UNITED STATES SECURITIES AND EXCHANGE COMMISSION


WASHINGTON, D.C. 20549






AMENDMENT NO. 1 to


FORM 10-K









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 Number: 000-52721







FOX PETROLEUM INC.(Exact name of Company as specified in its charter)




Nevada


None(State or other jurisdiction of

incorporation or organization)


(IRS Employer Identification No.)545 Eighth Avenue, Suite 401

New York, NY


10018(Address of principal executive offices)


(Zip Code)
  Company’s telephone number, including area code: (212) 560-5195
 _________________________________________
 
 Securities registered under Section 12(b) of the Exchange Act:
 None
 
 Securities registered under Section 12(g) of the Exchange Act:
 Common Stock, $.001 Par Value
 (Title of class)


Indicate by check mark if the Company is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. o Yes     x No




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




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




Indicate by check mark whether the Company 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 (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Company 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 (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of Company’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 Company is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company filer.  See definition 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 check mark whether the Company is a shell company (as defined in Rule 12b-2 of the Exchange Act).  ̈ Yes     x No




On August 31, 2010, the last business day of the Company’s most recently completed second quarter, the aggregate market value of the Common Stock held by non-affiliates of the Company was $509,889. The aggregate market value was based on the closing price on that date of the Common Stock of the Company on the OTC Bulletin Board system of $0.035.  For purposes of this response, the Company has assumed that its directors, executive officers and beneficial owners of 5% or more of its Common Stock are deemed affiliates of the Company.


As of as of May 31, 2011 the Company had 120,424,997 shares of its Common Stock, $0.001 par value, outstanding.




1




EXPLANATORY NOTE
 
 Fox Petroleum, Inc. (the “Company”) is filing this Amendment No. 1 on Form 10-K/A (this “Amendment No. 1”) to reflect the effects of accounting and reporting errors, and to record the acquisition of its wholly-owned subsidiary, resulting from a deficiency in its accounting and financial statement preparation process. . This error and the related adjustments resulted in an understatement of net loss of $1,378,373 for the year ended February 28, 2011 and the understatements of $58,491and $1,394,373 of total assets and  deficits accumulated during the development stage, respectively, and the overstatement of $2,3174,583 of total current liabilities,  as of February 28, 2011 as reported in the Company’s Annual Report on Form 10-K for the year ended February 28, 2011, which was originally filed with the SEC on June 15, 2011. The restatement is discussed in more detail in note 1 to the “Consolidated Financial Statements” contained in this Amendment No. 1.
 
 For ease of reference, this Amendment No. 1 amends and restates the Original Filing in its entirety. However, "Part I—Item 1. Financial Statements," "Part I—Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations," "Part I—Item 4. Controls and Procedures", and "Part II—Item 6. Exhibits" are the only sections in which revisions to the Original Filing have been made. In addition, as required by Rule 12b-15 promulgated under the Securities Exchange Act of 1934, as amended, the Company's principal executive officer and principal financial officer have provided new Rule 13a-14(a) certifications and Section 1350 certifications in connection with this Amendment No. 1.


2





FOX PETROLEUM INC.




ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED FEBRUARY 28, 2011
 
 TABLE OF CONTENTS




PageCautionary Statement Concerning Forward-Looking Statements
4PART I
5Item 1.
Business.
5Item 1A.
Risk Factors.
13Item 1B.
Unresolved Staff Comments.
20Item 2.
Properties.
21Item 3.
Legal Proceedings.
21PART II
21Item 5.
Market for Company’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
21Item 6.
Selected Financial Data.
23Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations.
23Item 7A.
Quantitative and Qualitative Disclosures About Market Risk.
29Item 8.
Financial Statements and Supplementary Data.
30Item 9.
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.
62Item 9A.
Controls and Procedures.
62Item 9B.
Other Information.
64PART III

64Item 10.
Directors, Executive Officers and Corporate Governance.
64Item 11.
Executive Compensation.
66Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
67Item 13.
Certain Relationships and Related Transactions, and Director Independence.
68Item 14.
Principal Accounting Fees and Services.
69PART IV

70Item 15.
Exhibits, Financial Statement Schedules.
70SIGNATURES

74




3




CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
 
 This report contains “forward-looking statements.” You can identify forward-looking statements because they contain words such as “believes,” “expects,” “may,” “should,” “seeks,” “approximately,” “intends,” “plans,” “estimates,” or “anticipates” or similar expressions that relate to our strategy, plans or intentions. All statements we make relating to our estimated and projected earnings, margins, costs, expenditures, cash flows, growth rates and financial results or to our expectations regarding future industry trends are forward-looking statements. These forward-looking statements are subject to known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. We derive many of our forward-looking statements from our operating budgets and forecasts, which are based upon many detailed assumptions. While we believe that our assumptions are reasonable, we caution that it is very difficult to predict the impact of known factors, and it is impossible for us to anticipate all factors that could affect our actual results. All forward-looking statements are based upon information available to us on the date of this report.
 
 Important factors that could cause actual results to differ materially from our expectations, which we refer to as cautionary statements, are disclosed under “Risk Factors” and elsewhere in this report, including, without limitation, in conjunction with the forward-looking statements included in this report. All forward-looking information in this report and subsequent written and oral forward-looking statements attributable to us, or to persons acting on our behalf, are expressly qualified in their entirety by the cautionary statements.
  4
 
 PART 1
 
 Item 1.          Business
 
 Company History
 
 Fox Petroleum Inc., the Company, 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.”
 
 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 is 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.  During the quarter ended August 31, 2010, The Company decided to no longer continue with exploration activities in these interests and is exploring alternatives of disposing of its interests in the North Sea and Texas.
 
 Change in Management
 
 On June 9, 2010, Richard Moore, the Company’s President / Chief Executive Officer, Secretary, Treasurer, Chief Financial Officer and a member of the Board of Directors, resigned from all positions.  Also on June 9, 2010, the Company’s Board of Directors elected Mr. William Lieberman as a member of the Board of Directors and appointed Mr. Lieberman as the Company’s President / Chief Executive Officer, Secretary, Treasurer and Chief Financial Officer.
 
 On August 9, 2010, Mr. William MacNee resigned as Chief Operating Officer and a Director of the Company and Messrs. John Spence and Jeffrey Sternberg resigned as Directors of the Company.  As a result, Mr. William Lieberman is the sole director and officer of the Company.
 
 Subsidiaries
 
 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.
 
 1536692 Ontario, Inc.
 
 On July 15, 2010, the Company entered into a Share Exchange Agreement (the “Share Exchange Agreement”) with 1536692 Ontario, Inc. (“Ontario”), a Canadian corporation, and the shareholders of Ontario (“Ontario Shareholders”).  Ontario owns a scrap plastic processing plant with certain equipment, fixtures and improvements and assets located in Hamilton, Ontario, Canada with the intent of engaging in the business of recycling plastics.
 
 Resource Polymers Inc.
 
 On July 15, 2010, the Company entered into a Share Exchange Agreement (the “Resource Share Exchange Agreement”) with Resource Polymers Inc. (“Resource”), a Canadian corporation, and the shareholders of Ontario (“Ontario Shareholders”) to acquire 100% of the capital stock of Resource.  As of the date of this report, the acquisition has not been completed as Resource has not satisfied its conditions precedent to closing the exchange. There is no assurance that Resource will complete its requirements required to close.
  5
  Future Business Strategy
 
 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 and the acquisition of plastics recycling businesses.
 
 With the acquisition of Ontario in July 2010, the company initiated plans to move into the business of recycling oil based plastics.  We are focused on acquiring, developing and operating plastic recycling operations throughout North America.  We expect to begin operations of this division in fiscal 2012.  Our goal is to become an important partner for leading recycling companies who need proficient services. We expect Ontario to eventually become carbon neutral and process up to 30 Million pounds of post-industrial and post-consumer scrap plastics per year with revenues approaching Five million dollars per year at these processing levels.  We are also aggressively seeking additional acquisition targets in the plastics recycling market place to increase our processing capacity and are currently speaking to companies in the automotive and beverage industries to process plastic waste streams and fulfill circular recycling streams
  We are also currently identifying and evaluating alternatives to expand our Oil and Natural gas portfolios.
 
 Current Business Operations
 
 As we are currently a development stage company without significant capital resources, our current oil and gas projects are on hold.  We are currently evaluating potential alternatives arrange for the sale or disposal of these properties.  Our properties and interests are described as follows:





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.




6





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.





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, 2010, 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 during the fiscal year ended February 28, 2010.
 
 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, 2010, 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, 2010, 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, 2010.




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.





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




7




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.





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.




8





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 persona 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.




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 km 2 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.





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.




9





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.


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.





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.




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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.





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.




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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.





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.




Employees
 
 As of February 28, 2011, the Company has one employee, Mr. William Lieberman, our sole executive officer and director.  We do not intend to hire additional employees until our business has been successfully launched and has sufficient operating capital.  Our Officer and Director will provide work as necessary to bring us to the point of earning revenues. We periodically hire independent contractors to execute our administrative functions, acquisition, exploration and development, if any, activities. Human resource planning will be part of an ongoing process that will include constant evaluation of our operations. We do not expect to hire any employees before the end of this calendar year.  However, in the event that we are able to raise sufficient capital and proceed with an acquisition or exploration program, we may hire a number of employees to aid in our operations.
 
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 Available Information
 
 All reports of the Company filed with the SEC are available free of charge through the SEC’s Web site at www.sec.gov.  In addition, the public may read and copy materials filed by the Company at the SEC’s Public Reference Room located at 100 F Street, N.E., Washington, D.C. 20549.  The public may also obtain additional information on the operation of the Public Reference Room by calling the Commission at 1-800-SEC-0330.




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.




The following important factors among others, could cause our actual operating results to differ materially from those indicated or suggested by forward-looking statements made in this Form 10-K or presented elsewhere by management from time to time.




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 $21,332,496. 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 $1,394,373 and $7,781,827 for the fiscal years ended February 28, 2011 and February 28, 2010, respectively. At February 28, 2011, we had accumulated deficit of $44,133,626 and had a working capital deficit of $21,332,496.  Our auditor's report on our 2011 financial statements expresses an opinion that substantial doubt exists as to whether we can continue as an ongoing concern. Because obtaining investment capital in not certain, or that our officers and directors may be unable or unwilling to loan or advance any additional capital to the Company, we may not have the funds necessary to continue our operations. See "February 28, 2011 Audited Financial Statements."


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.





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 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.




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As we operate internationally, there are risks which could adversely affect operating results.
 
 Currently, we operate in Canada.  Doing business in foreign countries subjects the Company to additional risks, any of which may adversely impact future operating results, including:





●
international political, economic and legal conditions;
 
 ●
our ability to comply with foreign regulations and/or laws affecting operations and projects;
 
 ●
difficulties in attracting and retaining staff and business partners to operate internationally;
 
 ●
language and cultural barriers;
 
 ●
seasonal reductions in business activities and operations in the countries where our international projects are located;
 
 ●
integration of foreign operations;
 
 ●
potential adverse tax consequences; and
 
 ●
potential foreign currency fluctuations.
 
 Factors beyond the control of the Company.
 
 Projects for the acquisition and development of the Company’s products are subject to many factors, which are outside our control.  These factors include general economic conditions in North America and worldwide (such as recession, inflation, unemployment, and interest rates), proximities to utilities and transportation, shortages of labor and materials and skilled craftsmen and price of materials and competitive products and the regulation by federal and state governmental authorities.




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 effect 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.




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.




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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.





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.




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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





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.




It is more difficult for our shareholders to sell their shares because we are not, and may never be, eligible for NASDAQ or any national stock exchange.
 
 We are not presently, nor is it likely that for the foreseeable future we will be, eligible for inclusion in NASDAQ or for listing on any United States national stock exchange.  To be eligible to be included in NASDAQ, a company is required to have not less than $4,000,000 in net tangible assets, a public float with a market value of not less than $5,000,000, and a minimum bid price of $4.00 per share. At the present time, we are unable to state when, if ever, we will meet the NASDAQ application standards.  Unless we are able to increase our net worth and market valuation substantially, either through the accumulation of surplus out of earned income or successful capital raising financing activities, we will never be able to meet the eligibility requirements of NASDAQ.  As a result, it will more difficult for holders of our common stock to resell their shares to third parties or otherwise, which could have a material adverse effect on the liquidity and market price of our common stock.
 
 Although the our Common Stock is currently traded on the OTC Bulletin Board, there is no assurance any public market for our Common Stock will continue.  There is also no assurance as to the depth or liquidity of any such market or the prices at which holders may be able to sell the Shares. An investment in these Shares may be totally illiquid and investors may not be able to liquidate their investment readily or at all when they need or desire to sell.




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.




18





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 450,000,000 shares of common stock with a par value of $0.001 per share. 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.





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.





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.




19





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.




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 Trafalgar controls more than 10% of our common stock, they will continue to be able to influence elections of our board of directors, 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.





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 our director and officer is a residents of a country other than the United States, investors may find it difficult to enforce, within the United States, any judgments obtained against our director and officer.
 
 Our director and officer is a national and/or resident of a country 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





On February 28, 2011, March 10, 2011, and June 6, 2011, the Company received comment letters from the staff of the Division of Corporation Finance of the SEC.  The comments from the staff were issued with respect to its review of the Company’s Form 10-K for the year ended February 28, 2010, Form 10-Q for the quarterly periods ended November 30, 2010, Form 8-K filed on July 19, 2010 relating to the Company’s acquisition of 1536692 Ontario Inc., Preliminary Schedules 14C filed on January 7 and November 4, 2009 and Form 8-K filed on March 9, 2011 relating to the change in the Company’s certifying accountant.





20


The Company is in the process of responding to all of the staff’s comments and expects to file its response in a letter to be filed with the SEC within the next 30 days.  Included in the Company’s response will be supplemental analyses and information requested by the staff, as well as possible amendments to the previously filed reports.  As of the date of the filing of this Form 10-K, these comments remain unresolved.





Item 2.          Properties





The Company’s maintains a virtual principal office located at 545 Eighth Avenue, Suite 401, New York, NY 10018. This office facility is used by the Company to receive mail and telephone calls.





The Company believes that the current facilities are suitable for its current needs.





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.





PART II





Item 5. Market for Company’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
 
 Market for Common Equity
 
 As the Company is a “smaller reporting company,” it is not required to provide the performance graph required in paragraph (e) of Item 201.
 
 Market Information
 
 The Company’s common stock is currently traded on the Over the Counter Bulletin Board (“OTCBB”) under the symbol "FXPT.OB".  As of February 28, 2011, the Company’s common stock was held by70 shareholders of record, which does not include shareholders whose shares are held in street or nominee name.
 
 Only a limited market exists for our securities.  There is no assurance that a regular trading market will develop, or if developed, that it will be sustained.  Therefore, a shareholder in all likelihood will be unable to resell his securities in our Company.  Furthermore, it is unlikely that a lending institution will accept our securities as pledged collateral for loans unless a regular trading market develops.
 
