---

****UNITED
STATES**SECURITIES AND EXCHANGE COMMISSION**Washington, D.C. 20549

FORM 10-Q

(Mark One)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended May 31, 2008

or

[ ] 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 registrant as specified in its charter)

|Nevada                                                               | N/A                                 
|-------------------------------------------------------------------- | ------------------------------------
|(State or other jurisdiction of incorporation or
      organization) | (I.R.S. Employer Identification No.)
|                                                                     |                                     
|64 Knightsbridge, London, England, UK                                | SW1X 7JF                            
|(Address of principal executive offices)                             | (Zip Code)                          

44-207-590-9630(Registrants telephone number,
including area code)

N/A(Former name, former address and former
fiscal year, if changed since last report

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

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

|Large accelerated filer                       | [ ] |  | Accelerated filer         | [ ]
|--------------------------------------------- | --- |  | ------------------------- | ---
|Non-accelerated filer                         | [ ] |  | Smaller reporting company | [X]
|(Do not check if a smaller reporting company) |     |  |                           |    

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

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the
issuers classes of common stock, as of the latest practicable date:
15,168,245 shares of common stock issued and outstanding as of July 14,
2008

---

- 1 -

PART I FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

---

FOX PETROLEUM INC.

(A Development Stage Company)

INTERIM CONSOLIDATED FINANCIAL STATEMENTS

May 31, 2008

(Stated in US Dollars)

(Unaudited)

---

|FOX PETROLEUM INC.                 
|-----------------------------------
|(A Development Stage Company)      
|INTERIM CONSOLIDATED BALANCE SHEETS
|May 31, 2008 and February 29, 2008 
|(Stated in US Dollars)             
|(Unaudited)                        

|ASSETS                                                                 |   | May 31,    |   |   | February 29, |  
|---------------------------------------------------------------------- | - | ---------- | - | - | ------------ | -
|                                                                       |   | 2008       |   |   | 2008         |  
|                                                                       |   |            |   |   |              |  
|Current                                                                |   |            |   |   |              |  
|Cash  general                                                         | $ | 89,179     |   | $ | 271,601      |  
| restricted                                                           |   | 31,003     |   |   | 30,000       |  
|Prepaid expenses                                                       |   | 57,544     |   |   | 63,084       |  
|                                                                       |   |            |   |   |              |  
|                                                                       |   | 177,726    |   |   | 364,685      |  
|Oil and gas interests  Notes 4 and 10                                 |   | 6,513,187  |   |   | 5,800,917    |  
|                                                                       |   |            |   |   |              |  
|                                                                       | $ | 6,690,913  |   | $ | 6,165,602    |  
|                                                                       |   |            |   |   |              |  
|LIABILITIES                                                            |   |            |   |   |              |  
|                                                                       |   |            |   |   |              |  
|Current                                                                |   |            |   |   |              |  
|Accounts payable and accrued
      liabilities  Notes 5 and 6         | $ | 672,973    |   | $ | 664,519      |  
|Due to related parties  Note 6                                        |   | 29,975     |   |   | 29,975       |  
|Notes payable  Note
      5                                           |   | 900,000    |   |   | -            |  
|                                                                       |   |            |   |   |              |  
|                                                                       |   | 1,602,948  |   |   | 694,494      |  
|Fees payable in stock and warrants  Notes 5, 7(c), 8(b)
      and (c) |   | 851,650    |   |   | 35,000       |  
|                                                                       |   |            |   |   |              |  
|                                                                       |   | 2,454,598  |   |   | 729,494      |  
|                                                                       |   |            |   |   |              |  
|STOCKHOLDERS EQUITY                                                   |   |            |   |   |              |  
|                                                                       |   |            |   |   |              |  
|Capital stock  Notes 4, 5, 6, 7, 8 and 10                             |   |            |   |   |              |  
|Authorized:                                                            |   |            |   |   |              |  
|90,000,000
      common shares, par value $0.001 per share             |   |            |   |   |              |  
|Issued and outstanding:                                                |   |            |   |   |              |  
|14,968,245
      common shares (February 29, 2008: 14,968,245          |   |            |   |   |              |  
|common shares)                                                         |   | 14,968     |   |   | 14,968       |  
|Additional paid-in capital                                             |   | 8,168,634  |   |   | 8,168,634    |  
|Deficit accumulated during the development
      stage                 |   | (3,947,287 | ) |   | (2,747,494   | )
|                                                                       |   |            |   |   |              |  
|                                                                       |   | 4,236,315  |   |   | 5,436,108    |  
|                                                                       |   |            |   |   |              |  
|                                                                       | $ | 6,690,913  |   | $ | 6,165,602    |  

SEE ACCOMPANYING NOTES

---

|FOX PETROLEUM INC.                                                       
|-------------------------------------------------------------------------
|(A Development Stage Company)                                            
|INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS                            
|for the three months ended May 31, 2008 and 2007 and                     
|for the period November 4, 2004 (Date of Inception) to May
      31, 2008
|(Stated in US Dollars)                                                   
|(Unaudited)                                                              

|                                                         |   |                    |   |   |               |   |   | November 4,   |  
|-------------------------------------------------------- | - | ------------------ | - | - | ------------- | - | - | ------------- | -
|                                                         |   |                    |   |   |               |   |   | 2004 (Date of |  
|                                                         |   | Three months ended |   |   | Inception) to |  
|                                                         |   | May 31,            |   |   | May 31        |  
|                                                         |   | 2008               |   |   | 2007          |   |   | 2008          |  
|                                                         |   |                    |   |   |               |   |   |               |  
|Expenses:                                                |   |                    |   |   |               |   |   |               |  
|Accounting and audit fees                                | $ | 33,244             |   | $ | 5,576         |   | $ | 130,174       |  
|Advertising and public relations                         |   | 120,091            |   |   | 8,312         |   |   | 1,820,466     |  
|Bank charges                                             |   | 2,990              |   |   | 682           |   |   | 13,312        |  
|Consulting fees  Note 6                                 |   | 194,357            |   |   | -             |   |   | 403,155       |  
|Filing and transfer agent                                |   | 1,125              |   |   | 700           |   |   | 17,810        |  
|Finance fees  Notes 5 and 8(c)                          |   | 653,000            |   |   | -             |   |   | 653,000       |  
|Interest on notes payable                                |   | 6,105              |   |   | -             |   |   | 6,105         |  
|Legal fees                                               |   | 40,073             |   |   | 11,451        |   |   | 203,931       |  
|Management fees 
      Note 6                           |   | 76,822             |   |   | 27,000        |   |   | 286,262       |  
|Mineral property acquisition and exploration
      costs |   | -                  |   |   | 2,335         |   |   | 17,000        |  
|Office and miscellaneous
       Note 6                  |   | 46,821             |   |   | 22,542        |   |   | 224,065       |  
|Insurance                                                |   | 8,822              |   |   | -             |   |   | 28,457        |  
|Travel and entertainment                                 |   | 16,837             |   |   | 9,496         |   |   | 153,400       |  
|                                                         |   |                    |   |   |               |   |   |               |  
|Loss before other item                                   |   | (1,200,287         | ) |   | (88,094       | ) |   | (3,957,137    | )
|                                                         |   |                    |   |   |               |   |   |               |  
|Other item:                                              |   |                    |   |   |               |   |   |               |  
|Interest and other income                                |   | 494                |   |   | 214           |   |   | 9,850         |  
|                                                         |   |                    |   |   |               |   |   |               |  
|Net loss for the period                                  | $ | (1,199,793         | ) | $ | (87,880       | ) | $ | (3,947,287    | )
|                                                         |   |                    |   |   |               |   |   |               |  
|Basic and diluted loss per share                         | $ | (0.08              | ) | $ | (0.01         | ) |   |               |  
|                                                         |   |                    |   |   |               |   |   |               |  
|Weighted average number of shares outstanding            |   | 14,968,245         |   |   | 9,840,274     |   |   |               |  

SEE ACCOMPANYING NOTES

---

|FOX PETROLEUM INC.                                                       
|-------------------------------------------------------------------------
|(A Development Stage Company)                                            
|INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS                            
|for the three months ended May 31, 2008 and 2007 and                     
|for the period November 4, 2004 (Date of Inception) to May
      31, 2008
|(Stated in US Dollars)                                                   
|(Unaudited)                                                              

|                                                      |   |                    |   |   |               |   |   | November 4, |  
|----------------------------------------------------- | - | ------------------ | - | - | ------------- | - | - | ----------- | -
|                                                      |   | Three months ended |   |   | 2004 (Date of |  
|                                                      |   | May 31,            |   |   | Inception) to |  
|                                                      |   |                    |   |   |               |   |   | May 31,     |  
|                                                      |   | 2008               |   |   | 2007          |   |   | 2008        |  
|                                                      |   |                    |   |   |               |   |   |             |  
|Operating Activities                                  |   |                    |   |   |               |   |   |             |  
|Net loss for the
      period                         | $ | (1,199,793         | ) | $ | (87,880       | ) | $ | (3,947,287  | )
|Donated services and rent                             |   | -                  |   |   | -             |   |   | 21,000      |  
|Shares to be issued
      for advisors fees          |   | 163,650            |   |   | -             |   |   | 198,650     |  
|Financing charge                                      |   | 653,000            |   |   | -             |   |   | 653,000     |  
|Change in non-cash
      working capital balances     |   |                    |   |   |               |   |   |             |  
|related to operations:                                |   |                    |   |   |               |   |   |             |  
|Prepaid
        expenses                              |   | 5,540              |   |   | (358,838      | ) |   | (57,544     | )
|Accounts payable
      and accrued liabilities        |   | (557,430           | ) |   | 12,635        |   |   | (322,884    | )
|                                                      |   |                    |   |   |               |   |   |             |  
|Net cash used in operating activities                 |   | (935,033           | ) |   | (434,083      | ) |   | (3,455,065  | )
|                                                      |   |                    |   |   |               |   |   |             |  
|Investing Activities                                  |   |                    |   |   |               |   |   |             |  
|Increase in oil
      and gas interests               |   | (146,386           | ) |   | -             |   |   | (3,551,628  | )
|Increase in restricted cash                           |   | (1,003             | ) |   | -             |   |   | (31,003     | )
|                                                      |   |                    |   |   |               |   |   |             |  
|Net cash used in investing activities                 |   | (147,389           | ) |   | -             |   |   | (3,582,631  | )
|                                                      |   |                    |   |   |               |   |   |             |  
|Financing Activities                                  |   |                    |   |   |               |   |   |             |  
|Issuance of common
      shares                       |   | -                  |   |   | 2,000,000     |   |   | 6,196,900   |  
|Advance from related parties                          |   | -                  |   |   | -             |   |   | 29,975      |  
|Proceeds from notes
      payable                     |   | 900,000            |   |   | -             |   |   | 900,000     |  
|                                                      |   |                    |   |   |               |   |   |             |  
|Net cash provided by financing activities             |   | 900,000            |   |   | 2,000,000     |   |   | 7,126,875   |  
|                                                      |   |                    |   |   |               |   |   |             |  
|Increase (decrease) in cash and restricted
      cash |   |                    |   |   |               |   |   |             |  
|during the period                                     |   | (182,422           | ) |   | 1,565,917     |   |   | 89,179      |  
|                                                      |   |                    |   |   |               |   |   |             |  
|Cash, beginning of period                             |   | 271,601            |   |   | 119,051       |   |   | -           |  
|                                                      |   |                    |   |   |               |   |   |             |  
|Cash, end of period                                   | $ | 89,179             |   | $ | 1,684,968     |   | $ | 89,179      |  

