UNITED STATES
 SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 AMENDMENT NO. 2 to
 FORM 10-Q
 
 
 x     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 For the quarterly period ended May 31, 2010
 
 OR
 
 o      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 For the transition period from ______ to ______.
 
 Commission File Number: 000-52721
 
 Fox Petroleum Inc.
 (Exact name of registrant as specified in its charter)
 
 
 
 Nevada


27-1885936(State or other jurisdiction of

incorporation or organization)


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

New York, NY


10018(Address of principal executive offices)


(Zip Code)
 
 (212) 560-5195
 (Registrant’s telephone number, including area code)
 
 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the issuer was required to file such reports), and (2)has been subject to such filing requirements for the past 90 days.           Yes  x  No  o
 
 Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes  o  No  o
 
 Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company filer.  See definition of “accelerated filer” and “large accelerated filer” in Rule 12b-2 of the Exchange Act:
 
 Large Accelerated Filer  o
Accelerated Filer  oNon-Accelerated Filer  o
Smaller Reporting Company  x
 
 Indicate by check mark whether the registrant is a shell company as defined in Rule 12b-2 of the Exchange Act. Yes o  No  x
 
 As of as of July 19, 2010 the registrant had 34,418,245 shares of its Common Stock, $0.001 par value, outstanding.
 
 
 
 EXPLANATORY NOTE
 
 Fox Petroleum Inc. (the “Company”) is filing this Amendment No. 2 on Form 10-Q/A (this “Amendment No. 2”) to reflect the effects of accounting and reporting errors resulting from a deficiency in its accounting and financial statement preparation process.  This error and the related adjustments resulted in an understatement of net income of $412,943 for the three months ended May 31, 2010 and the overstatement of $396,943 of deficits accumulated during the development stage, and the understatement of $117,557 of total current liabilities, as of May 31, 2010 as reported in the Company’s Amended Quarterly Report on Form 10-Q/A for the quarter ended May 31, 2010, which was originally filed with the SEC on July 28, 2010. The restatement is discussed in more detail in Note 1 to the “Consolidated Financial Statements” contained in this Amendment No. 2.
 
 
 
 FOX PETROLEUM INC.
 FORM 10-Q
 MAY 31, 2010
 INDEX
 
 PART I – FINANCIAL INFORMATIONItem 1.
Financial StatementsConsolidated Balance Sheets as of May 31, 2010 (unaudited) and February 28, 2010Consolidated Statements of Operations for the Three Months Ended May 31, 2010 and 2009 and for the Period November 4, 2004 (Inception) to May 31, 2010 (unaudited)Consolidated Statements of Cash Flows for the Three Months Ended May 31, 2010 and 2009 and for the Period November 4, 2004 (Inception) to May 31, 2010 (unaudited)Notes to Consolidated Financial Statements (unaudited)Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of OperationsItem 3
Quantitative and Qualitative Disclosures About Market RiskItem 4.
Controls and ProceduresPART II – OTHER INFORMATIONItem 1.
Legal ProceedingsItem 1.A.
Risk FactorsItem 2.
Unregistered Sales of Equity Securities and Use of ProceedsItem 3.
Defaults Upon Senior SecuritiesItem 4.
(Removed & Reserved)Item 5.
Other InformationItem 6.
ExhibitsSIGNATURE
 
 
 
  PART I – FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 
 Fox Petroleum Inc. and Subsidiaries(A Development Stage Company)Consolidated Balance SheetsMay 31,


February 28,2010


2010Restated


RestatedASSETSCurrent assetsCash

$
-


$
-Total current assets


-



-Oil and gas interests


-



-Total assets

$
-


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

$
17,602,548


$
17,602,548Accrued interest


875,255



757,698Notes payable


5,312,333



5,312,333Total current liabilities


23,790,136



23,672,579Fees payable in stock and warrants


44,461



44,461Stockholders' deficitCommon stock, $.001 par value, 90,000,000 shares authorized,32,668,245 and 84,818,245 shares issued and outstandingat May 31, 2010 and February 28, 2010, respectively


32,668



84,818Additional paid-in capital


18,475,045



44,937,395Subscriptions receivable


-



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


(42,342,310
)


(42,739,253
)Total stockholders' deficit


(23,834,597
)


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

$
-


$
-See accompanying notes to unaudited consolidated financial statements.
 