 The following chart is indicative of the fluctuations in the stock prices:




For the Year Ended


For the Year EndedFebruary 28, 2011


February 28, 2010High


Low


High


LowFirst Quarter

$
0.080


$
0.035


$
0.395


$
0.180Second Quarter

$
0.088


$
0.030


$
0.250


$
0.086Third Quarter

$
0.101


$
0.030


$
0.230


$
0.086Fourth Quarter

$
0.070


$
0.018


$
0.066


$
0.040





21


These prices are bid prices which represent prices between broker-dealers and do not include retail mark-ups and mark-downs or any commission to the dealer.
 
 The Company’s transfer agent is Empire Stock Transfer of Henderson, Nevada.
 
 Dividend Distributions
 
 We have not historically and do not intend to distribute dividends to stockholders in the foreseeable future.





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.




Securities authorized for issuance under equity compensation plans
 
 The Company currently does not have any equity compensation plans.  The following table sets forth information relating to outstanding warrants.




Number of


Weighted


Number ofSecurites to


Average


Securitiesbe Issued


Exercise


RemainingUpon Exercise


Price of


Available forof Outstanding


Outstanding


Future IssuanceOptions,


Options,


Under EquityWarrants


Warrants


Compensationand Rights


and Rights


Plans (excluding(a)


(b)


column (a))Equity Compensation Plans Approved by Security Holders


-


$
-



-Equity Compensation Plans Not Approved by Security Holders


2,000,000


$
0.001



-Total


2,000,000


$
0.001



-




Penny Stock
 
 Our common stock is considered to be a "penny stock" under the rules the Securities and Exchange Commission (the "SEC") under the Securities Exchange Act of 1934. The SEC has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a price of less than $5.00, other than securities registered on certain national securities exchanges or quoted on the NASDAQ Stock Market System, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or quotation system. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock, to deliver a standardized risk disclosure document prepared by the Commission, that:
 
 -
contains a description of the nature and level of risks in the market for penny stocks in both public offerings and secondary trading;-
contains a description of the broker's or dealer's duties to the customer and of the rights and remedies available to the customer with respect to a violation to such duties or other requirements of Securities' laws; contains a brief, clear, narrative description of a dealer market, including bid and ask prices for penny stocks and the significance of the spread between the bid and ask price;-
contains a toll-free telephone number for inquiries on disciplinary actions;-
defines significant terms in the disclosure document or in the conduct of trading in penny stocks; and-
contains such other information and is in such form, including language, type, size and format, as the Commission shall require by rule or regulation.
 22





The broker-dealer also must provide, prior to effecting any transaction in a penny stock, the customer with:


-
bid and offer quotations for the penny stock;-
the compensation of the broker-dealer and its salesperson in the transaction;-
the number of shares to which such bid and ask prices apply, or other comparable information relating to the depth and liquidity of the marker for such stock; and-
monthly account statements showing the market value of each penny stock held in the customer's account.
  In addition, the penny stock rules that require that prior to a transaction in a penny stock not otherwise exempt from those 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 acknowledgement of the receipt of a risk disclosure statement, a written agreement to transactions involving penny stocks, and a signed and dated copy of a written suitably statement.


These disclosure requirements may have the effect of reducing the trading activity in the secondary market for our stock.
 
 Related Stockholder Matters
 
 None.
 
 Purchase of Equity Securities
 
 None.
 
 Item 6.          Selected Financial Data.
 
 As the Company is a “smaller reporting company,” this item is inapplicable.




Item 7.          Management’s Discussion and Analysis of Financial Condition and Results of Operation.
 
 You should read the following discussion of our results of operations and financial condition with the audited financial statements and related notes included elsewhere in this report. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs, and that involve numerous risks and uncertainties, including, but not limited to, those described in the “Risk Factors” section of this report. Actual results may differ materially from those contained in any forward-looking statements.  See “Cautionary Statement Concerning Forward-Looking Statements.”
 
 Overview
 
 We are a development stage company and have not generated any revenue to date. The following discussions 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, however, there is no assurance that we will be successful in raising additional capital.
   Results of Operations
 
 Year ended February 28, 2011 compared to the year ended February 28, 2010
 
 Our net loss for fiscal year ended February 28, 2011 was $1,394,373 compared to a net loss of $7,781,827 during fiscal year ended February 28, 2010, a decrease of $6,387,454. 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 $2,958,374 compared to $7,242,233, a decrease of $4,283,859. The decrease in operating expenses was primarily attributable to a decrease in general and administrative expenses of $697,767 (reflecting our decrease in operating activity and changes in management structure), decrease in finance fees of $5,770,203 and decrease in impairments of oil and gas assets of $588,270, offset by an increase in consulting fees of $3,301,106, primarily consisting of stock issued for services of $3,459,612 during the year ended February 28, 2011.
 
 23
 
 Other income for the year ended February 28, 2011 was $1,564,001 compare to other expense of $539,594 for the year ended February 28, 2010, or a change of $2,103,595.  The change was due to an increase of the gain on recovery of payables of $3,059,477, a decrease of interest expense of $176,607, offset by impairment of goodwill of $397,575, accretion of discounts on convertible notes payable of $19,264 and loss on conversion of debt of $715,650.
 
 For the period from November 4, 2004 (date of inception) to February 28, 2011, we have incurred an accumulated loss of $44,133,626 attributable to our shareholders.
 
 Liquidity and Capital Resources
 
 As of February 28, 2011, the Company had cash of $-0-, total assets of $58,491 and a deficit in working capital of $21,332,496.  The Company generated a negative cash flow from operations of $26,298 for the year ended February 28, 2011. The negative cash flow from operating activities for the period is primarily attributable to the Company's net loss from operations of $1,394,373, noncash gain from the recovery of payables and the recovery of finance and other fees paid in stock and warrants of $554,597, offset by a loss on debt conversion of $715,650, noncash charges for depreciation and debt discount accretion of $31,325, impairment of goodwill of $397,575, stock issued for services of $3,459,612 and changes in operating assets and liabilities of $503,130.  Cash from operations for the year ended February 28, 2010 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 generated by 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 used in investing activities was $22,491 for the year ended February 28, 2011 compared to cash from investing activities for the year ended February 28, 2010 of $25,468.  Cash from financing activities increased by $82,789 for the year ended February 28, 2011 compared to 2010 primarily due to increased proceeds from the issuance of notes payable of $45,000 and advances from officer of $3,789 in 2011 compared to the repayment of advances from related parties of $34,000 in 2010.




Plan of Operations and Funding
 
 The majority of fiscal year ended February 28, 2011 was dedicated to restructuring the management and direction of the Company and developing a revised business strategy including identifying potential acquisition targets.  A substantial portion of fiscal year ended February 28, 2010 was dedicated to the North Slope and Cook Inlet projects. As of February 28, 2011, our cash and cash equivalents were $-0-. For fiscal year ended February 28, 2011, we incurred a net loss of $1,394,373.
 
 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 oil and gas assets. 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.


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.




24





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.





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.




25





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.





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.




26





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


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.




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.




27





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.




Going Concern
 
 Our independent auditors included an explanatory paragraph in their report on the accompanying financial statements regarding concerns about our ability to continue as a going concern. Our financial statements contain additional note disclosures describing the circumstances that lead to this disclosure by our independent auditors.
 
 Our financial statements have been prepared on a going concern basis, which assumes the realization of assets and settlement of liabilities in the normal course of business. Our ability to continue as a going concern is dependent upon our ability to generate profitable operations in the future and/ or to obtain the necessary financing to meet our obligations and repay our liabilities arising from normal business operations when they become due. The outcome of these matters cannot be predicted with any certainty at this time and raise substantial doubt that we will be able to continue as a going concern. Our financial statements do not include any adjustments to the amount and classification of assets and liabilities that may be necessary should we be unable to continue as a going concern.
 
 There is no assurance that our operations will be profitable. The Company has conducted private placements of its common stock, which have generated funds to satisfy the initial cash requirements of its planned exploration ventures. Our continued existence and plans for future growth depend on our ability to obtain the additional capital necessary to operate either through the generation of revenue or the issuance of additional debt or equity.
 
 Off-Balance Sheet Arrangements
 
 We currently have no off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
  Critical Accounting Policies and Estimates
 
 Our principal accounting policies are described in Note 3 of the audited financial statements included elsewhere in this report.  The preparation of the financial statements in accordance with U.S. GAAP requires management to make significant judgments and estimates.  Some accounting policies have a significant impact on amounts reported in these financial statements.  Our financial position and results of operations may be materially different when reported under different conditions or when using different assumptions in the application of such policies.  In the event estimates or assumptions prove to be different from actual amounts, adjustments are made in subsequent periods to reflect more current information.  The preparation of interim financial statements involves the use of certain estimates that are consistent with those used in the preparation of our annual financial statements. Significant accounting policies, including areas of critical management judgments and estimates, include the following:
 
 28
 
 Development Stage and Mineral Property and Exploration Costs
 
 The Company has been in the development stage since November 4, 2004, as defined in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 915 “Development Stage Entities”, and has not yet realized revenues from its planned operations.  It is primarily engaged in the acquisition, exploration, and development of oil and gas mineral properties.
 
 Mineral property exploration costs are expensed as incurred. When it has been determined that a mineral property can be economically developed as a result of establishing probable and then proven reserves, then the costs incurred to develop such property are capitalized. Such costs will be amortized using the units-of-production method over the estimated life of the probable-proven reserves. If mineral properties are subsequently abandoned or impaired, any capitalized costs will be charged to operations. The Company has incurred $17,000 of exploration and acquisition costs and $0 of development costs from inception through February 28, 2011.
  Impairment or Disposal of Long-Lived Assets
 
 The Company accounts for the impairment or disposal of long-lived assets according to ASC 360 “Property, Plant and Equipment”. ASC 360 clarifies the accounting for the impairment of long-lived assets and for long-lived assets to be disposed of, including the disposal of business segments and major lines of business. Long-lived assets are reviewed when facts and circumstances indicate that the carrying value of the asset may not be recoverable. When necessary, impaired assets are written down to estimate fair value based on the best information available. Estimated fair value is generally based on either appraised value or measured by discounting estimated future cash flows. Considerable management judgment is necessary to estimate discounted future cash flows. Accordingly, actual results could vary significantly from such estimates.
 
 Item 7A.          Quantitative and Qualitative Disclosures About Market Risk.
 
 As the Company is a “smaller reporting company,” this item is inapplicable.




29




Item 8. Financial Statements and Supplementary Data.




Index
PageReport of Independent Registered Public Accounting Firm – Eugene M. Egeberg, CPA
31Financial Statements
32Consolidated Balance Sheets
32Consolidated Statements of Operations
33Consolidated Statements of Stockholders’ Deficit
34 - 35Consolidated Statements of Cash Flows
36 - 37Notes to Consolidated Financial Statements
38





30




Eugene M Egeberg
 Certified Public Accountant
 2400 Boston Street, Suite 102
 Baltimore, Maryland  21224
 (410) 218-1711
 
 INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM’S REPORT







Board of Directors


Fox Petroleum, Inc.
 New York, NY
 
 We have audited the accompanying consolidated balance sheets of Fox Petroleum, Inc., and subsidiaries as of February 28, 2011 and 2010, and the related consolidated statements of operations, changes in stockholders deficiency and cash flows for the years then ended. These financial statements are the responsibility of the management of Fox Petroleum, Inc.   Our responsibility is to express an opinion on these financial statements based on my audit.
 
 We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that my audit provides a reasonable basis for our opinion.
 
 In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Fox Petroleum, Inc. as of February 28, 2011 and 2010, and the results of operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States.
 
 These consolidated financial statements have been prepared assuming that the Company will continue as a Going Concern. As discussed in Note 2 to the consolidated financial statements, the Company has a large working capital deficiency, has not yet achieved profitable operations, and has large accumulated losses. The Company is in the development stage, has not yet achieved profitable operations and is dependent on its ability to raise capital from stockholders or other sources to meet its obligations and repay its liabilities arising from normal business operations when they come due. These factors, along with other matters as set forth in Note 1, raise substantial doubt that the Company will be able to continue as a Going Concern. The financial statements do not include any adjustments that might result from the outcome of these uncertainties.
  
 
 Eugene M Egeberg, CPA
 Baltimore, MD
 9 August 2011




31







Fox Petroleum Inc. and Subsidiaries(A Development Stage Company)Consolidated Balance Sheets  February 28,


February 28,2011


2010RestatedASSETSCurrent assetsCash

$
-


$
-Due from affiliate


22,500



-Total current assets


22,500



-Property and equipment, net


35,991



-Total assets

$
58,491


$
-LIABILITIES AND STOCKHOLDERS' DEFICITCurrent liabilitiesAccounts payable and accrued expenses

$
14,432,928


$
17,602,548Accrued interest


1,234,651



757,698Accrued interest, related parties


143,228



-Due to officer


3,789



-Notes payable


5,343,932



5,312,333Notes payable, related parties


196,468



-Total current liabilities


21,354,996



23,672,579Fees payable in stock and warrants


4,364



44,461Stockholders' deficitPreferred stock, $0.001 par value, 50,000,000 shares authorizedno shares shares issued and outstanding


-



-Common stock, $.001 par value, 450,000,000 and 90,000,000 sharesauthorized, 111,924,997 and 84,818,245 shares issued andoutstanding at February 28, 2011 and 2010, respectively


111,925



84,818Additional paid-in capital


22,738,715



44,937,395Subscriptions receivable


-



(26,000,000
)Accumulated other comprehensive income (loss)


(17,883
)


-Deficit accumulated during the exploration stage


(44,133,626
)


(42,739,253
)Total stockholders' deficit


(21,300,869
)


(23,717,040
)Total liabilities and stockholders' deficit

$
58,491


$
-See accompanying notes to consolidated financial statements.
  32







Fox Petroleum Inc. and Subsidiaries(A Development Stage Company)Consolidated Statements of Operations  For the PeriodNovember 4, 2004(Inception) toFor the Year Ended February 28,


February 28,2011


2010


2011Restated





RestatedSales revenue

$
-


$
-


$
-Operating expenses:General and administrative expenses


31,859



729,626



4,287,306Consulting fees


3,421,015



119,909



4,176,254Finance Fees


(494,500
)


5,275,703



9,218,304Impairment of oil and gas assets


-



588,270



10,046,683Loss on failure to perform obligations underoil and gas commitments


-



-



12,910,000Management fees


-



528,725



1,380,186Total operating expenses


2,958,374



7,242,233



42,018,733Loss from operations


(2,958,374
)


(7,242,233
)


(42,018,733
)Other income (expense):Gain on recovery of VAT receivable


-



-



78,451Gain on recovery of payables


3,184,620



125,143



3,309,763Interest and other income


-



-



9,986Interest expense


(488,130
)


(664,737
)


(1,805,112
)Impairment of Goodwill


(397,575
)


-



(397,575
)Accretion of convertibe note discounts


(19,264
)


-



(2,594,756
)Loss on conversion of debt


(715,650
)


-



(715,650
)Total other income (expense)


1,564,001



(539,594
)


(2,114,893
)Loss before income taxes


(1,394,373
)


(7,781,827
)


(44,133,626
)Provision for income taxes


-



-



-Net loss

$
(1,394,373
)

$
(7,781,827
)

$
(44,133,626
)Net loss per share - basic and diluted

$
(0.02
)

$
(0.32
)Weighted average number of sharesoutstanding - Basic and Diluted


66,438,789



24,063,670Net loss

$
(1,394,373
)

$
(7,781,827
)

$
(44,133,626
)Foreign currency translation gain (loss)


(8,122
)


-



(8,122
)Total Comprehensive loss

$
(1,402,495
)

$
(7,781,827
)

$
(44,141,748
)See accompanying notes to consolidated financial statements.