Non-cash transactions  Note 9

SEE ACCOMPANYING NOTES

---

|FOX PETROLEUM INC.                                                        
|--------------------------------------------------------------------------
|(A Development Stage Company)                                             
|INTERIM CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
      (DEFICIENCY)
|for the period November 4, 2004 (Date of Inception) to May
      31, 2008 
|(Stated in US Dollars)                                                    
|(Unaudited)                                                               

|                              |  |                 |  |  |                |  |   |           |  |   |            |   |   |                 |  |   | Deficit     |   |   |         |  
|----------------------------- |  | --------------- |  |  | -------------- |  | - | --------- |  | - | ---------- | - | - | --------------- |  | - | ----------- | - | - | ------- | -
|                              |  |                 |  |  |                |  |   |           |  |   |            |   |   |                 |  |   | Accumulated |   |   |         |  
|                              |  |                 |  |  |                |  |   |           |  |   | Additional |   |   |                 |  |   | During the  |   |   |         |  
|                              |  |                 |  |  | *Common Shares |  |   | Paid-in   |  |   | Share      |   |   | Pre-exploration |  |   |             |  
|                              |  |                 |  |  | Number         |  |   | Par Value |  |   | Capital    |   |   | Subscriptions   |  |   | Stage       |   |   | Total   |  
|                              |  |                 |  |  |                |  |   |           |  |   |            |   |   |                 |  |   |             |   |   |         |  
|Capital stock issued for cash |  |  at $0.0008333 |  |  | 5,880,000      |  | $ | 5,880     |  | $ | (980       | ) | $ | -               |  | $ | -           |   | $ | 4,900   |  
|                              |  |  at $0.0083333 |  |  | 3,840,000      |  |   | 3,840     |  |   | 28,160     |   |   | -               |  |   | -           |   |   | 32,000  |  
|                              |  |  at $0.0833333 |  |  | 120,000        |  |   | 120       |  |   | 9,880      |   |   | -               |  |   | -           |   |   | 10,000  |  
|Donated services and rent     |  |                 |  |  | -              |  |   | -         |  |   | 3,000      |   |   | -               |  |   | -           |   |   | 3,000   |  
|Net loss for the period       |  |                 |  |  | -              |  |   | -         |  |   | -          |   |   | -               |  |   | (18,821     | ) |   | (18,821 | )
|                              |  |                 |  |  |                |  |   |           |  |   |            |   |   |                 |  |   |             |   |   |         |  
|Balance, February 28, 2005    |  |                 |  |  | 9,840,000      |  |   | 9,840     |  |   | 40,060     |   |   | -               |  |   | (18,821     | ) |   | 31,079  |  
|Donated services and rent     |  |                 |  |  | -              |  |   | -         |  |   | 9,000      |   |   | -               |  |   | -           |   |   | 9,000   |  
|Net loss for the year         |  |                 |  |  | -              |  |   | -         |  |   | -          |   |   | -               |  |   | (45,915     | ) |   | (45,915 | )
|                              |  |                 |  |  |                |  |   |           |  |   |            |   |   |                 |  |   |             |   |   |         |  
|Balance, February 28, 2006    |  |                 |  |  | 9,840,000      |  |   | 9,840     |  |   | 49,060     |   |   | -               |  |   | (64,736     | ) |   | (5,836  | )
|Capital stock issued for cash |  |  at $5.00      |  |  | 20,000         |  |   | 20        |  |   | 99,980     |   |   | -               |  |   | -           |   |   | 100,000 |  
|Donated services and rent     |  |                 |  |  | -              |  |   | -         |  |   | 9,000      |   |   | -               |  |   | -           |   |   | 9,000   |  
|Net loss for the year         |  |                 |  |  | -              |  |   | -         |  |   | -          |   |   | -               |  |   | (54,555     | ) |   | (54,555 | )
|                              |  |                 |  |  |                |  |   |           |  |   |            |   |   |                 |  |   |             |   |   |         |  
|Balance, February 28, 2007    |  |                 |  |  | 9,860,000      |  |   | 9,860     |  |   | 158,040    |   |   | -               |  |   | (119,291    | ) |   | 48,609  |  

/contd

SEE ACCOMPANYING NOTES

---

Continued

|FOX PETROLEUM INC.                                                        
|--------------------------------------------------------------------------
|(A Development Stage Company)                                             
|INTERIM CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
      (DEFICIENCY)
|for the period November 4, 2004 (Date of Inception) to May
      31, 2008 
|(Stated in US Dollars)                                                    
|(Unaudited)                                                               

|                                               |  |             |  |  |                |  |   |           |  |   |            |  |   |                 |  |   | Deficit     |   |   |            |  
|---------------------------------------------- |  | ----------- |  |  | -------------- |  | - | --------- |  | - | ---------- |  | - | --------------- |  | - | ----------- | - | - | ---------- | -
|                                               |  |             |  |  |                |  |   |           |  |   |            |  |   |                 |  |   | Accumulated |   |   |            |  
|                                               |  |             |  |  |                |  |   |           |  |   | Additional |  |   |                 |  |   | During the  |   |   |            |  
|                                               |  |             |  |  | *Common Shares |  |   | Paid-in   |  |   | Share      |  |   | Pre-exploration |  |   |             |  
|                                               |  |             |  |  | Number         |  |   | Par Value |  |   | Capital    |  |   | Subscriptions   |  |   | Stage       |   |   | Total      |  
|                                               |  |             |  |  |                |  |   |           |  |   |            |  |   |                 |  |   |             |   |   |            |  
|Balance, February 28, 2007                     |  |             |  |  | 9,860,000      |  |   | 9,860     |  |   | 158,040    |  |   | -               |  |   | (119,291    | ) |   | 48,609     |  
|Capital stock issued for oil and gas interests |  |             |  |  |                |  |   |           |  |   |            |  |   |                 |  |   |             |   |  
|                                               |  |  Note 4(i) |  |  | 4,000,000      |  |   | 4,000     |  |   | 997,702    |  |   | -               |  |   | -           |   |   | 1,001,702  |  
|Capital stock issued for cash                  |  |  Note 6(a) |  |  | 1,028,245      |  |   | 1,028     |  |   | 6,048,972  |  |   | -               |  |   | -           |   |   | 6,050,000  |  
|Capital stock issued for oil and gas           |  |             |  |  |                |  |   |           |  |   |            |  |   |                 |  |   |             |   |   |            |  
|interests                                      |  |  at $12.05 |  |  | 80,000         |  |   | 80        |  |   | 963,920    |  |   | -               |  |   | -           |   |   | 964,000    |  
|Share subscriptions                            |  |             |  |  | -              |  |   | -         |  |   | -          |  |   | 35,000          |  |   | -           |   |   | 35,000     |  
|Net loss for the year                          |  |             |  |  | -              |  |   | -         |  |   | -          |  |   | -               |  |   | (2,628,203  | ) |   | (2,628,203 | )
|                                               |  |             |  |  |                |  |   |           |  |   |            |  |   |                 |  |   |             |   |   |            |  
|Balance, February 29, 2008                     |  |             |  |  | 14,968,245     |  |   | 14,968    |  |   | 8,168,634  |  |   | 35,000          |  |   | (2,747,494  | ) |   | 5,436,108  |  
|Net loss for the year                          |  |             |  |  | -              |  |   | -         |  |   | -          |  |   | -               |  |   | (1,199,793  | ) |   | (1,199,793 | )
|                                               |  |             |  |  |                |  |   |           |  |   |            |  |   |                 |  |   |             |   |   |            |  
|Balance, May 31, 2008                          |  |             |  |  | 14,968,245     |  | $ | 14,968    |  | $ | 8,168,634  |  | $ | 35,000          |  | $ | (3,947,287  | ) | $ | 4,236,315  |  

* The common stock issued has been retroactively restated to
  reflect a reverse split of 1 new share for 5 old shares, effective April 21,
  2008. The par value of common stock and additional paid-in capital has been
  retroactively restated to reflect these changes.

SEE ACCOMPANYING NOTES

---

|FOX PETROLEUM INC.                                    
|------------------------------------------------------
|(A Development Stage Company)                         
|NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
|May 31, 2008                                          
|(Stated in US Dollars)                                
|(Unaudited)                                           

|Note 1 | Interim Financial Statements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|------ | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|       | While the information presented
        in the accompanying three months to May 31, 2008 interim financial statements
        is unaudited, it includes all adjustments which are, in the opinion of
        management, necessary to present fairly the financial position, results
        of operations and cash flows for the interim period presented in accordance
        with the accounting principles generally accepted in the United States
        of America. In the opinion of management, all adjustments considered necessary
        for a fair presentation of the results of operations and financial position
        have been included and all such adjustments are of a normal recurring
        nature. It is suggested that these financial statements be read in conjunction
        with the Companys February 29, 2008 financial statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|       | Operating results for the three
        months ended May 31, 2008 are not necessarily indicative of the results
        that can be expected for the year ending February 28, 2009.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|Note 2 | Nature of Operations and Ability
        to Continue as a Going Concern                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|       | The Company was incorporated
        in the State of Nevada on November 4, 2004 and is in the development stage.
        The Company has oil and gas interests in Alaska, North Sea and Texas and
        has not yet determined whether these properties contain reserves that
        are economically recoverable. The recoverability of amounts from the properties
        will be dependent upon the discovery of economically recoverable reserves,
        confirmation of the Companys interest in the underlying properties,
        the ability of the Company to obtain necessary financing to satisfy the
        expenditure requirements under the property agreements and to complete
        the development of the properties and upon future profitable production
        or proceeds for the sale thereof.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|       | These financial statements have
        been prepared in accordance with generally accepted accounting principles
        applicable to a going concern, which assumes that the Company will be
        able to meet its obligations and continue its operations for its next
        twelve months. Realization values may be substantially different from
        carrying values as shown and these financial statements do not give effect
        to adjustments that would be necessary to the carrying values and classification
        of assets and liabilities should the Company be unable to continue as
        a going concern. At May 31, 2008, the Company has a working capital deficiency
        of $1,425,222, has not yet achieved profitable operations, has accumulated
        losses of $3,947,287 since its inception and expects to incur further
        losses in the development of its business, all of which casts substantial
        doubt about the Companys ability to continue as a going concern.
        The Companys ability to continue as a going concern is dependent
        upon its ability to generate future profitable operations and/or to obtain
        the necessary financing to meet its obligations and repay its liabilities
        arising from normal business operations when they come due. Management
        has no formal plan in place to address this concern but considers that
        the Company will be able to obtain additional funds by equity financing
        and/or related party advances, however there is no assurance of additional
        funding being available or on acceptable terms, if at all (Note 10).