  Fox Petroleum Inc. and Subsidiaries(A Development Stage Company)Consolidated Statements of OperationsFor the PeriodNovember 4, 2004(Inception) toFor the Three Months May 31,


May 31,2010


2009


2010Restated





RestatedSales revenue

$
-


$
-


$
-Operating expenses:General and administrative expenses


-



329,533



4,255,447Consulting fees


-



86,657



755,239Finance Fees


(514,500
)


4,870,617



9,198,304Impairment of oil and gas assets


-



-



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


-



-



12,910,000Management fees


-



188,956



1,380,186Total operating expenses


(514,500
)


5,475,763



38,545,859Income (loss) from operations


514,500



(5,475,763
)


(38,545,859
)Other income (expense):Gain on recovery of VAT receivable


-



-



78,451Gain on recovery of payables


-



-



125,143Interest and other income


-



-



9,986Interest expense


(117,557
)


(106,997
)


(1,434,539
)Accretion of convertibe note discounts


-



-



(2,575,492
)Total other income (expense)


(117,557
)


(106,997
)


(3,796,451
)Income (loss) before income taxes


396,943



(5,582,760
)


(42,342,310
)Provision for income taxes


-



-



-Net income (loss)

$
396,943


$
(5,582,760
)

$
(42,342,310
)Net income (loss) per share - basic and diluted

$
0.01


$
(0.20
)
 Weighted average number of sharesoutstanding - Basic and Diluted


33,235,093



27,763,897See accompanying notes to unaudited consolidated financial statements.
  
  Fox Petroleum Inc. and Subsidiaries

(A Development Stage Company)

Consolidated Statements of Cash FlowsFor the PeriodNovember 4, 2004(Inception) toFor the Three Months Ended May 31,


May 31,2010


2009


2010Restated





RestatedCash flows from operating activities:Net income (loss)

$
396,943


$
(5,582,760
)

$
(42,342,310
)Adjustments to reconcile net income (loss) to net cash from in operations:Donated services and rent


-



-



21,000Accretion of convertible debt discount


-



-



2,575,492Fees payable in stock and warrants


-



2,090



37,087Finance fees paid in stock and warrants


(514,500
)


4,870,617



7,755,794Gain on settlement of accounts payable


-



-



(125,143
)Impairment of oil and gas assets


-



-



10,046,683Gain of VAT receivable written off


-



-



(78,451
)Changes in operating assets and liabilities:VAT Refund and other recivables


-



17,824



78,451Accounts payable and accrued expenses


-



580,397



18,291,988Accrued interest


117,557



106,997



845,196Net cash used in operating activities


-



(4,835
)


(2,894,213
)Cash flows from investing activities:Proceeds (investment) in oil and gas interests


-



20,000



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


-



5,468



-Net cash provided by investing activities


-



25,468



(7,702,687
)Cash flows from financing activities:Proceeds from issuance of common stock


-



-



6,196,900Proceeds from issuance of notes payable


-



-



4,400,000
 Advances from related parties





-



34,000Repayments of advances from related parties


-



(16,500
)


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


-



(16,500
)


10,596,900Net increase in cash


-



4,133



-Cash at beginning of period


-



737



-Cash at end of period

$
-


$
4,870


$
-
 
 See accompanying notes to unaudited consolidated financial statements.