33







Fox Petroleum Inc. and Subsidiaries(A Development Stage Company)Consolidated Statements of Stockholders' DeficitFor the period November 4, 2004 (Inception) through February 28, 2011  Deficitaccumulated


AccumulatedAdditional





during the


other


TotalPreferred stock


Common stock


paid-in


Stock


exploration


comprehensive


stockholders'Shares


Amount


Shares


Amount


capital


subscriptions


stage


income (loss)


deficitCommon stock issued for cash at $0.0008333 per share


-


$
-



5,880,000


$
5,880


$
(980
)

$
-


$
-


$
-


$
4,900Common stock issued for cash at $0.008333 per share


-



-



3,840,000



3,840



28,160



-



-



-



32,000Common stock issued for cash at $0.08333 per share


-



-



120,000



120



9,880



-



-



-



10,000Donated services and rent


-



-



-



-



3,000



-



-



-



3,000Net loss for the period November 4, 2004 (inception) to February 28, 2005


-



-



-



-



-



-



(18,821
)


-



(18,821
)Balance, February 28, 2005


-



-



9,840,000



9,840



40,060



-



(18,821
)


-



31,079Donated services and rent


-



-



-



-



9,000



-



-



-



9,000Net loss for the year ended February 28, 2006


-



-



-



-



-







(45,915
)


-



(45,915
)Balance, February 28, 2006


-



-



9,840,000



9,840



49,060



-



(64,736
)


-



(5,836
)Common stock issued for cash at $5.00 per share


-



-



20,000



20



99,980



-



-



-



100,000Donated services and rent


-



-



-



-



9,000



-



-



-



9,000Net loss for the year ended February 28, 2007


-



-



-



-



-



-



(54,555
)


-



(54,555
)Balance, February 28, 2007


-



-



9,860,000



9,860



158,040



-



(119,291
)


-



48,609Common stock issued for cash at an average price of $5.88 per share


-



-



1,028,245



1,028



6,048,972



-



-



-



6,050,000Common stock issued for oil and gas interests at $0.25 per share


-



-



4,000,000



4,000



997,702



-



-



-



1,001,702Common stock issued for oil and gas interests at $12.05 per share


-



-



80,000



80



963,920



-



-



-



964,000Net loss for the year ended February 29, 2008


-



-



-



-



-



-



(2,628,203
)


-



(2,628,203
)Balance, February 29, 2008


-


$
-



14,968,245


$
14,968


$
8,168,634


$
-


$
(2,747,494
)

$
-


$
5,436,108See accompanying notes to consolidated financial statements.




34






Fox Petroleum Inc. and Subsidiaries(A Development Stage Company)Consolidated Statements of Stockholders' Deficit (Continued)For the period November 4, 2004 (Inception) through February 28, 2011  Deficitaccumulated


AccumulatedAdditional





during the


other


TotalPreferred stock


Common stock


paid-in


Stock


exploration


comprehensive


stockholders'Shares


Amount


Shares


Amount


capital


subscriptions


stage


income (loss)


deficitBalance, February 29, 2008


-


$
-



14,968,245


$
14,968


$
8,168,634


$
-


$
(2,747,494
)

$
-


$
5,436,108Common stock issued for finance fee at $3.43


-



-



150,000



150



514,350



-



-



-



514,500Common stock issued pursuant to debt conversions at an average price of $0.48 per share


-



-



2,700,000



2,700



1,289,102



-



-



-



1,291,802Common stock subscribed at $0.50 per share


-



-



52,000,000



52,000



25,948,000



(26,000,000
)


-



-



-Discount on convertible debt


-



-



-



-



1,283,689



-



-



-



1,283,689Beneficial conversion feature


-



-



-



-



3,098,620



-



-



-



3,098,620Net loss for the year ended February 28, 2009


-



-



-



-



-



-



(32,209,932
)


-



(32,209,932
)Balance, February 28, 2009


-



-



69,818,245



69,818



40,302,395



(26,000,000
)


(34,957,426
)


-



(20,585,213
)Common stock released from escrow pursuant to default on securities purchase agreements at $0.31 per share


-



-



15,000,000



15,000



4,635,000



-



-



-



4,650,000Net loss for the year ended February 28, 2010


-



-



-



-



-



-



(7,781,827
)


-



(7,781,827
)Balance, February 28, 2010


-



-



84,818,245



84,818



44,937,395



(26,000,000
)


(42,739,253
)


-



(23,717,040
)Common stock cancelled for non- performance of finder's fee


-



-



(150,000
)


(150
)


(514,350
)


-



-



-



(514,500
)Cancellation of common stock subscriptions


-



-



(52,000,000
)


(52,000
)


(25,948,000
)


26,000,000



-



-



-Common stock issued for services and Company support at an average fair value of $0.57


-



-



60,756,752



60,757



3,398,855



-



-



-



3,459,612Common stock issued for acquisition of 1536692 Ontario, Inc.


-



-



1,750,000



1,750



94,500



-



-



-



96,250Common stock issued pursuant to debt conversions at an average price of $0.045 per share


-



-



16,750,000



16,750



737,650



-



-



-



754,400Beneficial conversion feature


-



-



-



-



32,665



-



-



-



32,665Accumulated other comprehensive loss acuired in 1536692 Ontario, Inc. acquisition


-



-



-



-



-



-



-



(9,761
)


(9,761
)Foreign currency transaltion adjustment


-



-



-



-



-



-



-



(8,122
)


(8,122
)Net loss for the year ended February 28, 2011


-



-



-



-



-



-



(1,394,373
)






(1,394,373
)Balance, February 28, 2011 - Restated


-


$
-



111,924,997


$
111,925


$
22,738,715


$
-


$
(44,133,626
)

$
(17,883
)

$
(21,300,869
)See accompanying notes to consolidated financial statements.




35







Fox Petroleum Inc. and Subsidiaries(A Development Stage Company)Consolidated Statements of Cash Flows  For the PeriodNovember 4, 2004(Inception) toFor the Year Ended February 28,


February 28,2011


2010


2011RestatedCash flows from operating activities:Net loss

$
(1,394,373
)

$
(7,781,827
)

$
(44,133,626
)Adjustments to reconcile net loss to net cash from (used in) operations:Donated services and rent


-



-



21,000Depreciation


12,061



-



12,061Accretion of convertible debt discount


19,264



-



2,594,756Loss on debt conversion


715,650







715,650Fees payable in stock and warrants


(40,097
)


(7,407
)


(3,010
)Finance fees paid in stock and warrants


(514,500
)


4,634,037



7,755,794Gain on settlement of accounts payable


(3,184,620
)


(125,143
)


(3,309,763
)Impairment of oil and gas assets


-



588,270



10,046,683Impairment of goodwill


397,575



-



397,575Gain of VAT receivable written off


-



-



(78,451
)Stock issued for services


3,459,612



-



3,459,612Changes in operating assets and liabilities:VAT Refund and other recivables


-



157,718



78,451Accounts payable and accrued expenses


15,000



2,126,224



18,306,988Accrued interest


476,953



415,923



1,204,592Accrued interest, related parties


11,177



-



11,177Net cash from (used) in operating activities


(26,298
)


7,795



(2,920,511
)Cash flows from investing activities:Cash acquired from acquisitions


9



-



9Advances to related entities


(22,500
)


-



(22,500
)Proceeds (investment) in oil and gas interests


-



20,000



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


-



5,468



-Net cash from (used in) investing activities


(22,491
)


25,468



(7,725,178
)Cash flows from financing activities:Proceeds from issuance of common stock


-



-



6,196,900Proceeds from issuance of notes payable


45,000



-



4,445,000Advances from officer


3,789



-



3,789Advances from related parties






-



34,000Repayments of advances from related parties


-



(34,000
)


(34,000
)Net cash from (used in) financing activities


48,789



(34,000
)


10,645,689Net increase in cash


-



(737
)


-Cash at beginning of period


-



737



-Cash at end of period

$
-


$
-


$
-See accompanying notes to consolidated financial statements.
 36
  
 Fox Petroleum Inc. and Subsidiaries(A Development Stage Company)Consolidated Statements of Cash Flows (Continued)  For the PeriodNovember 4, 2004(Inception) toFor the Year Ended February 28,


February 28,2011


2010


2011RestatedSupplemental disclosure of cash flow information:Cash paid for interest

$
-


$
-


$
16,667Cash paid for taxes

$
-


$
-


$
-Non-cash investing and financing activities:Common stock issued in conversion of notes payable, related parties

$
754,400


$
-


$
754,400Cancellation subscriptions for 52,000,000 shares of common stock

$
26,000,000


$
-


$
26,000,000Issuance of 1,750,000 shares of common stock for acquisitionof 1536692 Ontario, Inc.

$
96,250


$
-


$
96,250Benefical conversion feature on convertible debt

$
32,665


$
-


$
2,608,157Issuance of 52,000,000 common stock subscriptions

$
-


$
-


$
26,000,000Issuance of 4,080,000 shares of common stock for oil and gas interests

$
-


$
-


$
1,965,702See accompanying notes to consolidated financial statements.
  37




Fox Petroleum, Inc. and Subsidiaries


(A Development Stage Company)


Notes to Financial Statements


February 28, 2011





Note 1 – Restatement of Prior Period Consolidated Financial Statements





The Company restated its previously issued consolidated financial statements included in the original Annual Report on Form 10-K for the year ended February 28, 2011 to reflect the effects of accounting and reporting errors, and to record the acquisition of its wholly-owned subsidiary, resulting from a deficiency in its accounting and financial statement preparation process. This error and the related adjustments resulted in an understatement of net loss of $1,378,373 for the year ended February 28, 2011 and the understatements of $58,491and $1,394,373 of total assets and  deficits accumulated during the development stage, respectively, and the overstatement of $2,3174,583 of total current liabilities. The revisions applied to the affected individual line items in the consolidated financial statements are as follows:




February 28, 2011As previously





Asreported


Adjustments


restatedASSETSCurrent assetsCash

$
-


$
-


$
-Due from affiliate


-



22,500



22,500Total current assets


-



22,500



22,500Property and equipment, net


-



35,991



35,991Total assets

$
-


$
58,491


$
58,491LIABILITIES AND STOCKHOLDERS' DEFICITCurrent liabilitiesAccounts payable and accrued expenses

$
18,360,246


$
(3,927,318
)

$
14,432,928Accrued interest


-



1,234,651



1,234,651Accrued interest, related parties


-



143,228



143,228Due to officer


-



3,789



3,789Notes payable


5,312,333



31,599



5,343,932Notes payable, related parties


-



196,468



196,468Total current liabilities


23,672,579



(2,317,583
)


21,354,996Fees payable in stock and warrants


44,461



(40,097
)


4,364Stockholders' deficitPreferred stock


-



-



-Common stock


84,818



27,107



111,925Additional paid-in capital


44,937,395



(22,198,680
)


22,738,715Subscriptions receivable


(26,000,000
)


26,000,000



-Accumulated other comprehensive income (loss)


-



(17,883
)


(17,883
)Deficit accumulated during the exploration stage


(42,739,253
)


(1,394,373
)


(44,133,626
)Total stockholders' deficit


(23,717,040
)


2,416,171



(21,300,869
)Total liabilities and stockholders' deficit

$
-


$
58,491


$
58,491




38




Fox Petroleum, Inc. and Subsidiaries


(A Development Stage Company)


Notes to Financial Statements


February 28, 2011





Note 1 – Restatement of Prior Period Consolidated Financial Statements (Continued)





Consolidated Statements of Operations




Year ended February 28, 2011As previously





Asreported


Adjustments


restatedSales revenue

$
-


$
-


$
-Operating expenses:General and administrative expenses


-



31,859



31,859Consulting fees


16,000



3,405,015



3,421,015Finance Fees


-



(494,500
)


(494,500
)Total operating expenses


16,000



2,942,374



2,958,374Loss from operations


(16,000
)


(2,942,374
)


(2,958,374
)Other income (expense):Gain on recovery of payables


-



3,184,620



3,184,620Interest expense


-



(488,130
)


(488,130
)Impairment of goodwill


-



(397,575
)


(397,575
)Accretion of convertibe note discounts


-



(19,264
)


(19,264
)Loss on conversion of debt


-



(715,650
)


(715,650
)Total other income (expense)


-



1,564,001



1,564,001Loss before income taxes


(16,000
)


(1,378,373
)


(1,394,373
)Provision for income taxes


-



-



-Net loss

$
(16,000
)

$
(1,378,373
)

$
(1,394,373
)




39


Fox Petroleum, Inc. and Subsidiaries


(A Development Stage Company)


Notes to Financial Statements


February 28, 2011





Note 1 – Restatement of Prior Period Consolidated Financial Statements (Continued)





Consolidated Statements of Cash Flows




Year ended February 28, 2011As previously





Asreported


Adjustments


restatedCash flows from operating activities:Net loss

$
-


$
(1,394,373
)

$
(1,394,373
)Adjustments to reconcile net loss tonet cash used in operations:Depreciation


-



12,061



12,061Accretion of convertible debt discount


-



19,264



19,264Loss on debt conversion


-



715,650



715,650Fees payable in stock and warrants


-



(40,097
)


(40,097
)Finance fees paid in stock and warrants


-



(514,500
)


(514,500
)Gain on settlement of accounts payable


-



(3,184,620
)


(3,184,620
)Impairment of goodwill


-



397,575



397,575Stock issued for services


-



3,459,612



3,459,612Changes in operating assets and liabilities:Accounts payable and accrued expenses


-



15,000



15,000Accrued interest


-



476,953



476,953Accrued interest, related parties


-



11,177



11,177Net cash used in operating activities


-



(26,298
)


(26,298
)Cash flows from investing activities:Cash acquired from acquisitions


-



9



9Advances to related entities


-



(22,500
)


(22,500
)Net cash used in investing activities


-



(22,491
)


(22,491
)Cash flows from financing activities:Proceeds from issuance of common stock


-



-



-Proceeds from issuance of notes payable


-



45,000



45,000Advances from officer


-



3,789



3,789Net cash from financing activities


-



48,789



48,789Effect of exchange rate changes on cash


-



-



-Net increase in cash


-



-



-Cash at beginning of period


-



-



-Cash at end of period

$
-


$
-


$
-





40




Fox Petroleum, Inc. and Subsidiaries
 (A Development Stage Company)
 Notes to Financial Statements
 February 28, 2011
 
 Note 2 – Nature of Business, Presentation, and Going Concern
 
 Organization
 
 Fox Petroleum, Inc., the “Company”, was incorporated in Nevada on November 4, 2004 with the intent to engage in the business of oil and gas exploration.  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 is 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.  During the quarter ended August 31, 2010, The Company has decided to no longer continue with exploration activities in these interests and is exploring alternatives of disposing of its interests in the North Sea and Texas.
 