---

|Fox Petroleum Inc.                                    
|------------------------------------------------------
|(A Development Stage Company)                         
|Notes to the Interim Consolidated Financial Statements
|May 31, 2008                                          
|(Stated in US Dollars)                                
|(Unaudited)  Page 2                                  

|Note 3 | New Accounting Standards                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|------ | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|       | In March 2008, the FASB issued
        Statement of Financial Accounting Standards (SFAS) No. 161,
        Disclosures about Derivative Instruments and Hedging Activities,
        an amendment of FASB Statement No. 133, which requires additional disclosures
        about the objectives of the derivative instruments and hedging activities,
        the method of accounting for such instruments under SFAS No. 133 and its
        related interpretations, and a tabular disclosure of the effects of such
        instruments and related hedged items on our financial position, financial
        performance, and cash flows. SFAS No. 161 is effective for fiscal years
        and interim periods beginning after November 15, 2008. The adoption of
        SFAS 161 should have no effect on the financial position and results of
        operations of the Company.
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|       | In January 2008, Staff Accounting
        Bulletin (SAB) 110, Share-Based Payment was issued.
        Registrants may continue, under certain circumstances, to use the simplified
        method in developing estimates of the expected term of share options as
        initially allowed by SAB 107, Share-Based Payment. The adoption
        of SAB 110 should have no effect on the financial position and results
        of operations of the Company.                                                                                                                                                                                                                                                                                                                                                                                                                         
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|       | In December 2007, the FASB issued
        SFAS No. 141 (Revised) Business Combinations. SFAS 141 (Revised)
        establishes principles and requirements for how the acquirer of a business
        recognizes and measures in its financial statements the identifiable assets
        acquired, the liabilities assumed, and any noncontrolling interest in
        the acquire.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|       | The statement also provides guidance
        for recognizing and measuring the goodwill acquired in the business combination
        and determines what information to disclose to enable users of the financial
        statements to evaluate the nature and financial effects of the business
        combination. The guidance will become effective for the first fiscal year
        beginning after December 15, 2008. The management is in the process of
        evaluating the impact SFAS 141 (Revised) will have on the Companys
        financial statements upon adoption.                                                                                                                                                                                                                                                                                                    
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|       | In December 2007, the FASB issued
        SFAS No. 160 Noncontrolling Interests in Consolidated Financial
        Statements-an amendment of ARB No. 51. SFAS 160 establishes accounting
        and reporting standards for the noncontrolling interest in a subsidiary
        and for the deconsolidation of a subsidiary. The guidance will become
        effective for the first fiscal year beginning after December 15, 2008.
        The management is in the process of evaluating the impact SFAS 160 will
        have on the Companys financial statements upon adoption.                                                                                                                                                                                                                                                                                                     

---

|Fox Petroleum Inc.                                    
|------------------------------------------------------
|(A Development Stage Company)                         
|Notes to the Interim Consolidated Financial Statements
|May 31, 2008                                          
|(Stated in US Dollars)                                
|(Unaudited)  Page 3                                  

|Note 4 | Oil and Gas Interests Note 10
|------ | ------------------------------

| |                     |   | May 31, 2008      | 
| | ------------------- | - | ----------------- | 
| |                     |   | United            | 
| |                     |   | States            | 
| |                     |   |                   | 
| | Unproved properties |   |                   | 
| | - acquisition costs | $ | 3,537,182         | 
| | - exploration costs |   | 77,703            | 
| |                     |   |                   | 
| |                     | $ | 3,614,885         | 
| |                     |   |                   | 
| |                     |   | February 29, 2008 | 
| |                     |   | United            | 
| |                     |   | States            | 
| |                     |   |                   | 
| | Unproved properties |   |                   | 
| | - acquisition costs | $ | 3,533,282         | 
| | - exploration costs |   | 67,168            | 
| |                     |   |                   | 
| |                     | $ | 3,600,450         | 

| | i)  | 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 August 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
        their estimate of the cost of these wells.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | ii) | 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.

---

|Fox Petroleum Inc.                                    
|------------------------------------------------------
|(A Development Stage Company)                         
|Notes to the Interim Consolidated Financial Statements
|May 31, 2008                                          
|(Stated in US Dollars)                                
|(Unaudited)  Page 4                                  

|Note 4 | Oil and Gas Interests Note 10 
      (contd)
|------ | -----------------------------------------------

| | iii) | 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | ---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | iv)  | By a purchase agreement dated October 10, 2007 and amended
        November 2, 2007, the Company acquired 8 oil and gas leases located 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 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
        in the following paragraph.                                                                                                                                                                                                                                                                
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | v)   | 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 May 31, 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | vi)  | 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
        an 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.
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |      | At May 31, 2008, no costs have been incurred for this
        interest. The spud date of the well shall be before December 31, 2008.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | vii) | By a letter agreement dated February 27, 2008, the Company
        had the exclusive option to purchase an 80% net revenue interest in three
        oil leases in Ellsworth County, Kansas, USA for $80,000 until July 31,
        2008. Subsequent to May 31, 2008, the Company paid $80,000 to the optionor.
        The leases are subject to a landowner royalty of 12.5% and an overriding
        royalty of 7.5% retained by vendors. The Company must drill at least one
        well on each lease before the leases expire on November 19, 2008, August
        19, 2009 and August 31, 2009 or pay the vendor a penalty of $150,000.                                                                                                                                                                                                                                                                                                                                                                                 

---

|Fox Petroleum Inc.                                    
|------------------------------------------------------
|(A Development Stage Company)                         
|Notes to the Interim Consolidated Financial Statements
|May 31, 2008                                          
|(Stated in US Dollars)                                
|(Unaudited)  Page 5                                  

|Note 5 | Notes Payable
|------ | -------------

| | a) | On April 2, 2008 the Company was loaned $250,000 by
        the issuance of a promissory note, to be paid on the earlier of (i) the
        date that the Company obtains equity financing from a third party in the
        minimum amount of $1,000,000 net to the Company, or (ii) April 1, 2009.
        For the period from the date of advance of the loan up to and including
        the date that the loan is repaid, interest will accrue on the balance
        of principal outstanding at the rate of 10% per annum, compounded monthly.
        Interest will be payable in a balloon payment on the date the loan is
        repaid.                                                                                                                                                                                                    
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | b) | On May 6, 2008 the Company was loaned $150,000 by the
        issuance of a promissory note, to be paid on the earlier of (i) the date
        that the Company obtains equity financing from a third party in the minimum
        amount of $1,000,000 net to the company, or (ii) May 1, 2009. For the
        period from the date of advance of the loan up to and including the date
        that the loan is repaid, interest will accrue on the loan on the balance
        of principal outstanding at the rate of 10% per annum, compounded monthly.
        Interest will be payable in a balloon payment on the date the loan is
        repaid.                                                                                                                                                                                            
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | c) | On May 23, 2008 the Company was loaned $50,000 by the
        issuance of a promissory note, to be paid on the earlier of (i) the date
        that the Company obtains equity financing from a third party in the minimum
        amount of $1,000,000 net to the company, or (ii) May 23, 2009. For the
        period from the date of advance of the loan up to and including the date
        that the loan is repaid, interest will accrue on the loan on the balance
        of principal outstanding at the rate of 10% per annum, compounded monthly.
        Interest will be payable in a balloon payment on the date the loan is
        repaid.                                                                                                                                                                                           
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | d) | On May 30, 2008 the Company was loaned $450,000 pursuant
        to a loan agreement. The principal and interest is to be paid on the earlier
        of (i) cash 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) August 31, 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 was required
        to issue to the lender 150,000 common shares of the Company. The fair
        value of these shares was determined to be $514,500, which was included
        in fees payable in stock and warrants at May 31, 2008. These shares were
        issued subsequent to May 31, 2008.

Included in accounts payable and accrued
  liabilities at May 31, 2008 is $6,105 (February 29, 2008: $Nil) for accrued
  interest on these notes payable.

---

|Fox Petroleum Inc.                                    
|------------------------------------------------------
|(A Development Stage Company)                         
|Notes to the Interim Consolidated Financial Statements
|May 31, 2008                                          
|(Stated in US Dollars)                                
|(Unaudited)  Page 6                                  

|Note 6 | Related Party Transactions Note 8                                                                     
|------ | -------------------------------------------------------------------------------------------------------
|       |                                                                                                        
|       | The officers of the Company provide consulting
      and management services to the Company as follows:

| |                          |   |                    |  |   |               |  |   | November 4,   | 
| | ------------------------ | - | ------------------ |  | - | ------------- |  | - | ------------- | 
| |                          |   |                    |  |   |               |  |   | 2004 (Date of | 
| |                          |   | Three months ended |  |   | Inception) to | 
| |                          |   | May 31,            |  |   | May 31,       | 
| |                          |   | 2008               |  |   | 2007          |  |   | 2008          | 
| |                          |   |                    |  |   |               |  |   |               | 
| | Consulting fees          | $ | 27,925             |  | $ | -             |  | $ | 182,653       | 
| | Management fees          |   | 76,822             |  |   | 27,000        |  |   | 286,262       | 
| | Office and miscellaneous |   | -                  |  |   | -             |  |   | 7,000         | 
| |                          |   |                    |  |   |               |  |   |               | 
| |                          | $ | 104,747            |  | $ | 27,000        |  | $ | 475,915       | 

Included in accounts payable and accrued
  liabilities at May 31, 2008 is $Nil (February 29, 2008: $22,438) owed to directors
  of the Company for expenses incurred on behalf of the Company.

The amounts due to related parties are
  unsecured, non-interest bearing and have no specific terms for repayment. These
  amounts are 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.                   

|Note 7 | Capital Stock Notes 4, 5, 6, 8 and
      10                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|------ | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|       | Effective January 11, 2007 the
        Company effected a forward stock split 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.
        These financial statements have been retroactively restated to reflect
        these changes.

---

|Fox Petroleum Inc.                                    
|------------------------------------------------------
|(A Development Stage Company)                         
|Notes to the Interim Consolidated Financial Statements
|May 31, 2008                                          
|(Stated in US Dollars)                                
|(Unaudited)  Page 7                                  

|Note 7 | Capital Stock Notes 4, 5, 6, 8 and
      10  (contd)
|------ | -------------------------------------------------------
|       |                                                        
|       | Commitments:                                           
|       |                                                        
|       | a)                                                     
|       |                                                        
|       |                                                        
|       |                                                        
|       |                                                        

| |                    | Number of | Issue  | Total      
| | ------------------ | --------- | ------ | -----------
| | Issue Date         | Units     | Price  | Proceeds   
| |                    |           |        |            
| | May 17, 2007       | 377,358   | $5.30  | $ 2,000,000
| | August 1, 2007     | 31,056    | $8.05  | 250,000    
| | September 18, 2007 | 44,199    | $9.05  | 400,000    
| | September 18, 2007 | 52,133    | $10.55 | 550,000    
| | September 27, 2007 | 28,708    | $10.45 | 300,000    
| | October 26, 2007   | 16,381    | $12.21 | 200,000    
| | October 26, 2007   | 21,097    | $11.85 | 250,000    
| | October 26, 2007   | 35,897    | $9.75  | 350,000    
| | November 28, 2007  | 47,337    | $8.45  | 400,000    
| | January 16, 2008   | 43,478    | $3.45  | 150,000    
| | January 24, 2008   | 96,154    | $5.20  | 500,000    
| | January 30, 2008   | 48,387    | $3.10  | 150,000    
| | February 11, 2008  | 89,286    | $2.80  | 250,000    
| | February 26, 2008  | 96,774    | $3.10  | 300,000    
| |                    |           |        |            
| |                    | 1,028,245 |        | $ 6,050,000

---

|Fox Petroleum Inc.                                    
|------------------------------------------------------
|(A Development Stage Company)                         
|Notes to the Interim Consolidated Financial Statements
|May 31, 2008                                          
|(Stated in US Dollars)                                
|(Unaudited)  Page 8                                  

|Note 7 | Capital Stock Notes 4, 5, 6, 8 and
      10  (contd)
|------ | -------------------------------------------------------
|       |                                                        
|       | Commitments:  (contd)                                
|       |                                                        
|       | b)                                                     
|       |                                                        
|       |                                                        

| | Number of |             | Exercise |                   
| | --------- | ----------- | -------- | ------------------
| | Warrants  |             | Price    | Expiry Date       
| |           |             |          |                   
| | 20,000    |             | $6.25    | February 23, 2010 
| | 377,358   |             | $6.65    | May 17, 2010      
| | 31,056    |             | $10.05   | August 1, 2010    
| | 44,199    |             | $11.30   | September 10, 2010
| | 52,133    |             | $13.20   | September 10, 2010
| | 28,708    |             | $13.05   | October 1, 2010   
| | 16,381    |             | $15.25   | October 26, 2010  
| | 21,097    |             | $14.80   | October 26, 2010  
| | 35,897    |             | $12.20   | October 26, 2010  
| | 47,337    |             | $10.55   | November 28, 2010 
| | 43,478    |             | $4.30    | January 16, 2011  
| | 96,154    |             | $6.50    | January 24, 2011  
| | 48,387    |             | $3.90    | January 30, 2011  
| | 89,286    |             | $3.50    | February 11, 2011 
| | 96,774    |             | $3.90    | February 26, 2011 
| | 50,000    | (Note 8(c)) | $Nil     | May 8, 2011       
| |           |             |          |                   
| | 1,098,245 |             |          |                   

