-in awaiting further financing.





d)
Cook Inlet, Alaska, United States





By a purchase agreement dated October 10, 2007, the Company acquired 6 oil and gas leases located in Cook Inlet of the State of Alaska for $750,000, payable in installments on or before March 7, 2008.  At February 28, 2008, the Company had paid $750,000.  Included in these leases were 3 unissued leases that the vendors owned the rights thereto.  The leases are subject to a royalty of 16.66667% to the State of Alaska and a private royalty equal to 5% of net revenue.





Subsequent to February 28, 2010, the Company entered into an agreement dated May 29, 2009 with the Payers in respect of three these oil and gas leases (the “Three Leases”).  Pursuant to this agreement, the Payers made annual lease payments totaling $25,780 for the Three Leases on behalf of the Company.  The amount paid on behalf of the Company is subject to an 18% interest rate per annum. The Company also executed an assignment to the Payers of the Company's right, title, and interest in the Five Leases to be delivered into escrow in the event the Company fails to repay the payers by August 14, 2009.





49








Note 4
Oil and Gas Interests – (cont’d)





d)
Cook Inlet, Alaska, United States – (cont’d)





The Company could provide no assurance that it would be able to obtain financing arrangements to repay the Payers by August 14, 2009 and consequently, all costs incurred of $1,061,727 were written-off on the statement of operations during the year ended February 28, 2009.  During the years ended February 28, 2011, the Company failed to repay the Payers by the due date and the assignment of the related leases to the Payers was triggered. Consequently, outstanding lease fees and accrued interest of $26,743 were recorded as a gain on write off of amounts payable.





e)
Bourbon, North Sea, United Kingdom





On November 16, 2007, the Company entered into a farm-out agreement dated November 8, 2007 wherein the Company would be assigned a total of 46% interest in a license block in the UK North Sea.  In consideration for the assignment, the Company must pay for 89% of the cost of drilling and exploration well.





The Company is also required to pay for 46% of license costs.  On January 24, 2008, the Company agreed to jointly participate with another company to identify a potential farm-in or acquisition opportunity and transferred a 4.6% carried interest in the license block to that company until a full development plan is approved by the U.K. government.  Thereafter, that company will be responsible for its 4.6% share of the costs (10% of the Company’s interest).  Subsequent to the transfer, this company became related to the Company as two of its beneficial owners became directors of the Company.


During the year ended February 28, 2009, the license holders terminated the Farm-out agreement effective February 27, 2009. Consequently, all costs incurred of $1,419,627 were written off on the statement of operations during the year ended February 28, 2009.





f)
Geneseo-Edwards, Kansas, United States





By a letter agreement dated February 27, 2008, the Company purchased an 80% net revenue interest in three oil leases in Ellsworth County, Kansas, USA by the payment of $80,000.  The leases are subject to a landowner royalty of 12.5% and an overriding royalty of 7.5% retained by vendors.  The Company was required to drill at least one well on each lease before the leases expire on November 19, 2008, November 19, 2009 and November 30, 2009 or pay the vendor a penalty of $150,000.





During the year ended February 28, 2009 the Company had drilled four wells on these leases and earned incidental revenue of $90,689 from two of these wells, which was credited against oil and gas interests on the consolidated balance sheet as a result of the wells not yet reaching full commercial production.  Since January 2009 production has been suspended due to the need for implementation of water disposal facilities for which further funding is not currently available.





50








Note 4
Oil and Gas Interests – (cont’d)





f)
Geneseo-Edwards, Kansas, United States – (cont’d)





During the year ended February 28, 2009, two trade creditors issued mechanical liens against the oil and gas leases and its facilities for non-payment of outstanding invoices totaling $528,079.





During the year period ended February 28, 2011, the Company assigned its interest in these oil and gas leases to a creditor in return for a loan rescheduling (Note 5) and entering into an agreement not to sue the Company for defaulting on a loan agreement.  The creditor also received 15,000,000 common shares pledged as security from the Company’s treasury against the notes payable.





Pursuant to the above, costs incurred of $1,975,567 were written-off on the statement of operations and deficit for the year ended February 28, 2009 leaving a net book value of $20,000 recovered during the year period ended February 28, 2011 for the sale of certain furniture and equipment held for use on the property.





g)
UK Onshore, United Kingdom





On June 3, 2008, the Company was granted a 90% interest in four UK petroleum production licenses, located in the south of England.  In order to maintain the licenses, the Company must undertake seismic exploration estimated to cost $500,000 within the six year term of the license.





Pursuant to a letter agreement dated September 5, 2008, the Company will pay 100% of all costs, expenses, liabilities and obligations arising in respect of operations conducted in respect of each license block until a filed development plan is formally approved by the UK Secretary of State responsible for such matters, for the development of a discovery of petroleum in the blocks. Thereafter, the Company will each be responsible for 90% of all costs, expenses, liabilities and obligations.





h)
25th Round License Blocks 13/17 & 210/20e, United Kingdom





Pursuant to a letter agreement dated September 5, 2008, the Company was granted a 90% interest in an application made for four UK petroleum production licenses.  In order to maintain the licenses, the Company must carry out geological and seismic modeling before forming up a drilling location and must begin drilling within the four year term of the license.





Pursuant to the letter agreement, the Company will pay 100% of all costs, expenses, liabilities and obligations arising in respect of operations conducted in respect of each license block until a filed development plan is formally approved by the UK Secretary of State responsible for such matters, for the development of a discovery of petroleum in the blocks. Thereafter, the Company will each be responsible for 90% of all costs, expenses, liabilities and obligations.





51





Fox Petroleum Inc.