 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.
 
 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.
 
 On June 9, 2010, Richard Moore, the Company’s President / Chief Executive Officer, Secretary, Treasurer, Chief Financial Officer and a member of the Board of Directors, resigned from all positions.  Also on June 9, 2010, the Company’s Board of Directors elected Mr. William Lieberman as a member of the Board of Directors and appointed Mr. Lieberman as the Company’s President / Chief Executive Officer, Secretary, Treasurer and Chief Financial Officer.
 
 On July 15, 2010, the Company entered into a Share Exchange Agreement (the “Share Exchange Agreement”) with 1536692 Ontario, Inc. (“Ontario”), a Canadian corporation, and the shareholders of Ontario (“Ontario Shareholders”).  Ontario owns a scrap plastic processing plant with certain equipment, fixtures and improvements and assets located in Hamilton, Ontario, Canada with the intent of engaging in the business of recycling plastics.  Pursuant to the Share Exchange Agreement, the Company acquired, from the Ontario Shareholders, all of the capital stock of Ontario in exchange for an aggregate of 1,750,000 000 newly issued shares of its restricted common stock, par value $0.001 per share.  The purchase price was determined by the total market value of the newly issued shares on July 15, 2010, totaling $96,250, which was based on the closing market price of the Company’s common stock on the acquisition date.  The acquisition has been accounted for under the purchase method.  The excess of the purchase price paid over the fair value of the assets acquired and liabilities assumed has been classified as goodwill as of the acquisition date.  None of the goodwill is expected to be deductible for income tax purposes.  Revenue and loss generated by Ontario from the acquisition date through February 28, 2011 was $0 and $23,247, respectively.
 
 On July 15, 2010, the Company entered into a Share Exchange Agreement (the “Resource Share Exchange Agreement”) with Resource Polymers Inc. (“Resource”), a Canadian corporation, and the shareholders of Ontario (“Ontario Shareholders”) to acquire 100% of the capital stock of Resource.  As of the date of this report, the acquisition has not been completed as Resource has not satisfied its conditions precedent to closing the exchange.  There is no assurance that Resource will complete its requirements required to close.
 
 The Company is currently exploring new acquisition opportunities.
 
 Basis of Presentation
 
 The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in The United States of America and the rules and regulations of the Securities and Exchange Commission (“SEC”).
  41
  Fox Petroleum, Inc. and Subsidiaries
 (A Development Stage Company)
 Notes to Financial Statements
 February 28, 2011
 
 Note 2 – Nature of Business, Presentation, and Going Concern (Continued)
 
 Going Concern
 
 The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.  As reflected in the accompanying consolidated financial statements, the Company had an accumulated deficit of $44,133,626 at February 28, 2011, a net loss and net cash used in operations of $1,394,373 and $26,298, respectively, for the year ended February 28, 2011.  These conditions raise substantial doubt about the Company’s ability to continue as a going concern.
 
 The ability of the Company’s to continue as a going concern is dependent upon the Company’s ability to further implement its business plan, generate revenues, and continue to raise additional investment capital.  No assurance can be given that the Company will be successful in these efforts.
 
 The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.  Management believes that actions presently being taken to obtain additional funding and implement its strategic plans provide the opportunity for the Company to continue as a going concern.
 
 Note 3 – Summary of Significant Accounting Policies
 
 Use of Estimates
 
 The preparation of consolidated financial statements in conformity with accounting principles (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.  Significant estimates in the accompanying consolidated financial statements include the depreciable lives of property and equipment, valuation of share-based payments and the valuation allowance on deferred tax assets.  Actual results could differ from those estimates and would impact future results of operations and cash flows.
 
 Principles of Consolidation
 
 The consolidated financial statements include the accounts of Fox Petroleum, Inc. and its wholly-owned subsidiary, 1536692 Ontario, Inc.  All significant inter-company balances and transactions have been eliminated in consolidation.
 
 Reclassifications
 
 Certain items on the 2010 consolidated balance sheet, statement of operations, and statement of cash flows have been reclassified to conform to the current period presentation.
 
 Cash and Cash Equivalents
 
 The Company considers all highly liquid temporary cash investments with an original maturity of three months or less to be cash equivalents. At February 28, 2011 and 2010, respectively, the Company had no cash equivalents.
 
 Property and Equipment
 
 Property and equipment are recorded at cost. Expenditures for major additions and betterments are capitalized. Maintenance and repairs are charged to operations as incurred. Depreciation of property and equipment is computed by the straight-line method (after taking into account their respective estimated residual values) over the assets estimated useful lives of 10 years. Upon sale or retirement of property and equipment, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in the consolidated statements of operations. Leasehold improvements are amortized on a straight-line basis over the term of the lease or the estimated useful lives, whichever is shorter.
  42
 
 Fox Petroleum, Inc. and Subsidiaries
 (A Development Stage Company)
 Notes to Financial Statements
 February 28, 2011
 
 Note 3 – Summary of Significant Accounting Policies (Continued)
 
 Development Stage and Mineral Property and Exploration Costs
 
 The Company has been in the development stage since November 4, 2004, as defined in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 915 “Development Stage Entities”, and has not yet realized revenues from its planned operations.  It is primarily engaged in the acquisition, exploration, and development of oil and gas mineral properties.





Mineral property exploration costs are expensed as incurred. When it has been determined that a mineral property can be economically developed as a result of establishing probable and then proven reserves, then the costs incurred to develop such property are capitalized. Such costs will be amortized using the units-of-production method over the estimated life of the probable-proven reserves. If mineral properties are subsequently abandoned or impaired, any capitalized costs will be charged to operations. The Company has incurred $17,000 of exploration and acquisition costs and $0 of development costs from inception through February 28, 2011.




Goodwill and other intangible assets
 
 Goodwill represents the excess of acquisition consideration paid over the fair value of identifiable net tangible and identifiable intangible assets acquired. Goodwill and other indefinite-lived intangible assets are not amortized, but are reviewed for impairment at least annually, in the third quarter, or earlier upon the occurrence of certain triggering events.
 
 Goodwill is allocated among and evaluated for impairment at the reporting unit level. Management evaluates goodwill for impairment using a two-step process provided by ASC Topic 350 “Intangibles — Goodwill and Other”. The first step is to compare the fair value of each of our reporting units to their respective book values, including goodwill. If the fair value of a reporting unit exceeds its book value, reporting unit goodwill is not considered impaired and the second step of the impairment test is not required. If the book value of a reporting unit exceeds its fair value, the second step of the impairment test is performed to measure the amount of impairment loss, if any. The second step of the impairment test compares the implied fair value of the reporting unit’s goodwill with the book value of that goodwill. If the book value of the reporting unit’s goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to that excess. The Company determined that the goodwill resulting from the acquisition of 1536692 Ontario Inc. of $397,575 was fully impaired as of February 28, 2011and has charged the impairment to operations.
 
 Impairment or Disposal of Long-Lived Assets
 
 The Company accounts for the impairment or disposal of long-lived assets according to ASC 360 “Property, Plant and Equipment”. ASC 360 clarifies the accounting for the impairment of long-lived assets and for long-lived assets to be disposed of, including the disposal of business segments and major lines of business. Long-lived assets are reviewed when facts and circumstances indicate that the carrying value of the asset may not be recoverable. When necessary, impaired assets are written down to estimate fair value based on the best information available. Estimated fair value is generally based on either appraised value or measured by discounting estimated future cash flows. Considerable management judgment is necessary to estimate discounted future cash flows. Accordingly, actual results could vary significantly from such estimates.
 
 Fair Value of Financial Instruments
 
 FASB ASC 820, Fair Value Measurements and Disclosures, establishes a framework for measuring fair value and expands disclosures about fair value measurements.  ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.  ASC 820 states that a fair value measurement should be determined based on the assumptions the market participants would use in pricing the asset or liability.  In addition, ASC 820 specifies a hierarchy of valuation techniques based on whether the types of valuation information (“inputs”) are observable or unobservable.  Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances.
  43
 
 Fox Petroleum, Inc. and Subsidiaries
 (A Development Stage Company)
 Notes to Financial Statements
 February 28, 2011
 
 Note 3 – Summary of Significant Accounting Policies (Continued)
 
 The three broad levels defined by ASC 820 hierarchy are as follows:
 
 Level 1 – quoted prices for identical assets or liabilities in active markets.
 Level 2 – pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reported date.
 Level 3 – valuations derived from methods in which one or more significant inputs or significant value drivers are unobservable in the markets.
 
 These financial instruments are measured using management’s best estimate of fair value, where the inputs into the determination of fair value require significant management judgment to estimation. Valuations based on unobservable inputs are highly subjective and require significant judgments.  Changes in such judgments could have a material impact on fair value estimates.  In addition, since estimates are as of a specific point in time, they are susceptible to material near-term changes.  Changes in economic conditions may also dramatically affect the estimated fair values.
 
 Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of February 28, 2011. The respective carrying value of certain financial instruments approximated their fair values due to the short-term nature of these instruments. These financial instruments include amounts due from affiliate, accounts payable and accrued expenses and amounts due to officer. The fair value of the Company’s notes payable is estimated based on current rates that would be available for debt of similar terms which is not significantly different from its stated value.
 
 Revenue Recognition
 
 The Company recognizes revenue on arrangements in accordance with ASC Topic 605, “Revenue Recognition”   (“ASC Topic 605”).  Under ASC Topic 605, revenue is recognized only when the price is fixed and determinable, persuasive evidence of an arrangement exists, the service is performed and collectability of the resulting receivable is reasonably assured.  Revenue is recognized when the products are received and accepted by the customer.
 
 Stock Based Compensation
 
 The Company accounts for Stock-Based Compensation under ASC 718 “Compensation – Stock Compensation”, which addresses the accounting for transactions in which an entity exchanges its equity instruments for goods or services, with a primary focus on transactions in which an entity obtains employee services in share-based payment transactions. ASC 718-10 is a revision to SFAS No. 123, "Accounting for Stock-Based Compensation," and supersedes Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to Employees," and its related implementation guidance. ASC 718-10 requires measurement of the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award (with limited exceptions). Incremental compensation costs arising from subsequent modifications of awards after the grant date must be recognized.
 
 The Company accounts for stock-based compensation awards to non-employees in accordance with ASC 505-50 “Equity-Based Payments to Non-Employees” ("ASC 505-50"). Under ASC 505-50, the Company determines the fair value of the warrants or stock-based compensation awards granted as either the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. Any stock options issued to non-employees are recorded in expense and additional paid-in capital in shareholders' equity/(deficit) over the applicable service periods using variable accounting through the vesting dates based on the fair value of the options at the end of each period.
 
 The Company has not adopted a stock option plan and has not granted any stock options as of February 28, 2011.
 
 Income Taxes
 
 Income taxes are accounted for under the liability method of accounting for income taxes.  Under the liability method, future tax liabilities and assets are recognized for the estimated future tax consequences attributable to differences between the amounts reported in the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.  Future tax assets and liabilities are measured using enacted or substantially enacted income tax rates expected to apply when the asset is realized or the
  44
 
 Fox Petroleum, Inc. and Subsidiaries
 (A Development Stage Company)
 Notes to Financial Statements
 February 28, 2011
 
 Note 3 – Summary of Significant Accounting Policies (Continued)
 
 liability settled.  The effect of a change in income tax rates on future income tax liabilities and assets is recognized in income in the period that the change occurs.  Future income tax assets are recognized to the extent that they are considered more likely than not to be realized.
 
 The FASB has issued ASC 740 “Income Taxes” (formerly, Financial Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” – An Interpretation of FASB Statement No. 109 (FIN 48)).  ASC 740 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with prior literature FASB Statement No. 109, Accounting for Income Taxes.  This standard requires a company to determine whether it is more likely than not that a tax position will be sustained upon examination based upon the technical merits of the position. If the more-likely-than-not threshold is met, a company must measure the tax position to determine the amount to recognize in the financial statements.
 
 As a result of the implementation of this standard, the Company performed a review of its material tax positions in accordance with recognition and measurement standards established by FASB ASC 740 and concluded that the tax position of the Company has not met the more-likely-than-not threshold as of February 28, 2011.
 
 Foreign Currency Translation
 
 The consolidated financial statements are presented in United States dollars.  In accordance with ASC 830 ‘‘Foreign Currency Matters’’, foreign denominated monetary assets and liabilities are translated into their United States dollar equivalents using foreign exchange rates which prevailed at the balance sheet date.  Non-monetary assets and liabilities are translated at the exchange rates prevailing at the transaction date.  Revenue and expenses are translated at average rates of exchange during the year.  Gains or losses resulting from foreign currency transactions are included in results of operations.  Translation adjustments are included in Accumulated Other Comprehensive Income (Loss).
 
 Basic and Diluted Loss Per Share
 
 The Company computes income (loss) per share in accordance with ASC 260, "Earnings per Share", which requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the statement of operations.  Basic EPS is computed by dividing income (loss) available to common shareholders by the weighted average number of shares outstanding during the period.  Diluted EPS gives effect to all dilutive potential shares of common stock outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method.  In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants.  Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive.  Dilutive loss per share has not been presented because as of February 28, 2011 and 2010, respectively, there were no common share equivalents outstanding.
 
 Segment Information
 
 In accordance with the provisions of ASC 280-10, “Disclosures about Segments of an Enterprise and Related Information”, the Company is required to report financial and descriptive information about its reportable operating segments.  The Company operates in only one operating segment as of February 28, 2011.
 
 Accounting Standards Codification
 
 In September 2009, the Financial Accounting Standards Board (“FASB”) issued ASC 105, formerly FASB Statement No. 168, the FASB Accounting Standards Codification (“Codification”) and the Hierarchy of Generally Accepted Accounting Principles (“GAAP”), a replacement of FASB Statement No. 162 (“SFAS 168”). SFAS 168 establishes the Codification as the single source of authoritative GAAP in the United States, other than rules and interpretive releases issued by the SEC. The Codification is a reorganization of current GAAP into a topical format that eliminates the current GAAP hierarchy and establishes instead two levels of guidance — authoritative and non-authoritative. All non-grandfathered, non-SEC accounting literature that is not included in the Codification will become non-authoritative. The FASB’s primary goal in developing the Codification is to simplify user access to all authoritative GAAP by providing all the authoritative literature related to a particular accounting topic in one place. The Codification was effective for interim and annual periods ending after September 15, 2009. As the Codification was not intended to change or alter existing GAAP, it did not have a material impact on the Company’s consolidated financial statements.
  45
  Fox Petroleum, Inc. and Subsidiaries
 (A Development Stage Company)
 Notes to Financial Statements
 February 28, 2011
 
 Note 4 – Recent Accounting Pronouncements
 
 In January 2010, the FASB issued ASC Update 2010-01, “Equity (Topic 505): Accounting for Distributions to Shareholders with Components of Stock and Cash” (A Consensus of the FASB Emerging Issues Task Force). This amendment to Topic 505 clarifies the stock portion of a distribution to shareholders that allows them to elect to receive cash or stock with a limit on the amount of cash that will be distributed is not a stock dividend for purposes of applying Topics 505 and 260. Effective for interim and annual periods ending on or after December 15, 2009, and would be applied on a retrospective basis. The Company does not expect the provisions of ASCU 2010-01 to have a material effect on the financial position, results of operations or cash flows of the Company.
 