Continued on next page
 
 Fox Petroleum Inc. and Subsidiaries(A Development Stage Company)Consolidated Statements of Cash Flows (Continued)For the PeriodNovember 4, 2004(Inception) toFor the Three Months Ended May 31,


May 31,2010


2009


2010Restated





RestatedSupplemental disclosure of cash flow information:Cash paid for interest

$
-


$
-


$
16,667Cash paid for taxes

$
-


$
-


$
-Non-cash investing and financing activities:Cancellation subscriptions for 52,000,000 shares of common stock

$
26,000,000


$
-


$
26,000,000Benefical conversion feature on convertible debt

$
-


$
-


$
2,575,492Issuance of 52,000,000 common stock subscriptions

$
-


$
-


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

$
-


$
-


$
1,965,702See accompanying notes to unaudited consolidated financial statements.
  
 
  Fox Petroleum Inc. and Subsidiaries
 (A Development Stage Company)
 Notes to Consolidated Financial Statements
 May 31, 2010
 (unaudited)
   Note 1 – Restatement of Consolidated Financial Statements
 
 The Company restated its previously issued unaudited consolidated financial statements included in the Amendment No. 1 to its Quarterly Report on Form 10-Q/A for the quarter ended May 31, 2010 to reflect the effects of accounting and reporting errors resulting from a deficiency in its accounting and financial statement preparation process. This error and the related adjustments resulted in an understatement of net income of $412,943 for the three months ended May 31, 2010 and the overstatement of $396,943 of deficits accumulated during the development stage, and the understatement of $117,557 of total current liabilities. The revisions applied to the affected individual line items in the consolidated financial statements are as follows:
  May 31, 2010As previously





Asreported


Adjustments


restatedASSETSCurrent assetsCash


$
-


$
-


$
-Total current assets


-



-



-Oil and gas interests



-



-



-Total assets


$
-


$
-


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

$
18,360,246


$
(757,698
)

$
17,602,548Accrued interest



-



875,255



875,255Notes payable



5,312,333



-



5,312,333Total current liabilities


23,672,579



117,557



23,790,136Fees payable in stock and warrants


44,461



-



44,461Stockholders' deficitCommon stock



84,818



(52,150
)


32,668Additional paid-in capital



44,937,395



(26,462,350
)


18,475,045Subscriptions receivable



(26,000,000
)


26,000,000



-Deficit accumulated during the development stage


(42,739,253
)


396,943



(42,342,310
)Total stockholders' deficit


(23,717,040
)


(117,557
)


(23,834,597
)Total liabilities and stockholders' deficit

$
-


$
-


$
-
 
 
 
  Fox Petroleum Inc. and Subsidiaries
 (A Development Stage Company)
 Notes to Consolidated Financial Statements
 May 31, 2010
 (unaudited)
 
 Note 1 – Restatement of Consolidated Financial Statements (Continued)
 
 Consolidated Statements of Operations
  Three Months ended May 31, 2010As previously





Asreported


Adjustments


restatedSales revenue


$
-


$
-


$
-Operating expenses:Consulting fees



16,000



(16,000
)


-Finance Fees



-



(514,500
)


(514,500
)Total operating expenses


16,000



(530,500
)


(514,500
)Income (loss) from operations



(16,000
)


530,500



514,500Other income (expense):Interest expense



-



(117,557
)


(117,557
)Total other income (expense)


-



(117,557
)


(117,557
)Income (loss) before income taxes


(16,000
)


412,943



396,943Provision for income taxes



-



-



-Net income (loss)


$
(16,000
)

$
412,943


$
396,943Net income (loss) per share - basic and diluted

$
(0.00
)





$
0.01Weighted average number of sharesoutstanding - Basic and Diluted


24,063,670



9,171,423



33,235,093
  
  Fox Petroleum Inc. and Subsidiaries
 (A Development Stage Company)
 Notes to Consolidated Financial Statements
 May 31, 2010
 (unaudited)
 
 Note 1 – Restatement of Consolidated Financial Statements (Continued)
 