The summary of the changes in the Companys
  share purchase warrants for the periods ended May 31, 2008 and February 29,
  2008 is presented below:

| |                           |  | May 31, 2008 |  |   | February 29, 2008 | 
| | ------------------------- |  | ------------ |  | - | ----------------- | 
| |                           |  |              |  |   | Weighted          | 
| |                           |  |              |  |   | Average           | 
| |                           |  | Number of    |  |   | Exercise          | 
| |                           |  | Warrants     |  |   | Price             | 
| |                           |  |              |  |   |                   | 
| | Balance, beginning of the |  |              |  |   |                   | 
| | period                    |  | 1,048,246    |  | $ | 7.34              | 
| | Issued                    |  | 50,000       |  |   |                   | 
| |                           |  |              |  |   |                   | 
| | Balance, end of period    |  | 1,098,246    |  | $ | 7.01              | 

---

|Fox Petroleum Inc.                                    
|------------------------------------------------------
|(A Development Stage Company)                         
|Notes to the Interim Consolidated Financial Statements
|May 31, 2008                                          
|(Stated in US Dollars)                                
|(Unaudited)  Page 9                                  

|Note 7 | Capital Stock Notes 4, 5, 6, 8 and
      10  (contd)
|------ | -------------------------------------------------------
|       |                                                        
|       | Commitments:  (contd)                                
|       |                                                        
|       | b)                                                     
|       |                                                        
|       |                                                        
|       |                                                        
|       | c)                                                     
|       |                                                        
|       |                                                        
|       |                                                        
|Note 8 | Commitments Notes 4, 5, 7 and 10                      
|       |                                                        
|       | a)                                                     
|       |                                                        
|       | b)                                                     
|       |                                                        
|       | c)                                                     

---

|Fox Petroleum Inc.                                    
|------------------------------------------------------
|(A Development Stage Company)                         
|Notes to the Interim Consolidated Financial Statements
|May 31, 2008                                          
|(Stated in US Dollars)                                
|(Unaudited)  Page 10                                 

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

|Note 9  | Non-cash Transactions                                                                                                                                                                                                                                                                                                                                                          
|------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|        |                                                                                                                                                                                                                                                                                                                                                                                
|        | Investing and financing activities
        that do not have a direct impact on current cash flows are excluded from
        the statements of cash flows. For the three months ended May 31, 2008,
        accounts payable includes $565,884 of expenditures related to oil and
        gas projects. This transaction was excluded from the statements of cash
        flows.
|        |                                                                                                                                                                                                                                                                                                                                                                                
|Note 10 | Subsequent Events
        Notes 4, 5 and 7                                                                                                                                                                                                                                                                                                                                    
|        |                                                                                                                                                                                                                                                                                                                                                                                
|        | i)                                                                                                                                                                                                                                                                                                                                                                             
|        |                                                                                                                                                                                                                                                                                                                                                                                
|        | ii)                                                                                                                                                                                                                                                                                                                                                                            
|        |                                                                                                                                                                                                                                                                                                                                                                                
|        |                                                                                                                                                                                                                                                                                                                                                                                

---

|Fox Petroleum Inc.                                    
|------------------------------------------------------
|(A Development Stage Company)                         
|Notes to the Interim Consolidated Financial Statements
|May 31, 2008                                          
|(Stated in US Dollars)                                
|(Unaudited)  Page 11                                 

|Note 10 | Subsequent Events Notes 4, 5 and 7
       (contd)
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|Fox Petroleum Inc.                                    
|------------------------------------------------------
|(A Development Stage Company)                         
|Notes to the Interim Consolidated Financial Statements
|May 31, 2008                                          
|(Stated in US Dollars)                                
|(Unaudited)  Page 12                                 

|Note 10 | Subsequent Events – Notes
        4, 5 and 7 – (cont’d)
|------- | -------------------------------------------------------
|        |                                                        
|        | ii)                                                    
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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

Forward Looking Statements

This quarterly report contains forward looking statements as
that term is defined in section 27A of the

United States Securities Act of 1933, as amended, and
section 21E of the United States Securities Exchange Act of 1934, as
amended. These statements relate to future events or our future financial
performance. In some cases, you can identify forward looking statements by
terminology such as may, should, intend, expect, plan, anticipate,
believe, estimate, project, predict, potential, or continue or the
negative of these terms or other comparable terminology. These statements speak
only as of the date of this quarterly report. In particular, this quarterly
report contains forward looking statements pertaining to the following:

- the quantity of potential natural gas and crude oil reserves;
- potential natural gas and crude oil production levels;
- capital expenditure programs;
- projections of market prices and costs;
- supply and demand for natural gas and crude oil;
- expectations regarding our ability to raise capital and to continually add
  to reserves through acquisitions and development; and
- treatment under governmental regulatory regimes and tax laws.

These statements are only predictions and involve known and
unknown risks, uncertainties and other factors, including the risks, such as

- our ability to establish or find reserves;
- volatility in market prices for natural gas and crude oil;
- liabilities inherent in natural gas and crude oil operations;
- uncertainties associated with estimating natural gas reserves and crude
  oil;
- competition for, among other things, capital, acquisitions of reserves,
  undeveloped lands and skilled personnel;
- political instability or changes of laws in the countries in which we
  operate and risks of terrorist attacks;
- incorrect assessments of the value of acquisitions;
- geological, technical, drilling and processing problems;
- the uncertainty inherent in the litigation process, including the
  possibility of newly discovered evidence or the acceptance of novel legal
  theories, and the difficulties in predicting the decisions of judges and
  juries; and
- other factors discussed under Item 1A. Risk Factors commencing on
  page 18 of this quarterly report.

These risks may cause our or our industry's actual results,
levels of activity or performance to be materially different from any future
results, levels of activity or performance expressed or implied by these forward
looking statements.

Although we believe that the expectations reflected in the
forward looking statements are reasonable, we cannot guarantee future results,
levels of activity or performance. Except as required by applicable law,

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- 3 -

including the securities laws of the United States, we do not
intend to update any of the forward looking statements to conform these
statements to actual results.

In this quarterly report, the terms we, us and our refer
to Fox Petroleum Inc. and/or our wholly owned subsidiaries, Fox Petroleum
(Alaska) Inc. and Fox Energy Exploration Limited, as the case may be.

Overview

We are a development stage company engaged in the
identification, acquisition, exploration, and, if warranted, development of
prospective oil and gas properties. We were previously engaged in mineral
resource exploration. Because we have not discovered any economically viable
mineral deposit on our mineral property, we decided to change the direction of
our exploration activities to oil and gas sectors. We have oil and gas leases in
Alaska, farm-in interests in the licenses covering blocks in the UK North Sea,
interest in the UK onshore license, and joint venture interests in a gas well in
Texas, and oil leases in Kansas.

Our Oil and Gas Projects

Kansas

On February 27, 2008, we entered into an agreement of intention
to purchase the Geneseo-Edwards Program with Hodgden & Associates. Pursuant
to the agreement, we had an exclusive right to purchase the program until July
31, 2008. The program consists of 3 leases comprising 320 acres and located in
Ellsworth County, Kansas. The expiration dates of these 3 leases are November
19, 2008, August 19, 2009, and August 31, 2009.

On June 26, 2008, we purchased these 3 leases and pursuant to
an agreement with Hodgden & Associates, a mutual area of interest is
established to cover the entire leases in addition to some of the surrounding
areas. Under the agreement an overriding royalty of 7.5% is assigned to Mr.
Hodgden and Dr. Knight in all additional acreage acquired in any manner by us
within the mutual area of interest. Mr. Hodgden and Dr. Knight received the sum
of $80,000 from us and Hodgden and Associates sold and assigned to us an 80% net
revenue interest (100% working interest) in these 3 leases. The landowner
royalty on each of these leases is 12.5% and Hodgden and Associates retains an
overriding royalty interest of 7.5% in each lease. We are expected to drill a
minimum of 10 wells on these leases and we will have to drill and establish
production on each lease before the expiration date of each lease. If we fail to
drill and establish production on each lease before the expiration date, we will
have to pay $150,000 per lease lost to Hodgden & Associates.

We expect to commence a 10-well drilling program for the
development of the Geneseo-Edwards Field located in Ellsworth County in August
2008 with the potential for up to 4 more wells to be added in the future. A rig
is currently being secured for August, 2008. We are currently securing
well-site, distribution, processing and storage equipment for our drilling
program. We are also awaiting rates from 3 different companies looking to
purchase the oil from the properties upon completion. However, there is no
assurance that oil will be discovered or produced from these properties.

Spears Gas Unit 2, Well #1

On October 9, 2007, we entered into a subscription agreement
with Trius Energy, LLC, pursuant to which we acquired a 22.5% joint venture
interest in a gas well called the Spears Gas Unit 2, Well #1 in

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- 4 -

the Gomez Field, Pecos County, Texas in consideration for
$500,000. The joint venture consists of Trius Energy, LLC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 but we intend
to re-enter the well in August 2008 with a view to perforating the alternative
zones.

We are currently considering other similar oil and gas well
re-entry opportunities in this area. Given the nature of the projects, it is not
possible to define exact locations of our targets. However, we intend to
participate in a minimum of 4 workover projects onshore in the United States
over the coming twelve months at an estimated cost of $800,000 in total.

Cook Inlet, Alaska

Leases Acquired from Daniel Donkel and Samuel Cade

On October 10, 2007, through Fox Petroleum (Alaska) Inc., we
entered into a lease purchase agreement with Daniel Donkel and Samuel Cade to
acquire 6 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. Acquisitions of 3 oil and gas leases that had been issued were
completed effective March 1, 2008. The other 3 oil and gases have been issued,
but are not assigned to us yet.

Our primary focus in Alaska is the Catchers Mitt prospect
located in the Cook Inlet, Alaska. We have put into place a four-stage
development program on the Catchers Mitt prospect in order to begin
drilling.

Stage one was the purchase of a magnetic airborne survey over
the area. Fugro Airborne Surveys Corp. carried out the survey, which covered
approximately 1,869 line miles. We are analyzing this data in order to optimize
our understanding of where potential reserves are best defined thus enhancing
our choice of drilling locations.

Stage two was our acquisition of a detailed gravity survey from
Photo Gravity Corporation in order to acquire in depth data regarding the
structures and formations on the leases.

Stage three involves the re-interpretation of original and
offset well logs. Our geologists are working with data originally collected from
test wells that were initiated in the early stages of the prospects
exploration. We are reworking this information using the latest available
technology to improve our ability to decide upon exact zones and targets for
drilling and producing hydrocarbons.

Stage four is the purchase of the available seismic data on the
leases which was completed in July 2008 for approximately $200,000 and we plan
to drill 2 wells during the 2008-2009 drilling season. Hodgden and Associates
are currently finishing the geology and geophysical studies. These studies will
enable us to optimize well location selection.

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- 5 -

North Slope, Alaska

Leases Acquired from Fox Petroleum LLC

On August 14, 2007, we acquired 11 oil and gas leases in North
Slope, Alaska under the lease purchase and sale agreement that we entered into
with Fox Petroleum LLC on May 29, 2007. Effective March 1, 2008, we acquired
12th oil and gas lease under the agreement. These leases have been assigned to
our wholly owned subsidiary, Fox Petroleum (Alaska) Inc. We have combined 100%
working interests in these 12 state-issued oil and gas leases subject to a
royalty of 16.67% to the State of Alaska and a private royalty of 5%.

We intend to conduct an aggressive exploration and appraisal
program on the 12 oil and gas leases acquired under the lease purchase and sale
agreement with Fox Petroleum LLC, over the next two years.

We have already met with industry specialists in Alaska to
discuss the co-ordination of our exploration program with them. We are also
discussing existing seismic data acquisition with several licensed data brokers
in the region. The gathering of data on the leases is ongoing and our
consultants are carrying out quality assurance tests on the data available.

We aim to analyze as much quality information as is available
to us from the many geophysical surveys, well drilling and testing activities
that have already taken place in or around the leases since serious exploration
and appraisal commenced in the region.