(A Development Stage Company)


Notes to the Consolidated Financial Statements


February 28, 2011


(Stated in US Dollars)


(Unaudited)





Note 4
Oil and Gas Interests – (cont’d)





h)
25th Round License Blocks 13/17 & 210/20e, United Kingdom – (cont’d)





On November 12, 2008 Fox was formally notified by the UK Department of Energy and Climate Change (DECC) of its success in the 25th Seaward Licensing Round Awards, the rights to explore and develop the block 13/17 concession in the North Sea by the UK government.





On May 1, 2009 Fox received notification from the UK Department of Energy and Climate Change that this Secretary of State’s offer of this license in the 25th round had been withdrawn due to fact that they consider there to have been a material change in the circumstances relating to Fox having adequate funding arrangements already in place. Consequently, all costs incurred of $87,354 were written-off on the statement of operations and deficit for the year ended February 28, 2011.





Note 5
Notes Payable





February 28,


February 28,2011


2010Promissory notes (a), (b), (c)




$
450,000


$
450,000Loan agreement (d)





450,000



450,000Convertible notes payable (e)

$
3,500,000Add: liquidating damages due under registration rights agreement


914,667Less: financing costs


(75,545
)Add: amortization of financing costs


75,545



4,414,667



3,770,667$
5,314,667


$
4,670,667





a)
On April 2, 2008 the Company was loaned $250,000 by the issuance of a promissory note, to be paid on the earlier of (i) the date that the Company obtains equity financing from a third party in the minimum amount of $1,000,000 net to the Company, or (ii) April 1, 2009.  For the period from the date of advance of the loan up to and including the date that the loan is repaid, interest will accrue on the balance of principal outstanding at the rate of 10% per annum, compounded monthly. Interest will be payable in a balloon payment on the date the loan is repaid. The note is unsecured.





As at February 28, 2011, this loan has not been repaid as the lender has agreed to extend the terms of the loan until the Company is able to obtain further financing.





52




Fox Petroleum Inc.


(A Development Stage Company)


Notes to the Consolidated Financial Statements


February 28, 2011


(Stated in US Dollars)


(Unaudited)





Note 5
Notes Payable – (cont’d)





b)
On May 6, 2008 the Company was loaned $150,000 by the issuance of a promissory note, to be paid on the earlier of (i) the date that the Company obtains equity financing from a third party in the minimum amount of $1,000,000 net to the company, or (ii) May 1, 2009.  For the period from the date of advance of the loan up to and including the date that the loan is repaid, interest will accrue on the loan on the balance of principal outstanding at the rate of 10% per annum, compounded monthly.  Interest will be payable in a balloon payment on the date the loan is repaid. The note is unsecured.





As at February 28, 2011, this loan has not been repaid as the lender has agreed to extend the terms of the loan until the Company is able to obtain further financing.





c)
On May 23, 2008 the Company was loaned $50,000 by the issuance of a promissory note, to be paid on the earlier of (i) the date that the Company obtains equity financing from a third party in the minimum amount of $1,000,000 net to the company, or (ii) May 23, 2009.  For the period from the date of advance of the loan up to and including the date that the loan is repaid, interest will accrue on the loan on the balance of principal outstanding at the rate of 10% per annum, compounded monthly. Interest will be payable in a balloon payment on the date the loan is repaid. The note is unsecured.





As at February 28, 2011, this loan has not been repaid as the lender has agreed to extend the terms of the loan until the Company is able to obtain further financing.





d)
On May 30, 2008 the Company was loaned $450,000 pursuant to a loan agreement.  The principal and interest is to be paid on the earlier of (i) cash being available from operations, (ii) the date that the Company obtains equity or debt financing from a third party in the minimum amount of $1,000,000, or (iii) November 30, 2008.  This loan bears interest at 12% per annum, calculated annually.  The loan is secured by the Company’s assets.  As additional compensation for the loan, the Company issued to the lender 150,000 common shares of the Company.  The fair value of these shares was determined to be $514,500 based on the quoted market price of the shares on the date of issuance and was recorded as a financing fee on the consolidated statement of operations.





As at February 28, 2011, this loan has not been repaid as the lender has agreed to extend the terms of the loan until the Company is able to obtain further financing.





e)
Pursuant to an Amendment to Securities Purchase Agreement, Secured Debenture, Registration Rights Agreement and Security Agreement dated October 31, 2008 ("Amendment Agreement"), the Company amended a Securities Purchase Agreement, Debentures, a Registration Rights Agreement, an Escrow Agreement and a Pledge and Escrow Agreement ("Original Agreements") all originally dated June 24, 2008.  Under the Amendment Agreement the Company issued three secured convertible debentures totaling $3,500,000 consisting of two “Amended Debentures” and one “New Debenture”:





53








Fox Petroleum Inc.


(A Development Stage Company)


Notes to the Consolidated Financial Statements


February 28, 2011


(Stated in US Dollars)


(Unaudited)





Note 5
Notes Payable – (cont’d)




e)
– (cont’d)


(i)           Amended Debentures - $2,500,000





The Original Debenture which was a $2,500,000 senior secured convertible note was amended on November 11, 2008 into two debentures each of which are for a total principal amount of $1,250,000 (the “Amended Debentures).





The Amended Debentures bear interest at 10% per annum, compounded monthly. The principal and any unpaid accrued interest owing on the debentures are convertible into common stock of the Company in the event of a default or at the option of the holder at the rate of the lesser of i) 100% of the volume weighted average stock price (“VWAP”) on the date of issuance and ii) at 85% of the lowest daily closing VWAP as quoted by Bloomberg L.P. during the 5 trading days immediately preceding the conversion date.  The Amended Debentures also contain a redemption option whereby the Company can redeem the Amended Debentures provided its common stock is trading below 100% of the VWAP as quoted by Bloomberg L.P on October 31, 2008 by paying the unpaid principal and interest accrued and a prepayment premium of 15%. The Company must redeem the entire principal amount outstanding on one of the Amended Debentures on April 30, 2009 at a 15% redemption premium; however, there is no mandatory redemption premium on the second Amended Debenture.