 In January 2010, the FASB issued ASC Update 2010-02, “Consolidation (Topic 810): Accounting and Reporting for Decreases in Ownership of a Subsidiary”. This amendment to Topic 810 clarifies, but does not change, the scope of current US GAAP. It clarifies the decrease in ownership provisions of Subtopic 810-10 and removes the potential conflict between guidance in that Subtopic and asset derecognition and gain or loss recognition guidance that may exist in other US GAAP. An entity will be required to follow the amended guidance beginning in the period that it first adopts FAS 160 (now included in Subtopic 810-10). For those entities that have already adopted FAS 160, the amendments are effective at the beginning of the first interim or annual reporting period ending on or after December 15, 2009. The amendments should be applied retrospectively to the first period that an entity adopted FAS 160. The Company does not expect the provisions of ASCU 2010-02 to have a material effect on the financial position, results of operations or cash flows of the Company.
 
 In January 2010, the FASB issued, and the Company adopted, ASC Update No. 2010-05, “Escrowed Share Arrangements and the Presumption of Compensation” (ASCU No. 2010-05”).  ASCU No. 2010-05 codifies the SEC staff’s views on escrowed share arrangements which historically has been that the release of such shares to certain shareholders based on performance criteria is presumed to be compensatory.  When evaluating whether the presumption of compensation has been overcome, the substance of the arrangement should be considered, including whether the transaction was entered into for a reason unrelated to employment, such as to facilitate a financing transaction.  In general, in financing transactions the escrowed shares should be reflected as a discount in the allocation of proceeds.  In debt financings the discounts are to be amortized using the effective interest method, while discounts on equity financings are not generally amortized.  As it relates to future financings, the adoption of this update may have an effect on the Company’s financial statements.
 
 In January 2010, the FASB issued ASC Update No. 2010-06 “Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements” which updated guidance to amend the disclosure requirements related to recurring and nonrecurring fair value measurements.  This update requires new disclosures on significant transfers of assets and liabilities between Level 1 and Level 2 of the fair value hierarchy (including the reasons for these transfers) and the reasons for any transfers in or out of Level 3.  This update also requires a reconciliation of recurring Level 3 measurements about purchases, sales, issuances and settlements on a gross basis.  In addition to these new disclosure requirements, this update clarifies certain existing disclosure requirements.  For example, this update clarifies that reporting entities are required to provide fair value measurement disclosures for each class of assets and liabilities rather than each major category of assets and liabilities.  This update also clarifies the requirement for entities to disclose information about both the valuation techniques and inputs used in estimating Level 2 and Level 3 fair value measurements.  This update becomes effective for the Company with the interim and annual reporting period beginning November 1, 2010, except for the requirement to provide the Level 3 activity of purchases, sales, issuances, and settlements on a gross basis, which will become effective for the Company with the interim and annual reporting periods beginning November 1, 2011.  The Company will not be required to provide the amended disclosures for any previous periods presented for comparative purposes.  Other than requiring additional disclosures, adoption of this update will not have a material effect on the Company’s financial statements.
 
 In September 2009, the FASB issued Update No. 2009-13, “Multiple-Deliverable Revenue Arrangements—a consensus of the FASB Emerging Issues Task Force” (ASU 2009-13). It updates the existing multiple-element revenue arrangements guidance currently included under ASC 605-25, which originated primarily from the guidance in EITF Issue No. 00-21, “Revenue Arrangements with Multiple Deliverables” (EITF 00-21). The revised guidance primarily provides two significant changes: 1) eliminates the need for objective and reliable evidence of the fair value for the undelivered element in order for a delivered item to be treated as a separate unit of accounting, and 2) eliminates the residual method to allocate the arrangement consideration. In addition, the guidance also expands the disclosure requirements for revenue recognition. ASU 2009-13 will be effective for the first annual reporting period beginning on or after June 15, 2010, with early adoption permitted provided that the revised guidance is retroactively applied to the beginning of the year of adoption. The Company is currently assessing the future impact of this new accounting update to its consolidated financial statements.
  46




Fox Petroleum, Inc. and Subsidiaries


(A Development Stage Company)


Notes to Financial Statements


February 28, 2011





Note 4 – Recent Accounting Pronouncements (Continued)





Management believes that any other recently issued but not yet effective accounting pronouncements, if adopted, will not have a material effect on the Company’s present or future consolidated financial statements.





Note 5 – Property and Equipment





Property and equipment consisted of the following at February 28, 2011:




Plant and machinery

$
215,945Less: accumulated depreciation


(179,954
)Property and equipment, net

$
35,991





Depreciation expense for the year period from July 15, 2010 (date of acquisition of 1536692 Ontario, Inc.) through February 28, 2011 was $12,061.
 
 Note 6 – Acquisition of Subsidiary and Goodwill
 
 Effective July 15, 2010, the Company acquired 100% of the outstanding capital stock of 1536692 Ontario, Inc., a Canadian Corporation, (“Ontario”) through a share exchange transaction.  In consideration of their shares of Ontario, the Ontario shareholder, Mr. Jack Lieberman, the father of the Company’s President and Chief Executive Officer, received One Million Seven Hundred Fifty Thousand (1,750,000) newly issued restricted common shares of the Company.  For accounting purposes, the acquisition was accounting for using the purchase method in accordance with ASC 805 “Business Combinations”.
 
 The following table summarizes the consideration given based was based on the closing market price of the Company’s common stock on the acquisition date and the fair values of the assets acquired and liabilities assumed at the acquisition date.




Consideration given:1,750,000 shares of Fox Petroleum, Inc. common stock

$
96,250Fair value of identifiable assets acquired and liabilities assumed:Cash

$
9Property and equipment, net


46,003Loans payable


(222,781
)Accrued interest


(124,556
)Total identifiable net assets


(301,325
)Goodwill


397,575$
96,250




The Company determined that the goodwill resulting from the acquisition of $397,575 was fully impaired as of February 28, 2011and has charged the impairment to operations.




47
 
  Fox Petroleum, Inc. and Subsidiaries
 (A Development Stage Company)
 Notes to Financial Statements
 February 28, 2011
 
 
 Note 7 – Oil and Gas Interests
 
 The Company has oil and gas interests in the North Sea and the United States and has not yet determined whether these properties contain reserves that are economically recoverable. Oil and gas interests consisted of the following at February 28, 2011 and 2010:
  February 28, 2011 and 2010United


UnitedStates


Kingdom


TotalUnproved properties:acquistion costs

$
3,701,871


$
23,439


$
3,725,310exploration 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
)$
-


$
-


$
-
  During the quarter ended August 31, 2010, The Company has decided to no longer continue with exploration activities in these interests and is exploring alternatives of disposing of its existing interests in the North Sea and the United States.
 
 North Slope, Alaska, United States
  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.
 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.




48
 
 
 Fox Petroleum, Inc. and Subsidiaries
 (A Development Stage Company)
 Notes to Financial Statements
 February 28, 2011
 
 Note 7 – Oil and Gas Interests (Continued)
 
 North Slope, Alaska, United States (Continued)
  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, 2010, 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.





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, 2010.





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, 2010 and 2011, the gas well is shut-in awaiting further financing.


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, 2009, 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




Fox Petroleum, Inc. and Subsidiaries
 (A Development Stage Company)
 Notes to Financial Statements
 February 28, 2011
 
 Note 7 – Oil and Gas Interests (Continued)
 
 Cook Inlet, Alaska, United States (Continued)





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, 2010, 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.





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.





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.


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, 2010, 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, 2010 for the sale of certain furniture and equipment held for use on the property.





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.





50


Fox Petroleum, Inc. and Subsidiaries
 (A Development Stage Company)
 Notes to Financial Statements
 February 28, 2011
 
 Note 7 – Oil and Gas Interests (Continued)
 
 UK Onshore, United Kingdom (Continued)




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.





25thRound 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.





On November 12, 2008, the Company 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, the Company 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 the Company 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, 2009.


Note 8 – Notes Payable





Notes payable at February 28, 2011 and 2010 consisted of:




February 28,


February 28,2011


2010Debentures payable

$
4,412,333


$
4,412,333Promissory notes, net of discount


481,599



450,000Loan agreement


450,000



450,000Notes payable, related parties


196,468



-$
5,540,400


$
5,312,333




51




Fox Petroleum, Inc. and Subsidiaries
 (A Development Stage Company)
 Notes to Financial Statements
 February 28, 2011
 
 Note 8 – Notes Payable (Continued)
 
 Debentures Payable
 
 Debentures payable consisted of the following at February 28, 2011 and 2010:




February 28,


February 28,2011


2010Convertible debentures payable

$
3,500,000


$
3,500,000Liquidating damages


912,333



912,333Financing costs


(75,545
)


(75,545
)Amortization of financing costs


75,545



75,545$
4,412,333


$
4,412,333




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”:


(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%.


52




Fox Petroleum, Inc. and Subsidiaries
 (A Development Stage Company)
 Notes to Financial Statements
 February 28, 2011
 
 Note 8 – Notes Payable (Continued)
 
 Debentures Payable (Continued)
 
 (i)           Amended Debentures - $2,500,000 (Continued)


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.




The warrants expired during the year ended February 28, 2011 and $2,987 was recorded as a credit to consulting fees.
 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.


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.





53





Fox Petroleum, Inc. and Subsidiaries


(A Development Stage Company)


Notes to Financial Statements


February 28, 2011





Note 8 – Notes Payable (Continued)





Debentures Payable (Continued)








(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.





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 $912,333 (February 28, 2010 - $912,333) 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 accrued interest at February 28, 2011 is $800,000 (February 28, 2010 - $450,000) for accrued interest and redemption premiums on these debentures payable.
 
 During the year period ended February 28, 2011 and the year ended February 28, 2010, 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.




54


Fox Petroleum, Inc. and Subsidiaries
 (A Development Stage Company)
 Notes to Financial Statements
 February 28, 2011
 
 Note 8 – Notes Payable (Continued)
 
 Promissory Notes
 
 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.
 
 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.
 
 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.
 
 On September 21, 2010 the Company was loaned $45,000 by the issuance of a promissory note to be paid on June 23, 2011.  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 8% per annum. Interest will be payable in a balloon payment on the date the loan is repaid. The note is unsecured and is convertible into shares of the Company’s restricted common stock at a conversion price equal to 58% of the average of the lowest three trading prices during the ten trading day period preceding the conversion date.
 
 The Company recorded a beneficial conversion feature of $32,665 with respect to the loan at September 21, 2010 and has included in income amortization expense of $19,264 relating to the beneficial conversion feature during the year ended February 28, 2011, resulting in a net loan obligation of $31,599 at February 28, 2011.
 
 Included in accrued interest at February 28, 2011 is $201,991 (February 28, 2010 - $144,100) for accrued interest on these notes payable.
 
 Loan Agreement
 
 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 for the year ended February 28, 2009.  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.
 
 Included in accrued interest at February 28, 2011 is $232,659 (February 28, 2010 - $163,598) for accrued interest on these notes payable.





55




Fox Petroleum, Inc. and Subsidiaries
 (A Development Stage Company)
 Notes to Financial Statements
 February 28, 2011
 
 Note 8 – Notes Payable (Continued)
 
 Notes Payable, Related Parties
 
 On November 4, 2002, the Company’s wholly-owned subsidiary, 1536692 Ontario, Inc. (“Ontario”), received $144,583 (CAD$ 225,000) from a family member of the Company’s President and Chief Executive Officer, with which the Company purchased production equipment (Note 5).  Interest accrues at 6% compounded annually.  Principal and interest are payable on demand.  The promissory note is secured by the production equipment (Note 5), and any intangible assets developed or contract rights created by the Company in the future, pursuant to a General Security Agreement.
 
 During the period July 15, 2010 (date of acquisition) through February 28, 2011, the Company issued 16,750,000 shares of its restricted common stock in conversion of $38,750 (CAD$ 37,939) of the notes payable at an average price of $0.045 per share, realizing a loss on the debt conversions of $715,650.  The balance outstanding at February 28, 2011 of these notes payable is $191,445, net of foreign currency translation adjustments (CAD$ 187,061).  Included in accrued interest at February 28, 2011 is $143,228 for accrued interest on these notes payable.
 
 Ontario obtains advances from a family member of the Company’s President and Chief Executive Officer to provide operating capital when needed.  The advances are non-interest bearing and due on demand.  As of February 28, 2011, the Company owed the individual $5,023 (CAD$ 4,908), net of foreign currency translation adjustments.
 
 Note 9 – Related Party Transactions
 
 Prior to March 1, 2010, the Company’s previous officers provided consulting and management services to the Company as follows:
  November 4, 2004(Inception) toYear ended February 28,


February 28,2011


2010


2011Consulting fees

$
-


$
-


$
394,859Management fees


-



528,725



1,331,798Office and miscellaneous


-



-



7,000$
-


$
528,725


$
1,733,657




Included in accounts payable and accrued liabilities at February 28, 2011 and 2010 is $1,070,732 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.  Management has deemed that these unpaid management and consulting fees are not payable due to the resignations of all of the officers and directors and has recognized $1,070,732 as income included in gain on recovery of payables for the year ended February 28, 2011.
 
 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.
 
 The Company’s Board of Directors cancelled the above mentioned compensation policy effective March 1, 2010 and recognized the previous accrual of $65,347 for amounts owing to directors of the Company pursuant to this compensation policy as income included  in gain on recovery of payables for the year ended February 28, 2011.


56





Fox Petroleum, Inc. and Subsidiaries
 (A Development Stage Company)
 Notes to Financial Statements
 February 28, 2011
 
 Note 9 – Related Party Transactions (Continued)
 
 On July 15, 2010, the Company issued 1,750,000 shares of its restricted common stock in exchange for 100% of the outstanding capital stock of 1536692 Ontario, Inc., a Canadian Corporation, (“Ontario”) through a share exchange transaction to Mr. Jack Lieberman, the father of the Company’s President and Chief Executive Officer.
 
 On August 16, 2010, the Company issued 1,831,752 shares of its restricted common stock to Mr. William Lieberman, its President and Chief Executive Officer, for services rendered.  The shares were values at the market price on the date of issuance of $0.035, or a total of $64,111.
 
 Note 10 – Stockholders’ Deficit
 
 Effective January 11, 2007 the Company effected a forward stock spilt of the authorized, issued and outstanding shares of common stock on a six 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 effected 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 and outstanding common stock decreased from 74,841,228 to 14,968,246 shares.
 
 Effective August 31, 2010, the Company amended its Articles of Incorporation increasing its 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.