Thereafter, we intend to model the geological structure
surrounding and including the leases based on the direct and offset data
available to us.

We are also discussing with Petroleum Geo-Services, a major
seismic acquisition company, regarding a new seismic survey across our leases
and beyond. Although negotiations are at an early stage, Petroleum Geo-Services
is monitoring interest across a wide range of Alaskan North Slope exploration
companies with regard to participating in the survey. This would spread the
costs as well as giving the participants new data on their own acreage and fresh
data on the acreage in the region which is yet to be awarded. Given the early
stage of negotiations, there is no assurance that we will reach an agreement
with Petroleum Geo-Services regarding a new seismic survey.

We are also considering the use of electromagnetic and gravity
survey processes to further assist us in defining the most likely whereabouts of
hydrocarbons on the leases. The idea is to use electromagnetic and gravity
survey processes over prospects identified by seismic surveys as containing the
right kind of rock structures for the accumulation of hydrocarbons.
Electromagnetic and gravity survey processes provide an independent measurement
of the potential for hydrocarbons and could be used to select the prospects with
greatest chance of success.

We are currently in advanced discussions with other Alaskan
explorers and international geophysical service companies on areas of mutual
cooperation, including seismic acquisition and data sharing.

Leases Acquired from Daniel Donkel and Samuel Cade

On October 10, 2007, our wholly owned subsidiary, Fox Petroleum
(Alaska) Inc., entered into a purchase agreement with Daniel Donkel and Samuel
Cade to acquire a 100% working interest on 8 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 purchase agreement was amended to add us
as a party to the

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- 6 -

purchase agreement. 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 8 oil and gas leases were
completed effective March 1, 2008.

We are currently seeking to acquire all available data on these
leases, such as seismic, gravity, and magnetic data, which we plan to tie in
with the existing well logs and other offset and analog data.

UK North Sea

The Anglesey Prospect

On July, 31, 2007, through our wholly owned UK subsidiary, Fox
Energy Exploration Limited, we acquired a total of 33.33% interests in a UK
petroleum production license under a farm-in agreement dated June 8, 2007 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. 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 have declined
to take up this option but continue with our 33.33% interest in the license.

Pursuant to this 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 are currently analyzing these data. Pending the final analysis of all
relevant data, we expect to be able to define a drilling location during 2008,
and commit to a drilling program in the course of the year. We may have to spend
approximately $4,000,000 for our share of the cost of drilling an exploration
well under the agreement. However, we are in active negotiations with other UK
North Sea venturers to optimize our equity position in the license by inviting
interested parties to participate in drilling the well in return for a
percentage of our interests in the license at a promote uplift, meaning that we
would charge more than 1% of our costs for each 1% farmed-out (e.g. 1.5% or 2%
charged to farminee per 1% farmed-out). This could substantially reduce our
expenditure exposure on the well, but could lead to our having a reduced holding
in the license. Furthermore, there is no assurance that we will be able to reach
an agreement with any of these venturers.

The Bourbon Prospect

On November 8, 2007, through our wholly owned UK subsidiary,
Fox Energy Exploration Limited, we entered into a farm-in agreement with Valiant
North Sea Limited and Petrofac Energy Developments Limited. Pursuant to the
farm-in agreement, Valiant North Sea Limited and Petrofac Energy Developments
Limited agreed to assign a total of 46% interest in the southern part of block
211/17 located in the UK 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. When we acquire the 46% interest, Valiant North Sea Limited
will have a 30% interest and Petrofac Energy Developments Limited will have a
24% interest.

We are required to spud the exploration well before December
31, 2008 unless the parties agree to a later date. Our primary target for the
exploration well is the Bourbon prospect located in the southern part of block
211/17.

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- 7 -

Under a separate agreement with Aimwell Energy Ltd., we agreed
to transfer a 4.6% interest out of above 46% interest to Aimwell Energy Ltd.
when we acquire the 46% interest from Valiant North Seal Limited and Petrofac
Energy Developments Limited. Following the transfer of the 4.6% interest to
Aimwell Energy Ltd., we will pay Aimwell Energy Ltd.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, our company
and Aimwell Energy Limited will each be responsible for its respective share of
costs. Michael Rose and Robert Frost, who became directors of our company
effective May 5, 2008, are the beneficial owners and directors of Aimwell Energy
Ltd.

On April 15, 2008, we signed a letter of commitment with Senergy
  Limited, an international integrated oil services company, to utilize the Byford
  Dolphin semi-submersible drilling rig to drill a well on our Bourbon prospect.
  Senergy Limited countersigned the letter of commitment on May 5, 2008. On May
  20, 2008, we signed a new letter of commitment with Senergy Limited, which was
  countersigned by Senergy Limited 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 Limited.

We also committed to enter into a side letter agreement with
Senergy Limited 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).

We are ready to drill an exploration well on the Bourbon
prospect having recently completed the site survey. We plan to drill the well
late 2008 with rig mobilization at the beginning of November 2008.

UK Onshore License

On May 28, 2008, we acquired four 10km x 10km UK onshore
license blocks in the south of England. The United Kingdom government made
available this Petroleum Exploration and Development License and awarded the
blocks totaling 400 km sq to our company and Aimwell Energy Ltd. in the latest
round of onshore licensing. We have retained a 90% interest in the four blocks
and Aimwell Energy Ltd. retained a 10% interest.

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.

We have started the tendering process for the aforementioned
seismic acquisition obligation.

Other Commitments

By an agreement dated May 22, 2007, we engaged an analyst to
provide continuing research coverage regarding our company beginning May 22,
2007 until May 31, 2009. As of May 31, 2008, we are required to pay monthly
installments of $1,750 until May 31, 2009.

On June 8, 2007, we entered into an employment agreement with
  Richard Moore, which was amended on October 19, 2007, pursuant to which Mr.
  Moore serves as our President and Chief Executive Officer. Pursuant to the employment
  agreement, we pay Mr. Moore £9,000 per month, payable in £4,500 bi-monthly
  installments, in arrears and reimburse him for all reasonable travelling and
  other expenses

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- 8 -

incurred by him in connection with his services to us. Mr.
Moore is required to work at a minimum of 5 days per week for us and is entitled
to a minimum annual vacation of four weeks. The term of the agreement is for an
indefinite period and the agreement may be terminated with or without cause.

On June 8, 2007, we entered into a consulting agreement with
Alexander Craven, which was amended on October 19, 2007, pursuant to which we
pay Mr. Craven £7,000 monthly and all reasonable travelling and other expenses
incurred by him in connection with his duties to us. The term of the agreement
is for an indefinite period and the agreement may be terminated with or without
cause.

Effective August 17, 2007, we appointed William MacNee, Robert
Frost, Michael Rose, John Spence, and Jonathan Wood to our board of advisors. We
also entered into board of advisors agreements with Aimwell Energy Limited (a
company controlled by Robert Frost and Michael Rose), Black Gold Consulting Inc.
(a company controlled by William MacNee), John Spence, and Jonathan Wood,
whereby we agreed to grant 20,000, 10,000, 10,000, and 10,000 shares of our
common stock, respectively, for each completed year of the services. Effective
May 5, 2008, all five of them became our directors and the board of advisors was
dissolved. Also effective June 10, 2008, we entered into board of advisors
termination agreements, whereby we terminated the board of advisors agreements
and agreed to issue 20,000, 10,000, 10,000, 10,000 shares of our common stock to
Aimwell Energy Limited, Black Gold Consulting Inc., John Spence, and Jonathan
Wood, respectively, for the services performed by them.

Effective May 6, 2008, we adopted a compensation policy for our
independent directors pursuant to which we compensate each independent director
(i) a fee of $1,000 per month, (ii) 1,000 restricted shares of our common stock
per month, and (iii) a fee of $1,000 per each quarterly board meeting attended.
On May 6, 2008, our board of directors determined that Robert Frost, Michael
Rose, John Spence, and Jonathan Wood are independent directors. On July 11,
2008, our board of directors determined that Jonathan Wood no longer qualified
as an independent director of our company because of his appointment as our
Chief Financial Officer.

On May 8, 2008 we entered into a consulting agreement with Partners
  Consulting, Inc., a Florida corporation, with a view to introducing our company
  to potential new investors. We engaged Partners Consulting, Inc. 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, Inc., 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,
  Inc., 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, Inc. share purchase warrants equal to 50,000 shares
  of our common stock for the services of Partners Consulting, Inc. 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, Inc. introduces our company
  to potential new investors for successful financing, Partners Consulting, Inc.
  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 Inc. 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, Inc.
  for financing from Trafalgar Capital Specialized Investment Fund, Luxembourg.
  In addition, we are required to issue warrants for financing from Trafalgar
  Capital Specialized Investment Fund, Luxembourg, pursuant to the consulting
  agreement with Partners Consulting, Inc.

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- 9 -

Anticipated Cash Requirements

We estimate our minimum operating expenses and working capital
requirements for the next 12 month period to be as follows:

Estimated Operating Expenses For the Next 12 Month PeriodExploration (and appraisal) Costs
    $
    46,000,000Employee and Consultant Compensation
    
    1,300,000Professional Fees
    
    4,000,000General and Administrative Expenses
    
    1,000,000Total
    $
    52,300,000


Exploration Costs

We estimate that our exploration costs on our leases in Cook
Inlet, Alaska will be approximately $15,000,000 during the next 12 months, which
will include the costs of completing the four-stage development on the Catchers
Mitt prospect and the drilling of 3 wells.

We estimate that our exploration costs on our leases in North
Slope, Alaska (mainly to obtain seismic data) will be approximately $2,000,000
during the next 12 months, which will include modeling the geological structure
surrounding and including the leases based on the direct and offset data
available to us and re-processing the available seismic data and the use of
electromagnetic and gravity survey process.

We estimate that our exploration costs on our farm-in interests
in the UK North Sea licenses will be approximately $29,000,000 during the next
12 months, which will include drilling and testing of 2 exploration wells. These
costs may be substantially reduced depending on our ability to farm out a
reasonable percentage of our interests in the Anglesey and Bourbon prospects. We
are currently negotiating with several North Sea venturers which have shown
interest in participating in the exploration and appraisal of the two prospects.
Given the perceived potential of the prospects by the interested parties, we
could farm out part of our percentage interest on a promote basis whereby the
incoming farminees would acquire such interest by carrying us for a substantial
portion of the cost of drilling the wells.

Employee and Consultant Compensation

Given the early stage of our development and exploration
properties, we intend to continue to outsource our professional and personnel
requirements by retaining consultants on an as needed basis. We estimate that
our consultant and related professional compensation expenses for the next 12
month period will be approximately $300,000. We estimate that our employee
compensation expenses for the next 12 month period will be approximately
$1,000,000.

Professional Fees

We expect to incur ongoing legal expenses to comply with our
reporting responsibilities as public company under the United States
Securities Exchange Act of 1934, as amended. We estimate our legal and
accounting expenses for the next 12 month period to be approximately
$4,000,000.

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- 10 -

General and Administrative Expenses

We anticipate spending $1,000,000 on general and administrative
costs in the next 12 month period. These costs primarily consist of expenses
such as lease payments, office supplies and office equipment.

Results of Operation

Revenues

We have had no operating revenues since our inception on
November 4, 2004.

Expenses

The major components of our expenses for the three months ended
May 31, 2008 are outlined in the table below:

|                                                   |  | Three Months Ended May 31 | 
|-------------------------------------------------- |  | ------------------------- | 
|                                                   |  |                           | 
|                                                   |  |                           | 
|Expenses:                                          |  | 2008                      | 
|Accounting and audit fees                          |  | 33,244                    | 
|Advertising and public relations                   |  | 120,091                   | 
|Bank charges                                       |  | 2,990                     | 
|Consulting fees                                    |  | 194,357                   | 
|Filing and transfer agent                          |  | 1,125                     | 
|Finance charge                                     |  | 653,000                   | 
|Interest on notes payable                          |  | 6,105                     | 
|Legal fees                                         |  | 40,073                    | 
|Management fees                                    |  | 76,822                    | 
|Mineral property acquisition and exploration costs |  | -                         | 
|Office and miscellaneous                           |  | 46,821                    | 
|Insurance                                          |  | 8,822                     | 
|Travel and entertainment                           |  | 16,837                    | 

We reported accounting and audit fees of $33,244 for the three
months ended May 31, 2008, up from $5,576 for the three months ended May 31,
2007. This increase was primarily due to increased volume of work resulting from
the start up of our operational activity.