 Consolidated Statements of Cash Flows
 
 Three Months ended May 31, 2010As previously





Asreported


Adjustments


restatedCash flows from operating activities:Net loss

$
-


$
396,943


$
396,943Adjustments to reconcile net income (loss) tonet cash used in operations:Finance fees paid in stock and warrants


-



(514,500
)


(514,500
)Changes in operating assets and liabilities:Accounts payable and accrued expenses


-



-



-Accrued interest


-



117,557



117,557Net cash used in operating activities


-



-



-Cash flows from investing activities:Proceeds (investment) in oil and gas interests


-



-



-Decrease (increase) in restricted cash


-



-



-Net cash used in investing activities


-



-



-Cash flows from financing activities:Proceeds from issuance of common stock


-



-



-Proceeds from issuance of notes payable


-



-



-Net cash from financing activities


-



-



-Net increase in cash


-



-



-Cash at beginning of period


-



-



-Cash at end of period

$
-


$
-


$
-
  
  Fox Petroleum Inc. and Subsidiaries
 (A Development Stage Company)
 Notes to Consolidated Financial Statements
 May 31, 2010
 (unaudited)
 
 Note 2 – Nature of Business, Presentation, and Going Concern
 
 Organization
 
 Fox Petroleum, Inc., the “Company”, was incorporated in Nevada on November 4, 2004 with the intent to engage in the business of oil and gas exploration.  The Company has oil and gas interests in the North Sea and Texas and has not yet determined whether these properties contain reserves that are economically recoverable.  The recoverability of amounts from the properties is dependent upon the discovery of economically recoverable reserves, confirmation of the Company’s interest in the underlying properties, the ability of the Company to obtain necessary financing to satisfy the expenditure requirements under the property agreements and to complete the development of the properties and upon future profitable production or proceeds for the sale thereof.
 
 On April 17, 2007, we incorporated a wholly owned subsidiary, Fox Petroleum (Alaska) Inc. (“Fox Petroleum Alaska”) under the laws of the State of Alaska in order to carry out our Alaska operations after completing a lease purchase and sale agreement with Fox Petroleum LLC. In order to hold Alaska oil and gas leases, we either had to be registered in Alaska or operate through an Alaska subsidiary.
 
 On May 17, 2007, we incorporated a wholly owned subsidiary, Fox Energy Exploration Limited (“Fox Energy Exploration Limited”), in England and Wales to hold assets in the United Kingdom under a farm-in agreement with Granby Enterprises Limited and Atlantic Petroleum UK Limited.
 
 On June 9, 2010, Richard Moore, the Company’s President / Chief Executive Officer, Secretary, Treasurer, Chief Financial Officer and a member of the Board of Directors, resigned from all positions.  Also on June 9, 2010, the Company’s Board of Directors elected Mr. William Lieberman as a member of the Board of Directors and appointed Mr. Lieberman as the Company’s President / Chief Executive Officer, Secretary, Treasurer and Chief Financial Officer.
 
 As a result of the change in management, the Company is re-evaluating its current oil and gas assets and its long-term business strategy.
 
 On July 15, 2010, the Company entered into a Share Exchange Agreement (the “Share Exchange Agreement”) with 1536692 Ontario, Inc. (“Ontario”), a Canadian corporation, and the shareholders of Ontario (“Ontario Shareholders”).  Ontario owns a scrap plastic processing plant with certain equipment, fixtures and improvements and assets located in Hamilton, Ontario, Canada with the intent of engaging in the business of recycling plastics.  Pursuant to the Share Exchange Agreement, the Company acquired, from the Ontario Shareholders, all of the capital stock of Ontario in exchange for an aggregate of 1,750,000 000 newly issued shares of its restricted common stock, par value $0.001 per share.
 