In consideration for the holder's agreement to extend the maturity date of the original convertible debt from October 24, 2008 to April 30, 2009, the Company cancelled the original 500,000 warrants issued in connection with the Original Debenture and replaced them with 2,000,000 warrants with a term of 5 years and a decreased exercise price of $0.001.





The exercise price is subject to an adjustment if, during the term of the warrants, the Company issues shares, options or convertible securities for consideration less than the exercise price, then the exercise price will be adjusted to 85% of such consideration.  Additional warrants will be issued if the Company becomes in default under the transaction agreements.





The Company determined the allocation of the net proceeds of the Original convertible debenture based on the relative fair value of the convertible debenture, the 500,000 share purchase warrants and the 200,000 common shares.  The fair value of the warrants of $910,000 and the common shares of $580,000 were determined using the Black-Scholes valuation model and the quoted market price of the shares on the date of issuance, respectively.





The resulting discount of $839,292 was being accreted over the term of the debenture. The assumptions used in the Black-Scholes calculation are as follows:  expected life – 5 years; volatility – 78.26%; Dividend rate – 0%; and risk free interest rate is 0.95%.





54








Fox Petroleum Inc.


(A Development Stage Company)


Notes to the Consolidated Financial Statements


February 28, 2011


(Stated in US Dollars)


(Unaudited)








Note 5
Notes Payable – (cont’d)


e)
– (cont’d)


(i) Amended Debentures - $2,500,000 – (cont’d)


The Company recorded a beneficial conversion feature of $1,388,320 with respect to the Original Debentures pursuant to EITF 98-5 Accounting for Convertible Securities with Beneficial ConversionFeaturesor Contingently Adjustable Conversion Ratios.  The conversion feature was contingently exercisable in an event of default of the debenture; which occurred on October 24, 2008 when the debenture came due but was not repaid by the Company.  Therefore the amount was recorded as a financing fee during the year ended February 28, 2009.





The Company determined the allocation of the net proceeds of the Amended Debentures based on the relative fair value of the convertible debenture, the share purchase warrants and the common shares.  The fair value of the warrants of $1,578,000 and the common shares of $1,975,000 were determined using the Black-Scholes valuation model and the quoted market price of the shares on the date of issuance, respectively.  The resulting discount of $1,736,200 was being accreted over the term of the debentures. The assumptions used in the Black-Scholes calculation are as follows:  expected life – 5 years; volatility – 78.26%; Dividend rate – 0%; and risk free interest rate is 3.52%.





The Company was required to pay to the investor at closing of the Original Agreements: $17,500 in legal costs, a $10,000 due diligence fee, a 7% commitment fee and a 2% facility fee, 500,000 share purchase warrants and 200,000 shares of common stock.  Finder’s fees of $150,000 and 52,265 share purchase warrants were paid to Partners Consulting in connection with the Original Agreements pursuant to a finder agreement dated February 15, 2008.  This amount is included in fees payable in stock and warrants at February 28, 2010.  The warrants expire three years from the date of issuance.





At the closing of the Amended Debentures, the Company also issued 2,500,000 shares of common stock.





In no event shall the Holder be entitled to convert this Debenture for a number of shares of Common Stock in excess of that number of shares of Common Stock which, upon giving effect to such conversion, would cause the aggregate number of shares of Common Stock beneficially owned by the Holder and its affiliates to exceed 9.99% of the outstanding shares of the Common Stock following such conversion without the approval of the Company.





Upon the occurrence of an Event of Default by the Company, the Holder has the option to elect that the interest due and payable be paid in cash or in stock at the rate of 85% of the lower of:  (i) the VWAP on the date the interest payment is due; or (ii) if the interest payment is not made when due, the VWAP on the date the interest payment is made.





55








Fox Petroleum Inc.


(A Development Stage Company)


Notes to the Consolidated Financial Statements


February 28, 2011


(Stated in US Dollars)


(Unaudited)





Note 5
Notes Payable – (cont’d)




e)
– (cont’d)


(i) Amended Debentures - $2,500,000 – (cont’d)





The Debentures are secured by all of the assets and property of the Company and its subsidiaries pursuant to a Security Agreement.  The debentures were further secured by a Pledge and Escrow Agreement pursuant to which 15,000,000 common shares of the Company to be held in escrow on behalf of the investor.





Further, the debenture is subject to a currency adjustment clause whereby the exchange rate between the US Dollar and the Euro will be fixed at the date of closing and if the exchange rate moves unfavorably for the holder of the debenture, the Company will be required to adjust conversion and redemption rates to compensate the holder for any such loss.





The debenture also contains certain restrictions on the Company for new share or debt issuances as long as any principal or interest amount remains outstanding on the debenture.





(ii)  New Debenture - $1,000,000





The New Debenture and has a principal amount of $1,000,000 and matures on October 31, 2010 (the “New Debenture”).  The New Debenture bears interest at a rate of 10% per annum compounded monthly.  The principal and any unpaid accrued interest owing on the debentures are convertible into common stock of the Company in the event of a default or at the option of the holder at the rate of the lesser of i) 100% of the volume weighted average stock price on the date of issuance and ii) at 85% of the lowest daily closing VWAP as quoted by Bloomberg L.P. during the 5 trading days immediately preceding the conversion date.





The Company may redeem any or all of the New Debenture at any time, provided that the Common Stock is trading below the Fixed Price at the time the Company gives the Holder the redemption notice, by paying the unpaid principal and interest accrued and a prepayment premium of 15% redemption premium on the amount redeemed.  In any case, the Company must redeem the $1,000,000 debenture maturing October 31, 2010 in equal monthly installments commencing January 31, 2009 until maturity at a 15% redemption premium.