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




57


Fox Petroleum, Inc. and Subsidiaries
 (A Development Stage Company)
 Notes to Financial Statements
 February 28, 2011
 
 Note 10 – Stockholders’ Deficit (Continued)
 
 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, 2009; and
 ●
$10,000,000 on or before March 31, 2009.





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.




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 during the year ended February 28, 2009 along with the agreements to purchase Alaska Oil & Gas.  The Company is currently reviewing its legal position and any associated remedies relating to the above.
  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 52,000,000 shares issued to Carbon.  As a result, the shares that were previously subscribed were cancelled during the year ended February 28, 2011.





Acquisitions
 
 On July 15, 2010, the Company issued 1,750,000 in exchange for 100% of the outstanding capital stock of 1536692 Ontario, Inc., a Canadian Corporation, (“Ontario”) through a share exchange transaction to Mr. Jack Lieberman, the father of the Company’s President and Chief Executive Officer (Note 6).
 
 Debt Conversions
 
 During the period July 15, 2010 (date of acquisition) through February 28, 2011, the Company issued 16,750,000 shares of its restricted common stock in conversion of $38,750 of notes payable at an average price of $0.045 per share.





58





Fox Petroleum, Inc. and Subsidiaries
 (A Development Stage Company)
 Notes to Financial Statements
 February 28, 2011
 
 Note 10 – Stockholders’ Deficit (Continued)
 
 Stock Issued for Services
 
 During the year ended February 28, 2011, the Company issued 60,756,752 shares of its restricted common stock to various individuals and entities for services and company support.  The shares were valued at the market price of the Company’s common stock at the date of issuance for a total value of $3,459,612, or an average of $0.057 per share.
 
 Common Stock Purchase Warrants
 
 Changes in the Company’s common stock purchase warrants for the years ended February 28, 2011 and 2010 are as follows:





February 28, 2011


February 28, 2010Weighted





WeightedAverage





AverageNumber of


Exercise


Number of


ExerciseWarrants


Price


Warrants


PriceBalance at beginning of year


3,048,246


$
2.53



3,048,246


$
2.53Warrants issued


-


$
-



-


$
-Warrants exercised


-


$
-



-


$
-Warrants expired


(1,048,246
)

$
7.34



-


$
-Balance at end of year


2,000,000


$
0.001



3,048,246


$
2.53





The remaining average life of the warrants at February 28, 2011 and 2010 was 2.66 and 2.61 years, respectively.
 
 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%.  As of February 28, 2011 these warrants had not been exercised and expired.  The fair value of the shares ($1,208) has been reflected as a credit to consulting fees for the year ended February 28, 2011.
 
 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%.  As of February 28, 2011 these warrants had not been exercised and expired.  The fair value of the shares ($1,779) has been reflected as a credit to consulting fees for the year ended February 28, 2011.
  Note 11 – Commitments
 
 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.  Effective March 1, 2010, the agreement for £15,000 per month was terminated.


59


Fox Petroleum, Inc. and Subsidiaries
 (A Development Stage Company)
 Notes to Financial Statements
 February 28, 2011
 
 Note 11 – Commitments (Continued)
 
 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 was for a period of one year.




At February 28, 2011 and 2010, 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 and 2010.  The fair value of these warrants was determined to be $7,344 at February 28, 2009 and, consequently an amount of $2,982 has been shown as a credit to consulting fees for the year ended February 28, 2010. 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%.
 
 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 and 2010.  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.
 
 This additional $2,000,000 amount is subject to a commercial discussion between the parties involved and has been accrued at February 28, 2011 and 2010 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, 2009.
 
 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.  Due to the resignation of the officer, the fair value of the shares ($22,500) has been reflected as a credit to consulting fees for the year ended February 28, 2011.
 
 During the year ended February 28, 2010, the Company recorded a recovery of $8,500 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.  Due to the termination of the BOA, the fair value of the shares ($6,500) has been reflected as a credit to consulting fees for the year ended February 28, 2011.
 
 During the year ended February 28, 2010, the Company accrued $8,460 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.  Due to the termination of the consulting agreement, the fair value of the shares ($8,460) has been reflected as a credit to consulting fees for the year ended February 28, 2011.
 
 As of February 28, 2011, the Company has evaluated certain accrued expenses and accounts payable from prior years, primarily consisting of accrued salaries, consulting and management fees, and has determined that these amounts are no longer payable.  Accordingly, $3,184,620 has been recorded as a gain on recovery of payables for the year ended February 28, 2011.


60
 
  Fox Petroleum, Inc. and Subsidiaries
 (A Development Stage Company)
 Notes to Financial Statements
 February 28, 2011
 
 Note 12 – Income Taxes
 
 Deferred income taxes have been provided to show the effect of temporary differences between the recognition of expenses for financial and income tax reporting purposes and between the tax basis of assets and liabilities, and their reported amounts in the consolidated financial statements.  In assessing the realizability of deferred tax assets, the Company assesses the likelihood that deferred tax assets will be recovered through tax planning strategies or from future taxable income, and to the extent that recovery is not likely or there is insufficient operating history, a valuation allowance is established.  The Company adjusts the valuation allowance in the period management determines it is more likely than not that net deferred tax assets will or will not be realized.  As of February 28, 2011 and 2010, the Company has provided a valuation allowance for all net deferred tax assets due to their current realization not being  more likely than not.
 
 The provisions for income taxes differ from the amount computed by applying the statutory federal income tax rate to Income before provision for income taxes. The source and tax effects of the differences are as follows for the years ended February 28, 2011 and 2010:
  2011


2010U.S. federal statutory rate


34
%


34
%Valuation reserve


-34
%


-34
%Total


0
%


0
%
  As of February 28, 2011, we did not recognize any assets or liabilities relative to uncertain tax positions, nor do we anticipate any significant unrecognized tax benefits will be recorded during the next 12 months.  Any interest or penalties related to unrecognized tax benefits is recognized in income tax expense. Since there are no unrecognized tax benefits as a result of tax positions taken, there are no accrued penalties or interest.
 
 Tax positions are positions taken in a previously filed tax return or positions expected to be taken in a future tax return that are reflected in measuring current or deferred income tax assets and liabilities reported in the consolidated financial statements.  Tax positions include, but are not limited to, the following:
 
 ●
An allocation or shift of income between taxing jurisdictions;●
The characterization of income or a decision to exclude reportable taxable income in a tax return; or●
A decision to classify a transaction, entity or other position in a tax return as tax exempt.
  The Company reflects tax benefits only if it is more likely than not that we will be able to sustain the tax position, based on its technical merits.  If a tax benefit meets this criterion, it is measured and recognized based on the largest amount of benefit that is cumulatively greater than 50% likely to be realized.  The Company has no unrecognized tax benefits as of February 28, 2011.
 
 The Company’s practice is to recognize interest and/or penalties related to income tax matters in income tax expense. The Company had no accrual for interest or penalties on the Company’s balance sheets at February 28, 2011, and has not recognized interest and/or penalties in the statement of operations for either period.
 
 Note 13 – Subsequent Events
 
 On April 4, 2011 the Company issued 3,500,000 shares of its restricted common stock in conversion of $17,500 of notes payable at a market price of $0.01 per share.
 
 On April 20, 2011 the Company issued 3,000,000 shares of its restricted common stock to Mr. William Lieberman, its President and Chief Executive Officer, for services at a market price of $0.01 per share, or $30,000.




On April 20, 2011 the Company issued 2,000,000 shares of its restricted common stock to Mr. James Malloy, its Secretary and Treasurer, for services at a market price of $0.01 per share, or $20,000.





The Company has evaluated subsequent events through the date the financial statements were issued and filed with Securities and Exchange Commission. The Company has determined that there are no other events that warrant disclosure or recognition in the financial statements.




61




Item 9.          Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.
 
 On approximately June 10, 2010, BDO CANADA LLP (“BDO”) resigned as the Company’s independent registered public accounting firm. The reports of BDO on the Company’s financial statements as of and for the periods ended February 28, 2009 and 2008 contained no adverse opinion or disclaimer of opinion and were not qualified or modified as to any uncertainty, audit scope or accounting principles.  However, the reports of BDO on the Company’s financial statements as of and for the years ended February 28, 2009 and 2008 contained an explanatory paragraph which noted that there was substantial doubt as to the Company’s ability to continue as a going concern as the Company incurred net losses since inception and existing uncertain conditions which the Company faces relative to its obtaining capital in the equity market.
 
 On June 11, 2010, the Company engaged Larry O’Donnell CPA (“O’Donnell”) as its independent registered public accounting firm to audit the Company’s financial statements for the year ended February 28, 2010. The Company did not, during its two most recent fiscal years or in any subsequent interim period prior to engaging O’Donnell, consult with O’Donnell regarding:
 
 (i)
the application of accounting principles to a specified transaction, either completed or proposed; or the type of audit opinion that might be rendered on the Company’s financial statements whereby a written report was provided to the Company or oral advice was provided that PSH concluded was an important factor considered by the Company in reaching a decision as to the accounting, auditing or financial reporting issue; or
 
 (ii)
any matter that was either the subject of a disagreement or a reportable event as described in Item 304(a)(1)(v) of Regulation S-K.
 
 On February 28, 2011, the Company was advised by the staff of the U.S. Securities and Exchange Commission that the Public Company Accounting Oversight Board’s (“PCAOB”) registration of O’Donnell had been revoked effective December 14, 2010.  The Staff advised the Company that, because of the license revocation, the Company cannot include any audit report prepared by O’Donnell in any of its filings with the Commission.
 
 During the period from June 11, 2010 (the date O’Donnell was engaged by the Company) until the date of their dismissal on February 28, 2011, there (i) have been no disagreements between the Company and O’Donnell on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreement(s), if not resolved to the satisfaction of O’Donnell, would have caused it to make reference to the subject matter of the disagreement(s) in connection with its reports on the financial statements for such years and (ii) were no reportable events of the kind in Item 304(a)(1)(v) of Regulation S-K.
 
 On July 18, 2011, the Company engaged Eugene M. Egeberg, CPA (“Egeberg”) as its independent registered public accounting firm to audit the Company’s financial statements for the year ended February 28, 2011 and 2010. The Company did not, during its two most recent fiscal years or in any subsequent interim period prior to engaging Egeberg, consult with Egeberg regarding:
 
 (iii)
the application of accounting principles to a specified transaction, either completed or proposed; or the type of audit opinion that might be rendered on the Company’s financial statements whereby a written report was provided to the Company or oral advice was provided that Egeberg concluded was an important factor considered by the Company in reaching a decision as to the accounting, auditing or financial reporting issue; or
 
 (iv)
any matter that was either the subject of a disagreement or a reportable event as described in Item 304(a)(1)(v) of Regulation S-K.




Item 9A.          Controls and Procedures.





Evaluation of Disclosure Controls and Procedures
 
 The Securities and Exchange Commission defines the term “disclosure controls and procedures” to mean a company's controls and other procedures of an issuer that are designed to ensure that information required to be disclosed in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Securities Exchange Act of 1934 is accumulated and communicated to the issuer’s management, including its chief executive and chief financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. The Company maintains such a system of controls and procedures in an effort to ensure that all information which it is required to disclose in the reports it files under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified under the SEC's rules and forms and that information required to be disclosed is accumulated and communicated to chief executive and chief financial officers to allow timely decisions regarding disclosure.
 
 62
 
 As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures are not effective to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the SEC rules and forms, and that such information is accumulated and communicated to our management, including our certifying officer, to allow timely decisions regarding the required disclosure.
 
 Management’s Annual Report on Internal Control over Financial Reporting
 
 The management of the Company is responsible for the preparation of the financial statements and related financial information appearing in this Annual Report on Form 10-K. The financial statements and notes have been prepared in conformity with accounting principles generally accepted in the United States of America. The management of the Company is also responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. A company's internal control over financial reporting is defined as a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures that:
  ●
Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company;
 
 ●
Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the issuer are being made only in accordance with authorizations of management and directors of the Company; and
 
 ●
Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company's assets that could have a material effect on the financial statements.
 
 Management, including the Chief Executive Officer and Chief Financial Officer, does not expect that the Company's disclosure controls and internal controls will prevent all error and all fraud. Because of its inherent limitations, a system of internal control over financial reporting can provide only reasonable, not absolute, assurance that the objectives of the control system are met and may not prevent or detect misstatements. Further, over time, control may become inadequate because of changes in conditions or the degree of compliance with the policies or procedures may deteriorate.
 
 With the participation of the Chief Executive Officer and Chief Financial Officer, our management evaluated the effectiveness of the Company's internal control over financial reporting as of February 28, 2011 based upon the framework in Internal Control –Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on that evaluation, our management has concluded that, as of February 28, 2011, the Company had material weaknesses in its internal control over financial reporting. Specifically, management identified the following material weaknesses at February 28, 2011:
  1.
Lack of independent directors to provide oversight in the establishment and monitoring of required internal controls and procedures;2.
Lack of functioning audit committee, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures;3.
Lack of in-house personnel with the technical knowledge to identify and address some of the reporting issues surrounding certain complex or non-routine transactions. With material, complex and non-routine transactions, management has and will continue to seek guidance from third-party experts and/or consultants to gain a thorough understanding of these transactions;4.
Insufficient personnel resources within the accounting function to segregate the duties over financial transaction processing and reporting;5.
Insufficient written policies and procedures over accounting transaction processing and period end financial disclosure and reporting processes.
  63
  To remediate our internal control weaknesses, management intends to implement the following measures:
 
 ·
The Company will add sufficient number of independent directors to the board and appoint an audit committee.
 
 ·
The Company will hire staff technically proficient at applying U.S. GAAP to financial transactions and reporting.
 
 ·
The Company will add sufficient accounting personnel to properly segregate duties and to effect a timely, accurate preparation of the financial statements.
 
 ·
Upon the hiring of additional accounting personnel, the Company will develop and maintain adequate written accounting policies and procedures.
 
 The additional hiring is contingent upon The Company’s efforts to obtain additional funding through equity or debt for its continued exploration activities and corporate expenses. Management expects to secure funds in the coming fiscal year but provides no assurances that it will be able to do so.
 
 We understand that remediation of material weaknesses and deficiencies in internal controls is a continuing work in progress due to the issuance of new standards and promulgations. However, remediation of any known deficiency is among our highest priorities. Our management will periodically assess the progress and sufficiency of our ongoing initiatives and make adjustments as and when necessary.
 
 This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting.  Management’s report was not subject to attestation by our registered public accounting firm pursuant rules of the SEC that permit us to provide only management’s report in this annual report.On July 21, 2010, President Obama signed the Dodd-Frank Wall Street Reform and Consumer Protection Act.  Included in the Act is a provision that permanently exempts smaller public companies that qualify as either a Non-Accelerated Filer or Smaller Reporting Company from the auditor attestation requirement of Section 404(b) of the Sarbanes-Oxley Act of 2002.
 
 Changes in Internal Control over Financial Reporting
 
 There were no changes in our internal control over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
 
 Item 9B.          Other Information.
 
 None.


PART III
 
 Item 10.          Directors, Executive Officers and Corporate Governance.
 