We reported advertising and public relations expenses of
$120,091 for the three months ended May 31, 2008, up from $8,312 for the three
months ended May 31, 2007. This increase was primarily due to printing and
distribution of our brochures and newsletter.

We reported bank charges of $2,990 for the three months ended
May 31, 2008, up from $682 for the three months ended May 31, 2007. This
increase was primarily due to a significant increase in the number of banking
transactions.

We reported consulting fees of $194,357 for the three months
ended May 31, 2008, up from $0 for the three months ended May 31, 2007. This
increase was primarily due to start up of technical work program.

We reported filing and transfer agent fees of $1,125 for the
three months ended May 31, 2008, up from $700 for the three months ended May 31,
2007. This increase was primarily due to increased number of filings and
associated fees.

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- 11 -

We reported finance charge of $653,000 for the three months ended
  May 31, 2008, up from $0 for the three months ended May 31, 2007. This increase
  was primarily due to including fair value of shares required to be issued to
  lender as part of compensation for a loan provided to us and warrants to purchase
  shares of our common stock to be issued pursuant to a consulting agreement with
  Partners Consulting, Inc.

We reported interest on notes payable of $6,105 for the three
months ended May 31, 2008, up from $0 for the three months ended May 31, 2007.
This increase was due to inclusion of accrued interest on notes payable.

We reported legal fees of $40,073 for the three months ended
May 31, 2008, up from $11,451 for the three months ended May 31, 2007. This
increase was primarily due to increased legal advice requirements as a result of
the start up of our operational activity.

We reported management fees of $76,882 for the three months
ended May 31, 2008, up from $27,000 for the three months ended May 31, 2007.
This increase was primarily due to greater staffing levels.

We reported mineral property acquisition and exploration costs
of $0 for the three months ended May 31, 2008, down from $2,335 for the three
months ended May 31, 2007.

We reported office and miscellaneous expenses of $46,821 for
the three months ended May 31, 2008, up from $22,542 for the three months ended
May 31, 2007. This increase was primarily due to increase in staff numbers and
thus office space required.

We reported insurance expenses of $8,822 for the three months
ended May 31, 2008, up from $0 for the three months ended May 31, 2007. This
increase was primarily due to implementation of directors and officers insurance
coverage.

We reported travel and entertainment expenses of $16,837 for
the three months ended May 31, 2008, up from $9,496 for the three months ended
May 31, 2007. This increase was primarily due to an increase in the
international activities of our company and thus an increased management travel
requirement.

Liquidity and Capital Resources

Working Capital
    
    May 31, 2008
    
    
    February 29, 2008Current Assets
    $
    177,726
    
    $
    364,685Current Liabilities
    $
    1,602,948
    
    $
    694,494Working Capital
    $
    (1,425,222
    )
    $
    (329,809
    )


As of May 31, 2008, we held a cash balance of $89,179 and a
working capital deficit of $1,425,222, compared to a cash balance of $271,601
and a working capital deficit of $329,809 as of February 29, 2008. We have
suffered recurring losses from inception.

Financing from EuroEnergy Growth Capital S.A.

Share Issuances to EuroEnergy Growth Capital S.A.

On May 17, 2007, we entered into a share issuance agreement
with EuroEnergy Growth Capital S.A. or EuroEnergy whereby EuroEnergy agreed to
advance up to $8,000,000 to our company 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 10 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

---

- 12 -

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.

|1. | On June 1, 2007, we issued 377,358.4 units of our common
      stock to EuroEnergy at a deemed price of $5.30 per unit pursuant to the
      agreement. We gave EuroEnergy our drawdown request on May 17, 2007 in the
      amount of $2,000,000. Each warrant contained in the units entitles the
      holder to purchase one common share at an exercise price of $6.65 per
      common share until May 17, 2010.                   
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                          
|2. | On August 1, 2007, we issued 31,056 units of our common
      stock to EuroEnergy at a deemed price of $8.05 per unit pursuant to the
      agreement. We gave EuroEnergy our drawdown request on July 18, 2007 in the
      amount of $250,000. Each warrant contained in the units entitles the
      holder to purchase one common share at an exercise price of $10.05 per
      common share until August 1, 2010.                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                          
|3. | On September 18, 2007, we issued 44,199.8 units of our
      common stock to EuroEnergy at a deemed price of $9.05 per unit pursuant to
      the agreement. We gave EuroEnergy our drawdown request on August 7, 2007
      in the amount of $400,000. Each warrant contained in the units entitles
      the holder to purchase one common share at an exercise price of $11.30 per
      common share until September 10, 2010.       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                          
|4. | On September 18, 2007, we also issued 52,132.8 units of
      our common stock to EuroEnergy at a deemed price of $10.55 per unit
      pursuant to the agreement. We gave EuroEnergy our drawdown request on
      August 21, 2007 in the amount of $550,000. Each warrant contained in the
      units entitles the holder to purchase one common share at an exercise
      price of $13.20 per common share until September 10, 2010.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                          
|5. | On September 27, 2007, we issued 28,708.2 units of our
      common stock to EuroEnergy at a deemed price of $10.45 per unit pursuant
      to the agreement. We gave EuroEnergy our drawdown request on September 9,
      2007 in the amount of $300,000. Each warrant contained in the units
      entitles the holder to purchase one common share at an exercise price of
      $13.05 per common share until October 1, 2007.      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                          
|6. | On October 26, 2007, we issued 16,380.8 units of our
      common stock to EuroEnergy at a deemed price of $12.21 per unit pursuant
      to the agreement. We gave EuroEnergy our drawdown request on October 1,
      2007 in the amount of $200,000. Each warrant contained in the units
      entitles the holder to purchase one common share at an exercise price of
      $15.25 per common share until October 26, 2010.         
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                          
|7. | On October 26, 2007, we issued 21,097 units of our common
      stock to EuroEnergy at a deemed price of $11.85 per unit pursuant to the
      agreement. We gave EuroEnergy our drawdown request on October 10, 2007 in
      the amount of $250,000. Each warrant contained in the units entitles the
      holder to purchase one common share at an exercise price of $14.80 per
      common share until October 26, 2010.          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                          
|8. | On October 26, 2007, we issued 35,897.4 units of our
      common stock to EuroEnergy at a deemed price of $9.75 per unit pursuant to
      the agreement. We gave EuroEnergy our drawdown request on October 23, 2007
      in the amount of $350,000. Each warrant contained in the units entitles
      the holder to purchase one common share at an exercise price of $12.20 per
      common share until October 26, 2010.         

---

- 13 -

|9.  | On November 28, 2007, we issued 47,337.2 units of our
      common stock to EuroEnergy at a deemed price of $8.45 per unit pursuant to
      the agreement. We gave EuroEnergy our drawdown request on October 31, 2007
      in the amount of $400,000. Each warrant contained in the units entitles
      the holder to purchase one common share at an exercise price of $10.55 per
      common share until November 28, 2010.                                               
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|10. | On January 24, 2008, we issued 96,153.8 units of our
      common stock to EuroEnergy at a deemed price of $5.20 per unit pursuant to
      the agreement. Each warrant contained in the units entitles the holder to
      purchase one common share at an exercise price of $6.50 per common share
      until January 24, 2011. We gave EuroEnergy our drawdown request on
      November 21, 2007 in the amount of $500,000.                                                 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|11. | On March 26, 2008, we issued 43,478.2 units of our common
      stock to EuroEnergy at a deemed price of $3.45 per unit pursuant to the
      agreement. Each warrant contained in the units entitles the holder to
      purchase one common share at an exercise price of $4.30 per common share
      until January 16, 2011. We gave EuroEnergy our drawdown request on January
      16, 2008 in the amount of $150,000 and received the funds on January 18,
      2008.   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|12. | On March 26, 2008, we issued 48,387 units of our common
      stock to EuroEnergy at a deemed price of $3.10 per unit pursuant to the
      agreement. Each warrant contained in the units entitles the holder to
      purchase one common share at an exercise price of $3.90 per common share
      until January 30, 2011. We gave EuroEnergy our drawdown request on January
      30, 2008 in the amount of $150,000 and received the funds on January 31,
      2008.     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|13. | On March 26, 2008, we issued 89,285.8 units of our common
      stock to EuroEnergy at a deemed price of $2.80 per unit pursuant to the
      agreement. Each warrant contained in the units entitles the holder to
      purchase one common share at an exercise price of $3.50 per common share
      until February 11, 2011. We gave EuroEnergy our drawdown request on
      February 11, 2008 in the amount of $250,000 and received the funds on
      February 12, 2008.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|14. | On March 26, 2008, we issued 96,774.2 units of our common
      stock to EuroEnergy at a deemed price of $3.10 per unit pursuant to the
      agreement. Each warrant contained in the units entitles the holder to
      purchase one common share at an exercise price of $3.90 per common share
      until February 26, 2011. We gave EuroEnergy our drawdown request on
      February 26, 2008 in the amount of $300,000 and received the funds on
      February 28.      

Promissory Notes to EuroEnergy Growth Capital S.A.

Because of changes in market conditions, EuroEnergy requested
its financing to us to be debt financing instead of equity financing.
Subsequently, we obtained funds from EuroEnergy by issuing promissory notes and
entering into a loan agreement.

On April 1, 2008, EuroEnergy loaned $250,000 to our company. As
evidence of the loan, we have executed and delivered to EuroEnergy a promissory
note dated April 1, 2008 in the principal amount of US$250,000, 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) April 1, 2009.
For the period from the

---

- 14 -

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 May 1, 2008, EuroEnergy loaned $150,000 to our company. As
evidence of the loan, we have executed and delivered to EuroEnergy a promissory
note dated May 1, 2008 in the principal amount of US$150,000, 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) May 1, 2009. 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 May 23, 2008, EuroEnergy loaned $50,000 to our company. As
evidence of the loan, we have executed and delivered to EuroEnergy a promissory
note dated May 23, 2008 in the principal amount of US$50,000, 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) May 23, 2009. 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 with
EuroEnergy for the $450,000 loan that EuroEnergy provided us on May 30, 2008.
Pursuant to 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 to
EuroEnergy Growth Capital S.A. 150,000 restricted shares of our common stock 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.

The above mentioned loans will be repaid at the earlier of
either end of loan term or upon the securing of financing in excess of
$1,000,000 (provided that the terms of the financing do not preclude repayment
of debt).

Financing from Trafalgar Capital Specialized Investment
Fund, Luxembourg

On June 24, 2008, we entered into a securities purchase
agreement with Trafalgar Capital Specialized Investment Fund, Luxembourg or
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 5 years at an

---

- 15 -

exercise price of $2.9851 (issued on June 24, 2008), 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 on June 23, 2008). In addition, we agreed to
enter into a committed equity facility with Trafalgar, which will be entered
into upon the debenture being repaid in full by us.

The debenture matures on October 24, 2008 and bears an annual
interest rate of (i) 14% compounded monthly from June 24, 2008 until the date of
effectiveness of our registration statement covering shares of our common stock
into which the debenture may be converted and issuable upon exercise of the
warrant, and (ii) 10% compounded monthly thereafter until the unpaid principal
of the debenture is paid.

An event of default occurs if (i) we fail to pay amounts due
under the debenture, (ii) our transfer agent fails to issue freely tradeable
common stock to Trafalgar within 3 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 debenture for 5 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 5 business days of receiving a written notice
of the breach. Upon an event of default, Trafalgar may accelerate full repayment
of the debenture outstanding and accrued interest thereon.