At the closing of the New Debentures the Company incurred: $7,500 in legal costs, a $45,000 commitment fee, a $1,000 due diligence fee





The Company recorded a beneficial conversion feature of $1,710,300 with respect to the Original Debentures.  The amount was being amortized over the term of the debentures, however after an event of default (see below), the entire amount was immediately recognized into income as a financing fee during the year ended February 28, 2009.





56








Fox Petroleum Inc.


(A Development Stage Company)


Notes to the Consolidated Financial Statements


February 28, 2011


(Stated in US Dollars)


(Unaudited)





Note 5
Notes Payable – (cont’d)




e)
– (cont’d)


(ii) New Debenture - $1,000,000 – (cont’d)





Pursuant to the securities purchase agreement, the Company entered into a freestanding investor registration rights agreement dated June 24, 2008 and amended October 31, 2008.  Under the terms of this agreement, the Company must have registered at least three (3) times the number of shares which are anticipated to be issued upon conversion of the Debentures issued and shares of common stock issuable to the purchaser upon exercise of the warrants.  The Company has the obligation to use their best efforts to keep the registration of these securities effective by the SEC until all of the securities had been sold by the purchaser.  Failure to meet this obligation would result in the Company incurring liquidated damages in the amount of 2% of the liquidated value of the debentures for each 30 day period registration of the securities is not effective.





Under the provisions of FSP EITF 00-19-2 “Accounting for Registration Payment Arrangements (“EITF 00-19-2”), the Company is required to separately recognize and measure a contingent obligation in respect of the liquidating damages in accordance with FASB No.5 “Accounting for Contingencies” and FSB Interpretation No.14 “Reasonable Estimation of the Amount of a Loss”.  At February 28, 2011, an amount of $914,667 (February 28, 2011 - $270,667) has been recognized as the Company has determined that a loss is probable because the Company has failed to maintain effectiveness of its registration statement.





Included in accounts payable and accrued liabilities at February 28, 2011 is $573,892 (February 28, 2011 - $429,167) for accrued interest and redemption premiums on these notes payable.





During the year period ended February 28, 2011 and the year ended February 28, 2011, the Company failed to make any of the required redemption payments on the New Debenture.  This triggered a default, which resulted in all of the debentures immediately becoming due and payable and the remaining discounts on the debentures were immediately recognized in income.


As at February 28, 2011, the Company had not repaid the $1,250,000 debenture that matured on April 30, 2009.





As consideration for entering into negotiations to effect a loan rescheduling and the holder entering into an agreement not to sue, the Company assigned its interest in certain oil and gas leases to the holder (Note 4(f)).  The holder also received the 15,000,000 common shares pledged as security against for debentures valued at $4,650,000, based on the quoted market price of the Company’s common shares on the date they were released from escrow.





57








Fox Petroleum Inc.


(A Development Stage Company)


Notes to the Consolidated Financial Statements


February 28, 2011


(Stated in US Dollars)


(Unaudited)





Note 5
Notes Payable – (cont’d)




e)
– (cont’d)





Face

Amount


Discount


Deferred

Financing Costs


Carrying

ValueBalance, March 1, 2008

$
-


$
-


$
-


$
-Issuance of Original Debenture, June 24, 2008


2,500,000



(839,292
)


(252,500
)


1,408,208Commissions paid – cash


-



-



(150,000
)


(150,000
)Finder’s fees – warrants


-



-



(7,592
)


(7,592
)Event of default, October 24, 2008


-Beneficial conversion feature


-



-



(1,388,320
)


(1,388,320
)Accretion of debt discount


-



839,292



1,798,412



2,637,704Extinguishment of Original          debenture, October 31, 2008


(2,500,000
)


-



-



(2,500,000
)Issuance of Amended Debentures


3,500,000



(1,736,200
)


(53,500
)


1,710,300Beneficial conversion feature


-



-



(1,710,300
)


(1,710,300
)Commissions paid – cash


-



-



(60,000
)


(60,000
)Finder’s fee – warrants


-



-



(15,545
)


(15,545
)Event of default, January 31, 2011Accretion of debt discount


-



1,736,200



1,839,345



3,575,545Liquidating damages


270,667



-



-



270,667Balance, February 28, 2011


3,770,667



-



-



3,770,667Liquidating damages


700,000











700,000Balance, February 28, 2011

$
4,414,667


$
-


$
-


$
4,414,667





Note 6
Related Party Transactions – Note 8





The officers of the Company provide consulting and management services to the Company as follows:





November 4,2004 (Date ofYears ended


Inception) toFebruary 28,


February 28,2011


2010


2011Consulting fees

$
-


$
240,129


$
394,859Management fees


528,725



642,021



1,331,798Office and miscellaneous


-



-



7,000$
528,725


$
882,150


$
1,733,657





58


Note 6
Related Party Transactions – Note 8 – (cont’d)





Included in accounts payable and accrued liabilities at February 28, 2011 is $1,070,732 (February 28, 2011: $504,293) owed to directors of the Company and companies with directors in common for expenses incurred on behalf of the Company and for unpaid management and consulting fees.





The amounts due to related parties are unsecured, non-interest bearing and have no specific terms for repayment.  These amounts were due to the director of the Company and a company controlled by a director of the Company.





Effective May 6, 2008, the Company adopted a compensation policy for its directors pursuant to which the Company will compensate each director, as follows:





i)           a fee of $1,000 per month;


ii)           1,000 restricted shares of the common stock of the Company per month;


iii)           a fee of $1,000 per each quarterly board meeting attended.





Included in accounts payable and accrued liabilities is $65,347 (February 28, 2011: $Nil) for amounts owing to directors of the Company pursuant to this compensation policy.