 The following table sets forth information with respect to persons who are serving as directors and officers of the Company.  Each director holds office until the next annual meeting of shareholders or until his successor has been elected and qualified.




HeldPositionName

Age

Positions

SinceWilliam Lieberman

32

President, Chief Executive Officer, Chief Financial Officer, Treasurer and Director

6/9/2010William MacNee

56

Chief Operating Officer and Director

5/5/2008
(1)John Spense

61

Director

5/5/2008
(1)Jeffrey Sternberg

66

Director

4/21/2009
(1)(1) Resigned from all position effective August 9, 2010.




Each director holds office until the next annual meeting of shareholders or until his successor has been elected and qualified.  Officers hold their positions at the will of the Board of Directors, absent any employment agreement.  There are no arrangements, agreements or understandings between non-management shareholders and management under which non-management shareholders may directly or indirectly participate in or influence the management of the Company’s affairs.  There is a family relationship among our directors and executive officers.
 
 64
 
 Biography of Directors and Officers




William Lieberman, President, Chief Executive Officer, Chief Financial Officer, Treasurer and Director




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. 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 OTC Bulletin Board.
  William MacNee, Chief Operating Officer and Director
 
 William MacNee has served as our chief operating officer and a director since May 5, 2008 until his resignation on August 9, 2010. He has a Ph.D. in electrical engineering and he has more than thirty years of international oil, gas, metals and minerals experience. Mr. MacNee has worked throughout North and South America, Western Africa, Eastern Siberia and extensively in Kazakhstan and Kyrgystan. He is skilled at project management, with knowledge in the areas of facilities planning, construction and implementation, gathering systems, process engineering and production operations planning and processing. From April 2006 to April 2008, Mr. MacNee was on contract to Petrofac International and was based in Eastern Siberia as their Operations Manager on the Kovytka gas field for the client TNKBP. From March 2003 to March 2006, he held the position of Project Manager for Arctic Construction International where he handled contracts in the Tengiz field for Chevron and also in the Kashagan oil field for the Northern Constructors Consortium.
 
 Mr. MacNee received his Doctor of Science (Ph.D.) with Electrical Engineering Major at Concordia College and University, USA in July 2003.
  John Spence, Director
 
 Mr. Spence has served as a director since May 5, 2008 until his resignation on August 9, 2010. For 25 years he drilled locations across the United States as a contractor, consultant and for the second half of his career, as a senior manager and member of the Parker Drilling Company team. In the latter part of his career, he has worked in the international arena and in particular Russia and Eastern Europe with drilling operations in the Ukraine, Sakhalin and Kazakhstan. Since September 2006, he has been a consultant drilling manager of Ken Sary LLP – Kazakhstan. From March 2006 to September 2006, he was a consultant drilling manager of KKM – Kazakhstan. From August 2004 to January 2006, he was a consultant drilling manager of Uzpec – Uzbekistan. From September 1999 to May 2004, he was a consultant drilling manager of KKM – Kazakhstan.
  Jeffrey Sternberg, Director
 
 Mr. Sternberg has served as a director since April 21, 2009 until his resignation on August 9, 2010. Since the year 2000, Mr. Sternberg has been involved with investment advisory firms providing portfolio management and financial planning services to private and public companies. From approximately 2007 to current date, Mr. Sternberg has served as an analyst for Trafalgar Capital Advisors, LLC, an institutional investor (“Trafalgar”), where he is responsible for tracking and evaluating potential transactions and monitoring Trafalgar’s expenditures. From approximately 2004 to 2006, Mr. Sternberg served as the president of Advantage Capital Development Corporation, a small business development company (“Advantage Capital”), where he was primarily responsible for eliminating debt of client companies and managing Advantage Capital’s general operations.
 
 Indemnification of Directors and Officers
 
 Nevada Corporation Law allows for the indemnification of officers, directors, and any corporate agents in terms sufficiently broad to indemnify such persons under certain circumstances for liabilities, including reimbursement for expenses, incurred arising under the 1933 Act. The Bylaws of the Company provide that the Company will indemnify its directors and officers to the fullest extent authorized or permitted by law and such right to indemnification will continue as to a person who has ceased to be a director or officer of the Company and will inure to the benefit of his or her heirs, executors and Consultants; provided, however, that, except for proceedings to enforce rights to indemnification, the Company will not be obligated to indemnify any director or officer in connection with a proceeding (or part thereof) initiated by such person unless such proceeding (or part thereof) was authorized by the Board of Directors. The right to indemnification conferred will include the right to be paid by the Company the expenses (including attorney’s fees) incurred in defending any such proceeding in advance of its final disposition.
 
 65
 
 The Company may, to the extent authorized from time to time by the Board of Directors, provide rights to indemnification and to the advancement of expenses to employees and agents of the Company similar to those conferred to directors and officers of the Company. The rights to indemnification and to the advancement of expenses are subject to the requirements of the 1940 Act to the extent applicable.
 
 Furthermore, the Company may maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the Company or another company against any expense, liability or loss, whether or not the Company would have the power to indemnify such person against such expense, liability or loss under the Nevada General Corporation Law.
 
 Section 16(a) Beneficial Ownership Reporting Compliance
 
 Section 16(a) of the Exchange Act requires our directors, executive officers and persons who own more than 10% of a registered class of our equity securities to file with the SEC initial reports of ownership and reports of changes in ownership of our common stock and other equity securities. Officers, directors and greater-than-10% stockholders are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file.
 
 To our knowledge, based solely on a review of copies of such reports furnished to us and written representations that no other reports were required, each of our directors, officers and ten percent stockholders complied with all Section 16(a) filing requirements applicable to them except: William Lieberman (2 late filings / 2 late transactions).
 
 Code of Ethics
 
 Effective April 17, 2008, we have adopted a corporate code of ethics. We believe our code of ethics is reasonably designed to deter wrongdoing and promote honest and ethical conduct; provide full, fair, accurate, timely and understandable disclosure in public reports; comply with applicable laws; ensure prompt internal reporting of code violations; and provide accountability for adherence to the code
 
 Committees of the Board of Directors
 
 We do not have any separately-designated committees of the board. Audit committee functions are performed by William Lieberman, who also serves as an officer of the Company. Mr. Lieberman, our sole director, is not deemed independent. Mr. Lieberman is responsible for: (1) selection and oversight of our independent accountant; (2) establishing procedures for the receipt, retention and treatment of complaints regarding accounting, internal controls and auditing matters; (3) establishing procedures for the confidential, anonymous submission by our employees of concerns regarding accounting and auditing matters; (4) engaging outside advisors; and, (5) funding for the outside auditory and any outside advisors engaged by Mr. Lieberman.
 
 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).




Auditors





Our principal independent accountant is Eugene M. Egeberg, CPA.





Item 11.        Executive Compensation.





Our directors do not receive any stated salary for their services as directors or members of committees of the board of directors.  Directors may also serve the company in other capacities as an officer, agent or otherwise, and may receive compensation for their services in such other capacity.  Directors of the Company who are also employees of the Company will not receive additional compensation for their services as directors. Reasonable travel expenses are reimbursed.





66





The following tables set forth information concerning all cash compensation awarded to, earned by or paid to all individuals serving as Fox Petroleum, Inc.’s principal executive officers during the last two completed fiscal years, and all non-cash compensation awarded to those same individuals as of February 28, 2011.





Stock


All OtherName and Principal Position

Year


Salary


Bonus


Awards


Compensation


Total$


$


$


$


$William Lieberman, President, Chief Executive Officer, Chief Financial Officer, Secretary and Treasurer (1)


2011



-



-



64,111



-



64,111Richard Moore, Former President, Chief Executive Officer, Chief Financial Officer, Secretary, and Treasurer (2)


2011

2010



-

-



-

-



-

-



-

-



-

-William MacNee, Chief Operating Officer (3)


2011

2010



-

-



-

-



-

-



-

-



-

-
 (1)

Mr. William Lieberman was appointed as President, Chief Executive Officer, Chief FinancialOfficer, Secretary, Treasurer and Director on June 9, 2010.(2)

Mr. Richard Moore resigned from all positions held on June 9, 2010.(3)

Nr. William MacNee resigned as Chief Operating Officer on August 9, 2010.




There are no formal written employment arrangements in place. We do not have any agreements or understandings that would change the terms of compensation during the course of the year.


Item 12.       Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
 
 The following table sets forth certain information regarding beneficial ownership of the common stock as of February 28, 2011, by (i) each person who is known by the Company to own beneficially more than 5% of the any classes of outstanding Stock, (ii) each director of the Company, (iii) each officer and (iv) all directors and executive officers of the Company as a group.
 
 The number and percentage of shares beneficially owned is determined in accordance with Rule 13d-3 and 13d-5 of the Exchange Act, and the information is not necessarily indicative of beneficial ownership for any other purpose. We believe that each individual or entity named has sole investment and voting power with respect to the securities indicated as beneficially owned by them, subject to community property laws, where applicable, except where otherwise noted.




67




Name of Beneficial Owner (2)

Title of Stock

Class

Shares

Beneficially

Owned


Percent

of

Class (1)William Lieberman (4) (5)

Common Stock


1,831,752



1.64
%Trafalgar Capital Specialized Investment Fund (3)

Common Stock


17,700,000



15.81
%All Directors and Officers as a Group

Common Stock


1,831,752



1.64
%




(1)
The percentage of common stock is calculated based upon 111,924,927 shares issued andoutstanding as of February 28, 2011.(2)
Unless other wise indicated, the address of each person listed is c/o Fox Petroleum, Inc.,545 Eighth Avenue, Suite 401, New York, NY 10018(3)
The address of Trafalgar Capital Specialized Investment Fund is 43 Boulevard Prince Henri,L-1724 Luxembourg, RCS Luxembourg B 125117.  Amount includes warrants to purchase2,000,000 shares of our common stock at an exercise price of $0.001.(4)
Indicates director.(5)
Indicates officer.


Item 13.         Certain Relationships and Related Transactions, and Director Independence.




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.




Jack Lieberman
 
 As described in Item I, Part I of this Annual Report on Form 10-K, on December 15, 2009, the Company acquired 100% of the outstanding capital stock of 1536692 Ontario, Inc (“Ontario”).  The capital stock of Ontario was acquired from Mr. Jack Lieberman, the father of the Company’s President, Chief Executive Officer and Director, in exchange for a total of 1,750,000   restricted shares of the Company’s common stock.
 
 Richard Bullock
 
 Richard Bullock was our chairman and director from June 8, 2007 to May 1, 2008 and owned 4,000,000 shares of our common stock as of February 28, 2010 .
 
 On May 29, 2007, we entered into the Lease Purchase and Sale Agreement with Fox Petroleum LLC, a Nevada company, to acquire a combined 100% working interests in twelve state-issued oil and gas leases in North Slope, Alaska. These leases are subject to a royalty of 16.67% to the State of Alaska and a private royalty equal to 5%. In consideration for the oil and gas leases, we issued 20,000,000 shares of our restricted common stock (4,000,000 post-reverse stock split) to Richard Bullock, the 100% owner of Fox Petroleum LLC. Acquisitions of eleven oil and gas leases under the agreement with Fox Petroleum LLC was completed on August 14, 2007, while that of 12th oil and gas lease was completed effective March 1, 2008. These leases were assigned to our wholly owned subsidiary, Fox Petroleum Alaska and subsequently assigned to the Payors.
 
 Aimwell Energy Limited
 
 Michael Rose and Robert Frost, our former directors, are the beneficial owners and directors of Aimwell Energy Ltd. For information regarding our transactions with Aimwell Energy Limited, please see “Item 1. Business.” and “Item 2. Properties.”
 
 EuroEnergy Growth Capital S.A.
 
 EuroEnergy Growth Capital S.A. owned 1,028,245 shares of our common stock. For information regarding our transactions with EuroEnergy Growth Capital S.A., please see “Item 6. Management’s Discussion and Analysis or Plan of Operation - Liquidity and Capital Resources.”
 
 68
 
 Trafalgar Capital Specialized Investment Fund
 
 Trafalgar Capital Specialized Investment Fund owns 17,700,000 shares of our common stock and warrant to purchase 2,000,000 shares of our common stock. For information regarding our transactions with Trafalgar, please see “Item 1. Business.” and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
 
 Carbon Energy Investments Limited
 
 Carbon Energy Investments Limited owned 32,000,000 shares of our common stock under a subscription agreement.  As the subscription amount was never paid, the shares were cancelled and returned to the treasury in March 2010.  For information regarding our transactions with Carbon Energy, please see “Item 1. Business.”
 
 Libertas Capital Ventures Limited
 
 Libertas Capital Ventures Limited owned 20,000,000 shares of our common stock under a subscription agreement.  As the subscription amount was never paid, the shares were cancelled and returned to the treasury in March 2010.  For information regarding our transactions with Libertas Capital Ventures, please see “Item 1. Business.”
 
 Director Independence
 
 Our board of directors is presently composed of one director, William Lieberman.  Accordingly, we currently have no independent directors.
 
 Item 14.          Principal Accounting Fees and Services.


Audit Fees
 
 On June 11, 2010, the Company replaced BDO CANADA LLP and engaged Larry O’Donnell, CPA as its independent registered public accounting firm as of and for the year ended February 28, 2010.  The change in independent registered public accounting firm is not the result of any disagreement with BDO CANADA LLP.
 
 On July 18, 2011, the Company replaced Larry O’Donnell, CPA and engaged Eugene M. Egeberg, CPA as its independent registered public accounting firm as of and for the year ended February 28, 2011.  The change in independent registered public accounting firm is not the result of any disagreement with Larry O’Donnell, CPA.




2011 (1)


2010Audit fees

$
15,000


$
-Audit-related fees


-



-Tax fees


-



-All other fees


-



-$
15,000


$
-(1) Includes estimated fees to be billed in 2012 for fiscal 2011.




Audit Fees consist of the aggregate fees billed for professional services rendered for the audit of our annual consolidated financial statements and the reviews of the consolidated financial statements included in our Forms 10-Q and for any other services that are normally provided by our independent public accountants in connection with our statutory and regulatory filings or engagements.
 
 Audit Related Fees consist of the aggregate fees billed for professional services rendered for assurance and related services that were reasonably related to the performance of the audit or review of our consolidated financial statements and the financial statements of our subsidiaries that were not otherwise included in Audit Fees.
 
 Tax Fees consist of the aggregate fees billed for professional services rendered for tax compliance, tax advice and tax planning. Included in such Tax Fees were fees for preparation of our tax returns and consultancy and advice on other tax planning matters.
 
 All Other Fees consist of the aggregate fees billed for products and services provided by our independent public accountants and not otherwise included in Audit Fees, Audit Related fees or Tax Fees.




69





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.





PART IV
 
 Item 15.                       Exhibits, Financial Statement Schedules
 
 Financial Statements
 
 See Item 8. Financial Statements and Supplementary Data
 
 Exhibits





Exhibit No.