Also, if there is an event of default, Trafalgar is entitled,
at its option, to convert and sell the principal amount of the debenture plus
accrued interest into shares of our common stock at the price per share equal to
the lesser of (i) 125% of the volume weighted average price as quoted by
Bloomberg L.P. on June 24, 2008, or (ii) 85% 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. 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 Trafalgar
will be entitled to convert the 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 4.99% of the
outstanding shares of our common stock following such conversion without our
approval.

We may redeem the debenture, provided that our common stock is
trading below 125% of the volume weighted average price as quoted by Bloomberg
L.P. on June 24, 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 11% redemption premium on the amount redeemed. We must redeem the
entire principal amount outstanding on the debenture on October 24, 2008 at a 4%
redemption premium.

In addition, on June 24, 2008, we issued Trafalgar a warrant to
purchase 500,000 shares of our common stock at $2.9851 per share until June 24,
2013. If we issue or sell any shares of our common stock (except for certain
securities) for a consideration per share less than the price equal to the
exercise price in effect immediately prior to such issuance or sale, then
immediately after such issue or sale the exercise price then in effect has to be
reduced to 85% of such consideration per share. Upon such adjustment of the
exercise price, the number of the shares of our common stock issuable upon
exercise of the warrant must be adjusted to the number of shares determined by
multiplying the exercise price in effect immediately prior to such adjustment by
the number of the shares of our common stock issuable upon exercise the warrant
immediately prior to such adjustment and dividing the product thereof by the
adjusted exercise price. In no event Trafalgar will be entitled to exercise the
warrant for a number of shares of our common

---

- 16 -

stock in excess of that number of shares of our common stock
which, upon giving effect to such exercise, would cause the aggregate number of
shares of our common stock beneficially owned by Trafalgar and its affiliates to
exceed 4.99% of the outstanding shares of our common stock following such
exercise, except within 60 days of June 24, 2013.

In addition, on June 24, 2008, to induce Trafalgar to execute
and deliver the securities purchase agreement, we entered into a registration
rights agreement with Trafalgar. Pursuant to the registration rights agreement,
we agreed to prepare and file, no later than July 24, 2008, with the Securities
and Exchange Commission a registration statement for the registration for the
resale by Trafalgar at least 3 times the number of shares which are anticipated
to be issued upon conversion of the debenture and shares of our common stock
issuable to Trafalgar upon exercise of the warrant. We also have to use our best
efforts to have the registration statement declared effective by the Securities
and Exchange Commission no later than September 22, 2008. We have to cause the
registration statement to remain effective until Trafalgar sells all of the
shares issuable to Trafalgar upon conversion of the debenture and upon exercise
of the warrant. If the Securities and Exchange Commission does not declare the
registration statement effective by September 22, 2008, or if after the
Securities and Exchange Commission declares the registration statement
effective, Trafalgar cannot sell the shares of our common stock pursuant to the
registration statement, we have to pay liquidated damages to Trafalgar, at its
option, either a cash amount or shares of our common stock equal to 2% of the
liquidated value of the debenture outstanding for each 30 day period after July
24, 2008 or September 22, 2008 as the case may be.

In addition, on June 24, 2008, in connection with the
securities purchase agreement, Trafalgar and we entered into a security
agreement, pursuant to which we agreed to provide Trafalgar with a security
interest in all of our and our current or future acquired subsidiaries assets
to secure our obligations to Trafalgar including our obligations to Trafalgar
under the securities purchase agreement and the debenture and any other amounts
owed to Trafalgar by our company. In addition, pursuant to the securities
purchase agreement, we assigned our interest in Genesco-Edwards Fields leases in
Kansas to Trafalgar Capital Specialized Investment Fund, FIS as continuing
collateral security. The leases are held in escrow, and upon an occurrence of
default, the leases will be immediately assigned to Trafalgar.

Future Financing

Based on our current plan of operations, we do not currently
have sufficient amount of cash to satisfy our cash requirements for the next 12
months. We are pursuing various financing alternatives to meet our immediate and
long-term financial requirements.

We are currently in negotiation to obtain a financing from
Trafalgar in order to satisfy our cash requirements for our current plan of
operations. We agreed to enter into a committed equity facility with Trafalgar,
which will be entered into upon the debenture being repaid in full by us.

So long as any of the principal of or interest on the debenture
issued to Trafalgar 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.

---

- 17 -

There are no assurances that we will be able to obtain funds
required for our continued operations. There can be no assurance that additional
financing will be available to us when needed or, if available, that it can be
obtained on commercially reasonable terms. 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.

Going Concern

Because we are in the development stage, have not yet achieved
profitable operations and are dependent on our ability to raise capital from
stockholders or other sources to meet our obligations and repay our liabilities
arising from normal business operations when they become due, in their report on
our audited financial statements for the years ended February 29, 2008 and
February 28, 2007, our independent auditors included an explanatory paragraph
regarding concerns about our ability to continue as a going concern. Our
financial statements contain additional note disclosure describing the
circumstances that lead to this disclosure by our independent auditors.

Off-Balance Sheet Arrangements

We have no significant off-balance sheet arrangements that have
or are reasonably likely to have a current or future effect on our financial
condition, changes in financial condition, revenues or expenses, results of
operations, liquidity, capital expenditures or capital resources that is
material to stockholders.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK

Not Applicable.

ITEM 4. CONTROLS AND PROCEDURES.

Disclosure Controls and Procedures

As required by Rule 13a-15 under the Securities Exchange Act of
1934, we have carried out an evaluation of the effectiveness of the design and
operation of our company's disclosure controls and procedures as of the end of
the period covered by this quarterly report, being May 31, 2008. This evaluation
was carried out under the supervision and with the participation of our
management, including our President and Chief Executive Officer and our Chief
Financial Officer.

Our management does not expect that our disclosure controls or
our internal controls over financial reporting will prevent all error and fraud.
A control system, no matter how well conceived and operated, can provide only
reasonable, but no absolute, assurance that the objectives of a control system
are met. Further, any control system reflects limitations on resources, and the
benefits of a control system must be considered relative to its costs. These
limitations also include the realities that judgments in decision-making can be
faulty and that breakdowns can occur because of simple error or mistake.
Additionally, controls can be circumvented by the individual acts of some
persons, by collusion of two or more people or by management override of a
control. A design of a control system is also based upon certain assumptions
about potential future conditions; over time, controls may become inadequate
because of changes in conditions, or the degree of compliance with the policies
or procedures may deteriorate.

---

- 18 -

Because of the inherent limitations in a cost-effective control
system, misstatements due to error or fraud may occur and may not be
detected.

Based upon that evaluation, our President and Chief Executive
Officer and our Chief Financial Officer concluded that our disclosure controls
and procedures are effective as at the end of the period covered by this report.
There have been no changes in our internal controls 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 controls
over financial reporting.

Disclosure controls and procedures are controls and other
procedures that are designed to ensure that information required to be disclosed
in our reports filed or submitted 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 controls and procedures designed to ensure that
information required to be disclosed in our company's reports filed under the
Securities Exchange Act of 1934 is accumulated and communicated to management,
including our President and Chief Executive Officer and our Chief Financial
Officer as appropriate, to allow timely decisions regarding required
disclosure.

PART II  OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

We know of no material, active or pending legal proceedings
against us, nor are we involved as a plaintiff in any material proceedings or
pending litigation. There are no proceedings in which any of our directors,
officers or affiliates, or any registered beneficial shareholder are an adverse
party or has a material interest adverse to us.

ITEM 1A. RISK FACTORS

In addition to other information in this quarterly report, the
following risk factors should be carefully considered in evaluating our business
because such factors may have a significant impact on our business, operating
results, liquidity and financial condition. As a result of the risk factors set
forth below, actual results could differ materially from those projected in any
forward looking statements. Additional risks and uncertainties not presently
known to us, or that we currently consider to be immaterial, may also impact our
business, operating results, liquidity and financial condition. If any such
risks occur, our business, operating results, liquidity and financial condition
could be materially affected in an adverse manner. Under such circumstances, the
trading price of our securities could decline, and you may lose all or part of
your investment.

Risks Relating To Our Business and the Oil and Gas
Industry

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 revenues from our operations. We will not be able to
generate significant revenues in the immediate future and our management expects
operating expenses to increase substantially over the next 12 months because of
our increased oil and gas exploration activities. 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

---

- 19 -

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.

Because we are in the development stage, have not yet achieved
profitable operations and are dependent on our ability to raise capital from
stockholders or other sources to meet our obligations and repay our liabilities
arising from normal business operations when they become due, in their report on
our audited financial statements for the years ended February 29, 2008 and
February 28, 2007, our independent auditors included an explanatory paragraph
regarding concerns about our ability to continue as a going concern. Our
financial statements contain additional note disclosure describing the
circumstances that lead to this disclosure by our independent auditors.

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:

- inadequate pipeline transmission facilities or carrying capacity;
- government regulation of natural gas and oil production;
- government transportation, tax and energy policies;
- changes in supply and demand; and
- general economic conditions.

---

- 20 -

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

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

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

Future growth could strain our personnel and infrastructure
resources, and if we are unable to implement appropriate controls and procedures
to manage our growth, we may not be able to successfully implement our business
plan.

We expect to experience rapid growth in our operations, which
will place a significant strain on our management, administrative, operational
and financial infrastructure. Our future success will depend in part upon the
ability of our executive officers to manage growth effectively. This may require
us to hire and train additional personnel to manage our expanding operations. In
addition, we must continue to improve our operational, financial and management
controls and our reporting systems and procedures. If we fail to successfully
manage our growth, we may be unable to execute upon our business plan.

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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:

- the success of our planned projects on North Slope and Cook Inlet in
  Alaska, in Texas and Kansas, in the UK;
- success in locating and producing reserves; and
- prices of natural gas and oil.

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

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

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

Additional debt financing could lead to:

- a substantial portion of operating cash flow being dedicated to the
  payment of principal and interest;
- being more vulnerable to competitive pressures and economic downturns; and
- 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.

We may not be able to determine reserve potential or
identify liabilities associated with our properties in Alaska, Texas, Kansas,
the UK 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 properties in
Alaska, Texas, Kansas, and the UK in a manner consistent with industry
practices, 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

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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.

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

In general, our exploration and production activities are
subject to certain federal, state, local, and foreign laws and regulations
relating to environmental quality and pollution control. Such laws and
regulations increase the costs of these activities and may prevent or delay the
commencement or continuance of a given operation. Specifically, we are subject
to legislation regarding emissions into the environment, water discharges and
storage and disposition of hazardous wastes. In addition, legislation has been

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- 23 -

enacted which requires well and facility sites to be abandoned
and reclaimed to the satisfaction of state authorities. However, such laws and
regulations are frequently changed and any such changes may have material
adverse effects on our activities. We are unable to predict the ultimate cost of
compliance with such laws and regulations. Generally, environmental requirements
do not appear to affect us any differently or to any greater or lesser extent
than other companies in the industry. To date we have not been required to spend
any material amount on compliance with environmental regulations. However, we
may be required to do so in future and this may affect our ability to expand or
maintain our operations.

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

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

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

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

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

To the extent that we establish oil and gas reserves, we
will be required to replace, maintain or expand our oil and gas reserves in
order to prevent our reserves and production from declining, which would
adversely affect cash flows and income.

In general, production from oil and gas properties declines
over time as reserves are depleted, with the rate of decline depending on
reservoir characteristics. If we establish reserves, of which there is no
assurance, and we are not successful in our subsequent exploration and
development activities or in subsequently acquiring properties containing proved
reserves, our proved reserves will decline as reserves are produced. Our future
oil and gas production is highly dependent upon our ability to economically
find, develop or acquire reserves in commercial quantities.

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To the extent cash flow from operations is reduced, either by a
decrease in prevailing prices for oil and gas or an increase in finding and
development costs, and external sources of capital become limited or
unavailable, our ability to make the necessary capital investment to maintain or
expand our asset base of oil and gas reserves would be impaired. Even with
sufficient available capital, our future exploration and development activities
may not result in additional proved reserves, and we might not be able to drill
productive wells at acceptable costs.