Note 7
Capital Stock – Notes 4, 5, 6, 8 and 10





Effective January 11, 2007 the Company completed a forward stock split of the authorized, issued and outstanding shares of common stock on a nine new for one old basis.  Authorized capital increased from 75,000,000 common shares to 450,000,000 common shares.  Effective April 21, 2008 the Company completed a reverse stock split of authorized, issued and outstanding shares of common stock on a one new for five old basis.  Authorized capital decreased from 450,000,000 to 90,000,000.  In January 2009, the Company obtained shareholder approval to amend its authorized share capital from 90,000,000 common shares, par value $0.001 to 500,000,000 common shares, par value $0.001. These financial statements have been retroactively restated to reflect reverse stock split, however the increase in authorized share capital will not become effective until not less than 20 days after the information statement regarding the increase is first mailed to stockholders and until the appropriate filing is made with the Nevada Secretary of State.  Subsequent to February 28, 2011, these required filings had not been made but it is management’s intention to do so.





59








Fox Petroleum Inc.


(A Development Stage Company)


Notes to the Consolidated Financial Statements


February 28, 2011


(Stated in US Dollars)





Note 7
Capital Stock – Notes 4, 5, 6, and 8





a)
Share Issuance Agreements:





i)           On May 17, 2007, the Company entered into a share issuance agreement with a subscriber that will allow the subscriber to advance up to $8,000,000 to the Company in exchange for units of the Company.  The units will be issued at a price equal to 80% of the volume-weighted average of the closing price of common share for the 10 banking days immediately preceding the date of the notice.  Each unit will consist of one common share of the Company and one common share purchase warrant.  Each common share purchase warrant will entitle the subscriber to purchase one additional common share at 125% of the price of the units for a period of three years.  Should the Company seek alternative sources of financing this subscriber has the right to approve the terms.


Shares issued under the agreement were as follows:





Number of


Issue


TotalIssue Date

Units


Price


ProceedsMay 17, 2007


377,358


$
5.30


$
2,000,000August 1, 2007


31,056


$
8.05



250,000September 18, 2007


44,199


$
9.05



400,000September 18, 2007


52,133


$
10.55



550,000September 27, 2007


28,708


$
10.45



300,000October 26, 2007


16,381


$
12.21



200,000October 26, 2007


21,097


$
11.85



250,000October 26, 2007


35,897


$
9.75



350,000November 28, 2007


47,337


$
8.45



400,000January 16, 2008


43,478


$
3.45



150,000January 24, 2008


96,154


$
5.20



500,000January 30, 2008


48,387


$
3.10



150,000February 11, 2008


89,286


$
2.80



250,000February 26, 2008


96,774


$
3.10



300,0001,028,245






$
6,050,000





60








Note 7
Capital Stock – Notes 4, 5, 6, and 8: – (cont’d)





a)
Share Issuance Agreement: – (cont’d)





i) – cont’d





As at February 28, 2011, there are 3,028,246 share purchase warrants outstanding entitling the holders thereof the right to purchase one common share for each warrant held as follows:





Number of
ExerciseWarrants
Price
Expiry Date377,358
$6.65
May 17, 201031,056
$10.05
August 1, 201044,199
$11.30
September 10, 201052,133
$13.20
September 10, 201028,708
$13.05
October 1, 201016,381
$15.25
October 26, 201021,097
$14.80
October 26, 201035,897
$12.20
October 26, 201047,337
$10.55
November 28, 201043,478
$4.30
January 16, 201196,154
$6.50
January 24, 201148,387
$3.90
January 30, 201189,286
$3.50
February 11, 201196,775
$3.90
February 26, 20112,000,000
$0.001
October 31, 20133,028,246





ii)
On November 5, 2008, the Company entered into a subscription agreement with Carbon Energy Investments Limited (“Carbon Energy”) for the sale of 80,000,000 shares of common stock at a price of $0.50 per share for the aggregate price of $40,000,000. Carbon Energy agreed to pay for the shares as follows:





-
$15,000,000 on or before November 30, 2008 (later amended to December 12, 2008);





-
$15,000,000 on or before January 31, 2010; and





-
$10,000,000 on or before March 31, 2010.





61








Note 7
Capital Stock – Notes 4, 5, 6, and 8 – (cont’d)





a)
Share Issuance Agreement: – (cont’d)




ii) – cont’d
 On November 5, 2008, the Company entered into an agreement to purchase shares in Alaska Oil & Gas Resources Limited (“Alaska Oil & Gas”) with Carbon Energy. Carbon Energy is the sole owner of Alaska Oil & Gas. Pursuant to the agreement, the Company agreed to acquire 100% of the issued shares of Alaska Oil & Gas from Carbon Energy in consideration for $57,500,000, $250,000 of which was to be paid in cash and the remainder by the issuance of 57,250,000 shares of common stock. On the same day, two of the Company’s directors were appointed as directors of Alaska Oil & Gas.





On November 28, 2008, the Company entered into an amendment agreement with Carbon Energy relating to purchase of Alaska Oil & Gas whereby it was agreed that the consideration to be paid pursuant to the agreement was varied such that the consideration would amount to $57,500,000, payable by the issuance of 2,000,000 shares of common stock within three business days of November 2008 (issued subsequently) and 55,500,000 shares on completion of the transaction.





On December 3, 2008, the Company entered into a letter agreement with Carbon Energy whereby Carbon Energy agreed to return 2,000,000 shares of common stock to the company upon demand unless certain conditions are fulfilled or waived. The conditions are, among others, that Carbon Energy must complete in full the subscription agreement dated November 5, 2008 except that the first $20,000,000 must be paid to the company on or before December 7, 2008 and that Carbon Energy must sell to the Company Alaska Oil & Gas which must own certain oil and gas leases pursuant to the agreement relating to the purchase of Alaska Oil & Gas.