Description3.1

Articles of Incorporation (incorporated by reference to an exhibit to our registration statement on Form SB-2 filed on August 19, 2005)3.2

Certificate of change filed with the Secretary of State of Nevada on January 2, 2007 and which is effective on January 11, 2007 (incorporated by reference to an exhibit to our current report on Form 8- K filed on January 12, 2007)3.3

Article of Merger filed with the Secretary of State of Nevada on January 11, 2007 (incorporated by reference to an exhibit to our current report on Form 8-K filed on February 7, 2007)3.4

Certificate of Change filed with the Secretary of State of Nevada on April 4, 2008 (incorporated by reference to an exhibit to our current report on Form 8-K filed on April 21, 2008)3.5

Amended and Restated Bylaws (incorporated by reference to an exhibit to our current report on Form 8- K filed on April 30, 2008)3.6

Certificate of Amendment filed with the Secretary of State of Nevada on August 31, 2011 (incorporated by reference to an exhibit to our current report on Form 8-K filed on September 10, 2011)10.1

Private Placement Subscription Agreement dated February 23, 2007 (incorporated by reference to an exhibit to our current report on Form 8-K filed on June 1, 2007)10.2

Lease Purchase and Sale Agreement dated May 29, 2007 (incorporated by reference to an exhibit to our current report on Form 8-K filed on May 31, 2007)10.3

Share Issuance Agreement dated May 17, 2007 (incorporated by reference to an exhibit to our current report on Form 8-K filed on June 1, 2007)10.4

Farm-In Agreement dated June 8, 2007 (incorporated by reference to an exhibit to our annual report on Form 10-KSB filed on June 13, 2007)10.5

Employment Agreement dated June 11, 2007 (incorporated by reference to an exhibit to our annual report on Form 10-KSB filed on June 13, 2007)10.6

Escrow Agreement dated June 8, 2007 (incorporated by reference to an exhibit to our annual report on Form 10-KSB filed on June 13, 2007)10.7

Consulting Agreement dated June 12, 2007 (incorporated by reference to an exhibit to our annual report on Form 10- KSB filed on June 13, 2007)10.8

Consulting Agreement dated June 12, 2007 (incorporated by reference to an exhibit to our annual report on Form 10- KSB filed on June 13, 2007)10.9

Subscription Agreement between Trius Energy, LLC and our company (incorporated by reference to an exhibit to our current report on Form 8-K filed on October 19, 2007)  70
  Exhibit No.

Description
 10.10

Amendment to Employment Agreement dated October 19, 2007 (incorporated by reference to an exhibit to our quarterly report on Form 10-QSB filed on October 22, 2007)10.11

Amendment to Consulting Agreement dated October 19, 2007 (incorporated by reference to an exhibit to our quarterly report on Form 10-QSB filed on October 22, 2007)10.12

Farm-Out Agreement dated November 8, 2007 between Valiant North Sea Limited, Petrofac Energy Developments Limited and Fox Energy Exploration Limited (incorporated by reference to an exhibit to our current report on Form 8-K filed on November 23, 2007)10.13

Purchase Agreement (North Slope Leases) dated October 10, 2007 (incorporated by reference to an exhibit to our current report on Form 8-K filed on November 28, 2007)10.14

Amendment Agreement No. 1 to Purchase Agreement (North Slope Leases) dated November 2, 2007 (incorporated by reference to an exhibit to our current report on Form 8-K filed on November 28, 2007)10.15

Purchase Agreement (Cook Inlet) dated October 10, 2007 (incorporated by reference to an exhibit to our current report on Form 8-K filed on November 28, 2007)10.16

Finder Agreement with Partners Consulting, Inc. dated February 15, 2008 (incorporated by reference to an exhibit to our current report on Form 8-K filed on March 21, 2008)10.17

Promissory Note dated April 1, 2008 to EuroEnergy Growth Capital S.A. (incorporated by reference to an exhibit to our current report on Form 8-K filed on May 9, 2008)10.18

Letter of Commitment with Senergy Limited (incorporated by reference to an exhibit to our current report on Form 8-K filed on May 9, 2008)10.19

Promissory Note dated May 1, 2008 to EuroEnergy Growth Capital S.A. (incorporated by reference to an exhibit to our current report on Form 8-K filed on May 21, 2008)10.20

Bonus Agreement dated May 22, 2008 between Richard Moore and our company (incorporated by reference to an exhibit to our current report on Form 8-K filed on May 28, 2008)10.21

Agreement of Intention to Sell/Purchase the Geneseo-Edwards Program between Hodgden & Associates and our company (incorporated by reference to an exhibit to our current report on Form 8-K filed on May 29, 2008)10.22

Promissory Note dated May 23, 2008 to EuroEnergy Growth Capital S.A. (incorporated by reference to an exhibit to our current report on Form 8-K filed on June 6, 2008)10.23

Board of Advisors Agreement dated July 19, 2007 with Aimwell Energy Limited (incorporated by reference to an exhibit to our annual report on Form 10-KSB filed on June 13, 2008)10.24

Board of Advisors Agreement dated July 19, 2007 with Black Gold Consulting Inc. (incorporated by reference to an exhibit to our annual report on Form 10-KSB filed on June 13, 2008)10.25

Board of Advisors Agreement dated August 2007 with John Spence (incorporated by reference to an exhibit to our annual report on Form 10-KSB filed on June 13, 2008)10.26

Board of Advisors Agreement dated August 2007 with Jonathan Wood (incorporated by reference to an exhibit to our annual report on Form 10-KSB filed on June 13, 2008)10.27

Board of Advisors Termination Agreement dated June 10, 2008 with Aimwell Energy Limited (incorporated by reference to an exhibit to our annual report on Form 10-KSB filed on June 13, 2008)10.28

Board of Advisors Termination Agreement dated June 10, 2008 with Black Gold Consulting Inc.( incorporated by reference to an exhibit to our annual report on Form 10-KSB filed on June 13, 2008)10.29

Board of Advisors Termination Agreement dated June 10, 2008 with John Spence (incorporated by reference to an exhibit to our annual report on Form 10-KSB filed on June 13, 2008)10.30

Board of Advisors Termination Agreement dated June 10, 2008 with Jonathan Wood (incorporated by reference to an exhibit to our annual report on Form 10-KSB filed on June 13, 2008)10.31

Agreement dated January 24, 2008 with Aimwell Energy limited (incorporated by reference to an exhibit to our annual report on Form 10-KSB filed on June 13, 2008)10.32

Loan Agreement with EuroEnergy Growth Capital S.A. (incorporated by reference to an exhibit to our annual report on Form 10-KSB filed on June 13, 2008)10.33

Senior Secured Convertible Redeemable Debenture dated June 24, 2008 issued by our company to Trafalgar Capital Specialized Investment Fund, Luxembourg (incorporated by reference to an exhibit to our quarterly report on Form 10-Q filed on July 21, 2008)10.34

Warrant dated June 24, 2008 issued by our company to Trafalgar Capital Specialized Investment Fund, Luxembourg (incorporated by reference to an exhibit to our quarterly report on Form 10-Q filed on July 21, 2008)10.35

Securities Purchase Agreement dated June 24, 2008 between Trafalgar Capital Specialized Investment Fund, Luxembourg and our company (incorporated by reference to an exhibit to our quarterly report on Form 10-Q filed on July 21, 2008)  71
  Exhibit No.

Description
 10.36

Registration Rights Agreement dated June 24, 2008 between Trafalgar Capital Specialized Investment Fund, Luxembourg and our company (incorporated by reference to an exhibit to our quarterly report on Form 10-Q filed on July 21, 2008)10.37

Escrow Agreement dated June 24, 2008 between Trafalgar Capital Specialized Investment Fund, Luxembourg, The Law Office of James G. Dodrill II, P.A. and our company (incorporated by reference to an exhibit to our quarterly report on Form 10-Q filed on July 21, 2008)10.38

Security Agreement dated June 24, 2008 between Trafalgar Capital Specialized Investment Fund, Luxembourg and our company (incorporated by reference to an exhibit to our quarterly report on Form 10-Q filed on July 21, 2008)10.39

Irrevocable Transfer Agent Instructions dated June 18, 2008 between Empire Stock Transfer Inc. and our company (incorporated by reference to an exhibit to our quarterly report on Form 10-Q filed on July 21, 2008)10.40

General Assignment of Contracts and Leases dated June 18, 2008 between Trafalgar Capital Specialized Investment Fund, FIS and our company (incorporated by reference to an exhibit to our quarterly report on Form 10-Q filed on July 21, 2008)10.41

Consulting Agreement with Partners Consulting, Inc. dated May 8, 2008 (incorporated by reference to an exhibit to our quarterly report on Form 10-Q filed on July 21, 2008)10.42

Letter of Commitment with Senergy Limited (incorporated by reference to an exhibit to our quarterly report on Form 10-Q filed on July 21, 2008)10.43

Investor Relations Consulting Service Agreement dated September 1, 2008 between our company and Benaterra Communications Inc. (incorporated by reference to an exhibit to our current report on Form 8-K filed on September 12, 2008)10.44

Investor Relations Consulting Service Agreement dated June 1, 2007 between our company and Senergy Communications Inc. (incorporated by reference to an exhibit to our current report on Form 8-K filed on September 12, 2008)10.45

Transaction Proposal and Exclusivity Agreement dated September 26, 2008 between Ballyliffin Capital Corp., Fox Energy Exploration Limited, and Fox Petroleum Inc. (incorporated by reference to an exhibit to our current report on Form 8-K filed on October 1, 2008)10.46

Letter Agreement dated September 25, 2008 between Fox Energy Exploration Limited and Pollard Financial Ltd. (incorporated by reference to an exhibit to our current report on Form 8-K filed on October 1, 2008)10.47

Amendment to June 24, 2008 Financing Documents between Fox Petroleum Inc. and Trafalgar Capital Specialized Investment Fund, Luxembourg (incorporated by reference to an exhibit to our current report on Form 8-K filed on November 21, 2008)10.48

Amended Debenture No. 1 - $1.25 million principal amount (incorporated by reference to an exhibit to our current report on Form 8-K filed on November 21, 2008)10.49

Amended Debenture No. 2 - $1.25 million principal amount (incorporated by reference to an exhibit to our current report on Form 8-K filed on November 21, 2008)10.50

New Debenture - $1 million principal amount (incorporated by reference to an exhibit to our current report on Form 8-K filed on November 21, 2008)10.51

Replacement Warrant (incorporated by reference to an exhibit to our current report on Form 8-K filed on November 21, 2008)10.52

Amended Security Agreement (incorporated by reference to an exhibit to our current report on Form 8-K filed on November 21, 2008)10.53

Pledge and Escrow Agreement (incorporated by reference to an exhibit to our current report on Form 8-K filed on November 21, 2008)10.54

Side Letter Agreement (incorporated by reference to an exhibit to our current report on Form 8-K filed on November 21, 2008)10.55

Irrevocable Transfer Agent Instructions (incorporated by reference to an exhibit to our current report on Form 8-K filed on November 21, 2008)10.56

Subscription Agreement with Carbon Energy Investments Limited dated November 5, 2008 (incorporated by reference to an exhibit to our current report on Form 8-K filed on January 7, 2009)10.57

Agreement for the Purchase of Shares in Alaska Oil & Gas Resources Limited dated November 5, 2008 (incorporated by reference to an exhibit to our current report on Form 8-K filed on January 7, 2009)10.58

Amendment Agreement for the Purchase of Shares of Alaska Oil & Gas Resources Limited dated November 2008 (incorporated by reference to an exhibit to our current report on Form 8-K filed on January 7, 2009)10.59

Letter Agreement with Carbon Energy Investments Limited dated December 10, 2008 (incorporated by reference to an exhibit to our current report on Form 8-K filed on January 7, 2009)  72
  Exhibit No.

Description
 10.60

Letter agreement between Fox Energy Exploration Limited and Aimwell Energy Limited dated September 5, 2008 (incorporated by reference to an exhibit to our quarterly report on Form 10-Q filed on January 21, 2009)10.61

Letter agreement between Fox Energy Exploration Limited and Aimwell Energy Limited dated September 5, 2008 (incorporated by reference to an exhibit to our quarterly report on Form 10-Q filed on January 21, 2009)10.62

Oil and Gas Lease Agreement dated October 14, 2008 (incorporated by reference to an exhibit to our quarterly report on Form 10-Q filed on January 21, 2009)10.63

Oil and Gas Lease Agreement dated October 14, 2008 (incorporated by reference to an exhibit to our quarterly report on Form 10-Q filed on January 21, 2009)10.64

Amendment to Securities Purchase Agreement, Secured Debenture, Registration Rights Agreement and Security Agreement dated April 2009 between our company and Trafalgar Capital Specialized Investment Fund, Luxembourg (incorporated by reference to an exhibit to our annual report on Form 10-K filed on July 15, 2009).10.65

Bill of Sale and Assignment in Lieu of Foreclosure between our company and TCF Oil and Gas Corp. (incorporated by reference to an exhibit to our annual report on Form 10-K filed on July 15, 2009).10.66

Certificate of Seller by our company (incorporated by reference to an exhibit to our annual report on Form 10-K filed on July 15, 2009).10.67

Covenant Not To Sue dated April 6, 2009 between our company and Trafalgar Capital Specialized Investment Fund, FIS (incorporated by reference to an exhibit to our annual report on Form 10-K filed on July 15, 2009).10.68

Agreement relating to Alaska Oil and Gas Leases dated May 14, 2009 (incorporated by reference to an exhibit to our annual report on Form 10-K filed on July 15, 2009).10.69

Agreement relating to Alaska Oil and Gas Leases dated May 16, 2009 (incorporated by reference to an exhibit to our annual report on Form 10-K filed on July 15, 2009).10.70

Agreement relating to Alaska Oil and Gas Leases dated May 29, 2009 (incorporated by reference to an exhibit to our annual report on Form 10-K filed on July 15, 2009).10.71

Agreement between our company and Trafalgar Capital Advisory Partners LLP relating to the appointment of Trafalgar Capital Advisory Partners LLP as Introducer/Advisor (incorporated by reference to an exhibit to our annual report on Form 10-K filed on July 15, 2009.)10.72

Share Exchange Agreement dated July 15, 2010 between Fox Petroleum, Inc., 1536692 Ontario, Inc. and the shareholders of 1536692 Ontario, Inc. (incorporated by reference to an exhibit in our current report on Form 8-K filed July 19, 2010.10.73

Share Exchange Agreement dated July 15, 2010 between Fox Petroleum, Inc., Resource Polymers, Inc. and the shareholders of Resource Polymers, Inc. (incorporated by reference to an exhibit in our current report on Form 8-K filed July 19, 2010.31.1

Rule 13a-14(a) Certification by the Principal Executive and Financial Officer (*)32.1

Certification by the Principal Executive and Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (*)
  (*)
Filed herewith.
  73





SIGNATURES
 
 Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
 /s/ William Lieberman

August 9, 2011William Lieberman, President, Chief Executive Officer and Chief Financial Officer

(Principal Executive and Principal Financial Officer)

Date
 
 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 Company and in the capacities and on the dates indicated.
 
 /s/ William Lieberman

August 9, 2011William Lieberman, Director

Date