The geographic concentration of all of our properties in
Alaska, Texas, Kansas, and the UK subjects us to an increased risk of loss of
revenue or curtailment of production from factors affecting those areas.

The geographic concentration of all of our leasehold interests
in Alaska and Kansas, our joint venture interests in Texas, our farm-in
interests in UK North Sea, and our UK onshore license means that our properties
could be affected by the same event should the regions experience:

- severe weather;
- delays or decreases in production, the availability of equipment,
  facilities or services;
- delays or decreases in the availability of capacity to transport, gather
  or process production; or
- changes in the regulatory 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:

- weather conditions in the United States and wherever our property
  interests are located;
- economic conditions, including demand for petroleum-based products, in the
  United States and the rest of the world;
- actions by OPEC, the Organization of Petroleum Exporting Countries;
- political instability in the Middle East and other major oil and gas
  producing regions;
- governmental regulations, both domestic and foreign;
- domestic and foreign tax policy;
- the pace adopted by foreign governments for the exploration, development,
  and production of their national reserves;
- the price of foreign imports of oil and gas;
- the cost of exploring for, producing and delivering oil and gas;
- the discovery rate of new oil and gas reserves;
- the rate of decline of existing and new oil and gas reserves;
- available pipeline and other oil and gas transportation capacity;
- the ability of oil and gas companies to raise capital;
- the overall supply and demand for oil and gas; and
- 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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- 25 -

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 least at the present, we do not plan to
serve as the operator for our projects. 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:

- the timing and amount of capital expenditures;
- the operator's expertise and financial resources;
- approval of other participants in drilling wells;
- selection of technology;
- the rate of production of the reserves; and
- 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.

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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 to our company.

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

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

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

Risks Relating to Our Common Stock

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

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

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

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

Our articles of incorporation authorize the issuance of up to
90,000,000 shares of common stock with a par value of $0.001 per share. Our
board of directors may choose to issue some or all of such shares to

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- 27 -

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.

Financial Industry Regulatory Authority 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, the
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. 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.

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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
shareholders 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.

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

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 in our company.

An event of default in connection with the debenture issued
to Trafalgar could contribute to the future decline of our stock price.

If there is an event of default in connection with the
debenture issued to Trafalgar, Trafalgar is entitled, at its option, to convert
the principal amount of the debenture plus accrued interest into shares of our
common stock at the price per share equal to the lesser of (i) 125% of the
volume weighted average price as quoted by Bloomberg L.P. on June 24, 2008, or
(ii) 85% 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. To the extent that Trafalgar sells its shares of our common stock,
our stock price may decrease due to the additional shares in the market. This
could lead to Trafalgar selling additional amounts of our common stock, the
sales of which would further depress our stock price.

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- 29 -

The market price of our common stock could be reduced if
Trafalgar exercises its warrant or convert the debenture, such that we would be
required to issue additional shares of our commons stock.

If Trafalgar exercises its warrant or convert the debenture,
such that we would be required to issue additional shares of our common stock,
it would result in substantial dilution to the equity interests of our
stockholders. Furthermore, we agreed to register the shares of our common stock
to be issued pursuant to such warrant exercise and debenture conversion for
resale. Public resales of shares of our common stock following such warrant
exercise and debenture conversion could depress the prevailing market price of
our common stock. Even prior to the actual warrant exercise or debenture
conversion, the perception of a significant market overhang resulting from the
existence of our obligation to honor the warrant exercise and debenture
conversion could depress the market price of our common stock.

Risks Related to Our Company

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 of our company.

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 of our company. If there is a take-over of
our company, our management and directors may change.

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

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

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS

None

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None

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

None

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ITEM 5. OTHER INFORMATION

On May 8, 2008 we entered into a consulting agreement with Partners
  Consulting, Inc., a Florida corporation, to introduce our company with potential
  new investors. We engaged Partners Consulting, Inc. 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,
  Inc., 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, Inc., 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,
  Inc. share purchase warrants equal to 50,000 shares of our common stock for
  the services of Partners Consulting, Inc. 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, Inc. introduces our company to potential
  new investors for successful financing, Partners Consulting, Inc. 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, Inc. for financing from Trafalgar
  Capital Specialized Investment Fund, Luxembourg. In addition, we are required
  to issue warrants for financing from Trafalgar Capital Specialized Investment
  Fund, Luxembourg, pursuant to the consulting agreement with Partners Consulting,
  Inc.

Effective June 10, 2008, we entered into board of advisors
termination agreements with Aimwell Energy Limited (a company controlled by
Robert Frost and Michael Rose, two of our directors), Black Gold Consulting Inc.
(a company controlled by William MacNee, our Chief Operating Officer and
director), and John Spence, our director, and Jonathan Wood, our director. We
entered into these agreements in order to terminate board of advisors agreements
that we previously entered into with them. In consideration for the services
performed, we agreed to issue 20,000, 10,000, 10,000, 10,000 shares of our
common stock to Aimwell Energy Limited, Black Gold Consulting Inc., John Spence,
and Jonathan Wood, respectively.

On February 27, 2008, we entered into an agreement of
intentions to purchase the Geneseo-Edwards Program with Hodgden &
Associates. Pursuant to the agreement, we had an exclusive right to purchase the
program until July 31, 2008. The program consists of 3 leases comprising 320
acres and located in Ellsworth County, Kansas. The expiration dates of these 3
leases are November 19, 2008, August 19, 2009, and August 31, 2009.

On June 26, 2008, we purchased these 3 leases and pursuant to
  an agreement with Hodgden & Associates, a mutual area of interest is established
  to cover the entire leases in addition to some of the surrounding areas. Under
  the agreement an overriding royalty of 7.5% is assigned to Mr. Hodgden and Dr.
  Knight in all additional acreage acquired in any manner by us within the mutual
  area of interest. Mr. Hodgden and Dr. Knight received the sum of $80,000 from
  us and Hodgden and Associates sold and assigned to us an 80% net revenue interest
  (100% working interest) in these 3 leases. The landowner royalty on each of
  these leases is 12.5% and Hodgden and Associates retains an overriding royalty
  interest of 7.5% in each lease. We are expected to drill a minimum of 10 wells
  on these leases and we will have to drill and establish production on each lease
  before the expiration date of each lease. If we fail to drill and establish
  production on each lease before the expiration date, we will have to pay $150,000
  per lease lost to Hodgden & Associates.

On April 15, 2008, we signed a letter of commitment with Senergy
  Limited, an international integrated oil services company, to utilize the Byford
  Dolphin semi-submersible drilling rig to drill a well on our Bourbon prospect.
  Senergy Limited countersigned the letter of commitment on May 5, 2008. On May
  20, 2008, we signed a new letter of commitment with Senergy Limited, which was
  countersigned by Senergy Limited on May 21, 2008, because Senergy Limited entered
  into a rig contract with Dolphin Drilling Limited, and agreed to extend that
  contract at a base operating rate of $405,000. Pursuant to the new letter of
  commitment, the base operating rate at which we committed to enter into a rig
  re-supply or rig assignment contract with Senergy Limited to use the rig was
  changed from $385,000 per day to $405,000 per day. Also, because Senergy Limited
  has executed the extension of the rig contract with Dolphin Drilling Limited,
  the term of the new letter of commitment endures until its commitments are met.

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ITEM 6. EXHIBITS

Exhibits required by Item 601 of Regulation S-K

Exhibit No.
    Description(3)
    (i) Articles of Incorporation and (ii) By-laws3.1
    Articles of Incorporation (incorporated by reference from
      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 from 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 from 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 from our current
      report on Form 8-K filed on April 21, 2008)3.5
    Amended and Restated Bylaws (incorporated by reference
      from our current report on Form 8- K filed on April 30, 2008)(10)
    Material Contracts10.1
    Private Placement Subscription Agreement dated February
      23, 2007 (incorporated by reference from 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 from our current report on Form 8-K filed on
      May 31, 2007)10.3
    Share Issuance Agreement dated May 17, 2007 (incorporated
      by reference from our current report on Form 8-K filed on June 1, 2007)10.4
    Farm-In Agreement dated June 8, 2007 (incorporated by
      reference from our annual report on Form 10-KSB filed on June 13, 2007)10.5
    Employment Agreement dated June 11, 2007 (incorporated by
      reference from our annual report on Form 10-KSB filed on June 13, 2007)10.6
    Escrow Agreement dated June 8, 2007 (incorporated by
      reference from our annual report on Form 10-KSB filed on June 13, 2007)10.7
    Consulting Agreement dated June 12, 2007 (incorporated by
      reference from our annual report on Form 10-KSB filed on June 13, 2007)10.8
    Consulting Agreement dated June 12, 2007 (incorporated by
      reference from 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 from our current report on Form 8-K
      filed on October 19, 2007)10.10
    Amendment to Employment Agreement dated October 19, 2007
      (incorporated by reference from 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 from 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 from 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 from 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 from our
      current report on Form 8-K filed on November 28, 2007)


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Exhibit No.
      Description10.15
      Purchase Agreement (Cook Inlet) dated October
        10, 2007 (incorporated by reference from 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 from 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 from our current report
        on Form 8-K filed on May 9, 2008)10.18
      Letter of Commitment with Senergy Limited (incorporated
        by reference from 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 from 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 from 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 from 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 from 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 from 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 from 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 from 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 from 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 from
        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
        from 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 from 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 from 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 from 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 from 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, Luxembourg10.34*
      Warrant dated June
        24, 2008 issued by our company to Trafalgar Capital Specialized Investment
        Fund, Luxembourg10.35*
      Securities Purchase
        Agreement dated June 24, 2008 between Trafalgar Capital Specialized Investment
        Fund, Luxembourg and our company10.36*
      Registration Rights
        Agreement dated June 24, 2008 between Trafalgar Capital Specialized Investment
        Fund, Luxembourg and our company


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Exhibit No.
      Description10.37*
      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 company10.38*
      Security Agreement
        dated June 24, 2008 between Trafalgar Capital Specialized Investment Fund,
        Luxembourg and our company10.39*
      Irrevocable Transfer
        Agent Instructions dated June 18, 2008 between Empire Stock Transfer Inc.
        and our company10.40*
      General Assignment
        of Contracts and Leases dated June 18, 2008 between Trafalgar Capital
        Specialized Investment Fund, FIS and our company10.41*
      Consulting Agreement
        with Partners Consulting, Inc. dated May 8, 200810.42*
      Letter of Commitment with Senergy
        Limited14.1
      Code of Conduct and Ethics (incorporated by reference
        from our current report on Form 8-K filed on May 9, 2008)(21)
      Subsidiaries21.1
      Fox Petroleum (Alaska) Inc., incorporated in
        Alaska21.2
      Fox Energy Exploration Limited, incorporated
        in England and Wales(31)
      Section 302 Certification31.1*
      Section 302 Certification
        of Richard Moore31.2*
      Section 302 Certification
        of Jonathan Wood(32)
      Section 906 Certification32.1*
      Section 906 Certification
        of Richard Moore32.2*
      Section 906 Certification
        of Jonathan Wood99.1
      Audit Committee Charter (incorporated by reference
        from our current report on Form 8-K filed on May 9, 2008)99.2
      Compensation Committee Charter (incorporated
        by reference from our current report on Form 8-K filed on May 9, 2008)99.3
      Nominating Committee Charter (incorporated by
        reference from our current report on Form 8- K filed on May 9, 2008)


*Filed herewith

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.

FOX PETROLEUM INC.

*/s/ Richard Moore*By: Richard Moore
President, Chief Executive Officer, Chairman, and Director
(Principal Executive Officer) 
  Dated: July 21, 2008

*/s/ Jonathan Wood*By: Jonathan WoodChief
Financial Officer and Director(Principal Financial Officer and Principal
Accounting Officer) 
  Dated: July 21, 2008

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