On November 26, 2008, the Company issued 50,000,000 shares of restricted common stock to Carbon Energy in consideration for $25,000,000 to be received pursuant to the above-mentioned subscription agreement.


On December 2, 2008, the Company issued an additional 2,000,000 shares of restricted common stock to Carbon Energy pursuant to the terms of the amendment agreement for $1,000,000 to be received.


The Company never received payment for the shares issued to Carbon and Carbon never completed on the sale of Alaska Oil & Gas.  As a result, the shares that were previously subscribed were cancelled along with the agreements to purchase Alaska Oil & Gas.  Consequently, shares have been excluded from the calculation of loss per share.  The Company is currently reviewing its legal position and any associated remedies relating to the above.





62








Note 7
Capital Stock – Notes 4, 5, 6, and 8  – (cont’d)





b)
Share Purchase Warrants





There were no changes in the Company’s share purchase warrants for the periods ended February 28, 2011 and February 28, 2010 as presented below:





August 31, 2011

February 28, 2010Weighted


WeightedAverage


AverageNumber of
Exercise

Number of
ExerciseWarrants
Price

Warrants
PriceBalance, end of period
3,028,246
$2.53

3,048,246
$2.53





The remaining average life of the warrants at February 28, 2011 is 2.61 years (February 28, 2010: 3.61 years).





A finder's fee of $60,000 and 52,265 share purchase warrants exercisable at $2.87 for a period of three years from the date of issuance (6% of proceeds) were paid to Partners Consulting in connection with the Original Debenture (Note 5(e)) pursuant to a finder agreement dated February 15, 2008.  The fair value of the warrants was determined using the Black-Scholes valuation model.  The assumptions used in the Black-Scholes calculation are as follows:  expected life – 3 years; volatility – 192%; Dividend rate – 0%; and risk free interest rate is 1.0%.  At February 28, 2011 these warrants had not yet been issued and are included in fees payable in stock and warrants.





A finder's fee of $60,000 and 76,923 share purchase warrants exercisable at $0.78 for a period of three years from the date of issuance (6% of additional proceeds) were paid to Partners Consulting in connection with the Amended Debentures (Note 5(e) pursuant to a finder agreement dated February 15, 2008.  The fair value of the warrants was determined using the Black-Scholes valuation model.  The assumptions used in the Black-Scholes calculation are as follows:  expected life – 3 years; volatility – 192.6%; Dividend rate – 0%; and risk free interest rate is 1.0%.  At February 28, 2011 these warrants had not yet been issued and are included in fees payable in stock and warrants.





63








Note 8
Commitments – Notes 4, 5, 7 and 10





a)
By agreements dated June 8, 2007, the Company agreed to pay three directors of the Company a total amount of $20,000 per month for an indefinite period for consulting and management services to the Company.  The agreements may be terminated at any time with cause and with three months notice without cause.  On October 19, 2007 two of these agreements were amended from $12,000 to £9,000 ($17,900) per month and from $5,000 per month to £7,000 ($13,900).  Effective June 1, 2008 these agreements were amended from £9,000 to £15,000 per month and from £7,000 to £12,500 per month. All other terms remained the same. Effective June 1, 2009, the agreement for £12,500 per month was terminated.





b)
On May 8, 2008 the Company entered into a consulting agreement with Partners Consulting Inc. (“PCI”), a Florida Corporation, to introduce the Company to potential new investors. The consideration payable to PCI is warrants to purchase 50,000 shares of common stock due upon signing the agreement.  In addition, PCI will receive 6% of the gross proceeds from any potential financing, payable in cash and share purchase warrants equal to 6% of the gross proceeds.  In the event a financing is facilitated through an investment banker introduced by PCI, PCI will instead receive 3% of the gross proceeds, payable in cash and share purchase warrants equal to 3% of the gross proceeds.  All warrants will have a cashless exercise and will be priced at market value as of the date of the financing and with a minimum expiry period of three years. The consulting agreement is for a period of one year.





At February 28, 2011 the Company had not yet issued the warrants for 50,000 common shares due upon signing of the agreement but the fair value of these warrants was determined to be $4,364, which was included in fees payable in stock and warrants at February 28, 2011.  The fair value of these warrants was determined to be $7,344 at February 28, 2011 and, consequently an amount of $2,982 has been shown as a credit to consulting fees for the years ended February 28, 2011. These warrants are exercisable at $2.77 and will expire three years from the date of issuance.  The fair value of these warrants was determined using the Black Scholes valuation model.  The assumptions used in the Black-Scholes calculation are as follows:  expected life – 3 years; volatility – 192%; Dividend rate – 0%; and risk free interest rate is 1.0%.





c)
On May 21, 2008, the Company signed a letter of commitment whereby the Company agreed to commit to the use of a drilling rig commencing no earlier than October 1, 2008 for a total cost of $8,910,000 which has been accrued in accounts payable and accrued liabilities as at February 28, 2011.  The Company also committed to enter into a well project management and integrated services contract for the management of a well program on the rig.  The Company is also obligated to pay a fee of 1.75% of the operating rig rate in acknowledgement of the value provided with the rig opportunity, if the Company uses the rig, but not the integrated project management services. The Company also incurred and accrued penalties of $2,000,000 as compensation for lost revenues of the rig owners for its failure to fulfill its obligations under the rig provision contract and may be liable to pay up to an additional $2,000,000 for its share of additional costs incurred by the rig owners during the Company’s allotted rig slot.





64








Note 8
Commitments – Notes 4, 5, 7 and 10 – (cont’d)





c)
- (cont’d)





This additional $2,000,000 amount is subject to a commercial discussion between the parties involved and has been accrued at February 28, 2011 as it is likely that will be incurred. A total of $12,910,000 was recorded as a loss on failure to perform obligations under oil & gas commitments and has been charged to the statement of operations during the year ended February 28, 2011.





d)
By a bonus agreement dated May 22, 2008, the Company agreed to issue 5,000 common shares and £5,000 ($10,000) (paid during the year ended February 29, 2008) to an officer and director of the Company as a performance bonus. At February 28, 2008, the Company had not yet issued the shares due.  The fair value of the shares was determined to be $22,150, which was included in fees payable in stock and warrants at February 28, 2010.





e)
During the years ended February 28, 2011, the Company recorded a recovery of $8,500 (2008: $Nil) in consulting fees for the change in fair value of 50,000 common shares issuable pursuant to Board of Advisors (“BOA”) agreements dated November 17, 2007 as compensation to the members of the BOA.  An amount of $6,500 is included in fees payable in stock and warrants at February 28, 2010 for these shares.





f)
During the years ended February 28, 2010, the Company accrued $8,460 (2008: $Nil) in consulting fees for the fair value of 11,000 common shares issuable to a former employee of the Company. This amount is included in fees payable in stock and warrants at February 28, 2010.





Note 9
Additional Cash Flow Information





During the three and year periods ended February 28, 2011 and 2010 no amounts were paid for income taxes.


During the three and year periods ended February 28, 2011 and 2010 no amounts were paid for interest charges.


65







ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE




The company is currently interviewing auditors.  Larry O'Donnell its previous auditor was let go from PCAOB.




ITEM 9A. CONTROLS AND PROCEDURES




EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES




We maintain “disclosure controls and procedures,” as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”), that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.  We conducted an evaluation (the “Evaluation”), under the supervision and with the participation of our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), of the effectiveness of the design and operation of our disclosure controls and procedures (“Disclosure Controls”) as of the end of the period covered by this report pursuant to Rule 13a-15 of the Exchange Act.  Based on this Evaluation, our CEO and CFO concluded that our Disclosure Controls were effective as of the end of the period covered by this report.




Changes in Internal Controls




We have also evaluated our internal controls for financial reporting, and there have been no significant changes in our internal controls or in other factors that could significantly affect those controls subsequent to the date of their last evaluation.




Limitations on the Effectiveness of Controls




Our management, including our CEO and CFO, does not expect that our Disclosure Controls and internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management or board 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, controls 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.




CEO and CFO Certifications




Appearing immediately following the Signatures section of this report there are Certifications of the CEO and the CFO. The Certifications are required in accordance with Section 302 of the Sarbanes-Oxley Act of 2002 (the Section 302 Certifications). This Item of this report, which you are currently reading is the information concerning the Evaluation referred to in the Section 302 Certifications and this information should be read in conjunction with the Section 302 Certifications for a more complete understanding of the topics presented.


66





ITEM 9B. OTHER INFORMATION




Not applicable.




ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE




IDENTIFICATION OF DIRECTORS AND EXECUTIVE OFFICERS




All of our directors hold office until the next annual general meeting of the shareholders or until their successors are elected and qualified. Our officers are appointed by our board of directors and hold office until their earlier death, retirement, resignation or removal.




Our directors and executive officers, their ages and positions held are as follows:




Name
Age
Position with the CompanyWilliam Lieberman
35
President, Chief Executive Officer and and a DirectorJames Mollloy
35
Treasurer/Secretary




Business Experience




The following is a brief account of the education and business experience of each director, executive officer and key employee during at least the past five years, indicating each person's principal occupation during the period, and the name and principal business of the organization by which he or she was employed, and including other directorships held in reporting companies.




William Lieberman.Mr. Lieberman has been our President/Chief Executive Officer and Treasurer/Chief Financial Officer and a member of our Board of Directors since June 9, 2010. Mr. Lieberman is a Chartered Financial Analyst Candidate, Level one at the CFA Institute in New York, and earned a Masters in Business Administration from Hult International Business School in Boston, MA, in 2007.  He has an extensive track record in international mining, metal, plastic and advertising sales. Mr. Lieberman was vice president of sales and development for Zapoint, Inc. in Boston Massachusetts, where he was highly involved in all stages of financing and development for the solicitation and close of $1,250,000 of venture capital and angel investment. From 2005 through 2006, Mr. Lieberman was vice president of sales and development for Resource Polymers, Inc. in Toronto, Canada. During his tenure at Resource Polymers, Mr. Lieberman networked throughout Canada and internationally in global scrap markets, and provided arbitrage services to secondary metal and plastics markets. Mr. Lieberman was previously the president/chief executive officer and a member of the board of directors of Trilliant Resources Corporation, a publicly traded company on the Bulletin Board.




James Molloy.Mr. Molloy has spent nearly twenty years in the aviation industry and most recently was the former Vice-President of Aviation and Corporate Safety at Harbour Air Seaplanes in Vancouver, British Columbia  spending nearly seven years in various management capacities with Harbour Air.  In 2008 Mr. Molloy was asked to represent all commercial floatplane interest, in the Vancouver region during the planning for the 2010 Winter Olympic and Paralympic Games.  He advised and worked closely with the Integrated Security Unit to ease the impact on commercial operations and liased with top Canadian and US security operations during the Vancouver Olympics.  Mr. Molloy was elected to the Nav Canada Advisory Council in April 2010 and represents aviation activities for the Province of British Columbia. He is often a guest lecturer at British Columbia Institute of Technoology and has been a director of the British Columbia Aviation Council since April, 2009.  Mr. Molloy previously studied at the Earth and Ocean Science Program at the University of Victoria, Canada.


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COMMITTEES OF THE BOARD OF DIRECTORS




As of the date of this Annual Report, we have not established a compensation committee nor a nominating committee. We intend within the next fiscal quarter to establish such committees and adopt and authorize certain corporate governance policies and documentation.




FAMILY RELATIONSHIPS




There are no family relationships among our directors or officers.




INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS




During the past five years, none of our directors, executive officers or persons that may be deemed promoters is or have been involved in any legal proceeding concerning: (i) any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time; (ii) any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses); (iii) being subject to any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction permanently or temporarily enjoining, barring, suspending or otherwise limiting involvement in any type of business, securities or banking activity; or (iv) being found by a court, the Securities and Exchange Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law (and the judgment has not been reversed, suspended or vacated).




COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT




Section 16(a) of the Exchange Act requires our directors and officers, and the persons who beneficially own more than ten percent of our common stock, to file reports of ownership and changes in ownership with the Securities and Exchange Commission. Copies of all filed reports are required to be furnished to us pursuant to Rule 16a-3 promulgated under the Exchange Act. Based solely on the reports received by us and on the representations of the reporting persons, we believe that these persons have complied with all applicable filing requirements during the fiscal year ended February 28, 2011.




CORPORATE GOVERNANCE




Code of Ethics




Effective April 17, 2008, our board of directors adopted a code of conduct and ethics that applies to all directors, officers, and employees. Our code of conduct and ethics was filed as an exhibit to our current report on Form 8-K filed with the Securities and Exchange Commission on May 9, 2008.




Audit Committee and Audit Committee Financial Expert




We have an audit committee which consists of William Lieberman. We do not have any audit committee member that qualifies as an “audit committee financial expert”. Given our current financial difficulties, it has been very difficult to attract anyone who can serve as an audit committee financial expert.




ITEM 11. EXECUTIVE COMPENSATION




Our executives have not received cash compensation.  Mr. Molloy has received 2,000,000 restricted shares and Mr. Lieberman has received 4,831,752 shares of restricted stock.




The company has no employement agreements in place.




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INDEMNIFICATION




Under our Bylaws, we may indemnify an officer or director who is made a party to any proceeding, including a lawsuit, because of his position, if he acted in good faith and in a manner he reasonably believed to be in our best interest. We may advance expenses incurred in defending a proceeding. To the extent that the officer or director is successful on the merits in a proceeding as to which he is to be indemnified, we must indemnify him against all expenses incurred, including attorney's fees. With respect to a derivative action, indemnity may be made only for expenses actually and reasonably incurred in defending the proceeding, and if the officer or director is judged liable, only by a court order. The indemnification is intended to be to the fullest extent permitted by the laws of the State of Nevada.




Regarding indemnification for liabilities arising under the Securities Act of 1933, which may be permitted to directors or officers under Nevada law, we are informed that, in the opinion of the Securities and Exchange Commission, indemnification is against public policy, as expressed in the Act and is, therefore, unenforceable




ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS




The following tables set forth, as of the date of this Annual Report, certain information with respect to the beneficial ownership of our common stock by each of our current directors and our named executive officers and by each stockholder known by us to be the beneficial owner of more than 5% of our common stock.




Directors and Executive OfficersName of Beneficial Owner
Title of Class
Amount and Nature of

Beneficial Ownership
Percent of

Class(1)William Lieberman

President, Chief Executive Officer,

Director and Chairman
Common Stock
4,831,752
3.9 %James Molloy

Secretary/Treasurer
Common Stock
2,000,000
1.6%





5% or More StockholderName and Address of

Beneficial Owner
Title of Class
Amount and Nature of

Beneficial Ownership
Percent of Class(1)Trafalgar Capital Specialized Investment Fund

8-10 Rue Mathias Hardt, BP 3023

L-1030, Luxembourg
Common Stock
17,700,000 (2)
14.48%





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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE




TRANSACTIONS WITH RELATED PERSONS




Other than as disclosed below and elsewhere, there has been no transaction, since March 1, 2007, or currently proposed transaction, in which we were or are to be a participant and the amount involved exceeds the lesser of $120,000 or one percent of the average of our total assets at year end for the last two completed fiscal years, and in which any of the following persons had or will have a director or indirect material interest.




(i)
any director or executive officer of our company;(ii)
any beneficial owner of shares carrying more than 5% of the voting rights attached to our outstanding shares of common stock; and(iii)
any member of the immediate family (including spouse, parents, children, siblings and in-laws) of any of the foregoing persons.





The company entered into agreements to purchase the assets of both Canadian Corporations, 15336692 Ontario Inc.  and Resource Polymers Inc, with the Presidents Father.




ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES




AUDIT FEES




The aggregate fees billed or expected to be billed for the most recently completed fiscal years ended February 28, 2011 and February 29, 2010 for professional services rendered by the principal accountant for the audit of our annual financial statements and review of the financial statements included in our quarterly reports on Form 10-Q and services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for these fiscal periods were as follows:




Year EndedFebruary 28, 2011
February 29, 2010Audit Fees
$
$141,710Audit Related Fees
Nil
NilTax Fees
Nil
NilAll Other Fees
Nil
NilTotal
$
$141,710




Pre-Approval Policies and Procedures




Our board of directors pre-approves all services provided by our independent auditors. All of the above services and fees were reviewed and approved by the board of directors either before such services were rendered. Our board of directors has considered the nature and amount of fees billed by our independent auditors and believes that the provision of services for activities unrelated to the audit is compatible with maintaining our independent auditors’ independence




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ITEM 15. EXHIBITS AND FINANCIAL SCHEDULES




There are no exhbits.




FOX PETROLEUM INC.




SIGNATURES





Pursuant to the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.





FOX PETROLEUM INC.Dated: June 14, 2011
By:
/s/ WILLIAM LIEBERMANWilliam Lieberman, President/ChiefExecutive OfficerDated: June 14, 2011
By:
/s/ JAMES MOLLOYJAMES MOLLOY, Chief Financial Officer/Secretary





Pursuant to the requirements of 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.








Dated: June 14, 2011
By:
/s/ WILLIAM LIEBERMANDirector