 On July 15, 2010, the Company entered into a Share Exchange Agreement (the “Resource Share Exchange Agreement”) with Resource Polymers Inc. (“Resource”), a Canadian corporation, and the shareholders of Ontario (“Ontario Shareholders”) to acquire 100% of the capital stock of Resource.  As of the date of this report, the acquisition has not been completed as Resource has not satisfied its conditions precedent to closing the exchange.  There is no assurance that Resource will complete its requirements required to close.
 
 Basis of Presentation
 
 The accompanying unaudited financial statements have been prepared in accordance with U.S. Generally Accepted Accounting Principles (“U.S. GAAP”) for interim financial statement presentation and in accordance with Form 10-Q.  Accordingly, they do not include all of the information and footnotes required in annual financial statements.  In the opinion of management, the unaudited financial statements contain all adjustments (consisting only of normal recurring accruals) necessary to present fairly the financial position and results of operations and cash flows.  The results of operations presented are not necessarily indicative of the results to be expected for any other interim period or for the entire year.
 
 These unaudited financial statements should be read in conjunction with our 2010 annual financial statements included in our Form 10-K, filed with the U.S. Securities and Exchange Commission (“SEC”) on June 14, 2010.
 
 
  Fox Petroleum Inc. and Subsidiaries
 (A Development Stage Company)
 Notes to Consolidated Financial Statements
 May 31, 2010
 (unaudited)
 
 Note 2 – Nature of Business, Presentation, and Going Concern (Continued)
 
 Going Concern
 
 The accompanying unaudited consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.  As reflected in the accompanying unaudited consolidated financial statements, the Company had no cash and an accumulated deficit during the development stage of $42,342,310 at May 31, 2010.  These conditions raise substantial doubt about the Company’s ability to continue as a going concern.
 
 The ability of the Company’s to continue as a going concern is dependent upon the Company’s ability to further implement its business plan, generate revenues, and continue to raise additional investment capital.  No assurance can be given that the Company will be successful in these efforts.
 
 The unaudited consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.  Management believes that actions presently being taken to obtain additional funding and implement its strategic plans provide the opportunity for the Company to continue as a going concern.
 
 Note 3 – Summary of Significant Accounting Policies
 
 Use of Estimates
 
 The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.  Significant estimates in the accompanying unaudited consolidated financial statements include the valuation of share-based payments and the valuation allowance on deferred tax assets.  Actual results could differ from those estimates and would impact future results of operations and cash flows.
 
 Principles of Consolidation
 
 The consolidated financial statements include the accounts of Fox Petroleum Inc. and its wholly-owned subsidiaries, Fox Petroleum (Alaska) Inc. and Fox Energy Exploration Limited.  All significant inter-company balances and transactions have been eliminated in consolidation.
 
 Reclassifications
 
 Certain items on the 2009 balance sheet, statement of operations, and statement of cash flows have been reclassified to conform to the current period presentation.
 
 Cash and Cash Equivalents
 
 The Company considers all highly liquid temporary cash investments with an original maturity of three months or less to be cash equivalents. At May 31, 2010 and February 28, 2010, respectively, the Company had no cash equivalents.
 
 Development Stage and Mineral Property and Exploration Costs
 
 The Company has been in the development stage since November 4, 2004, as defined in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 915 “Development Stage Entities”, and has not yet realized revenues from its planned operations.  It is primarily engaged in the acquisition, exploration, and development of oil and gas mineral properties.
 
 Mineral property exploration costs are expensed as incurred. When it has been determined that a mineral property can be economically developed as a result of establishing probable and then proven reserves, then the costs incurred to develop such property are capitalized. Such costs will be amortized using the units-of-production method over the estimated life of the probable-proven reserves. If mineral properties are subsequently abandoned or impaired, any capitalized costs will be charged to operations. The Company has incurred $17,000 of exploration and acquisition costs and $0 of development costs from inception through May 31, 2010.
  
  Fox Petroleum Inc. and Subsidiaries
 (A Development Stage Company)
 Notes to Consolidated Financial Statements
 May 31, 2010
 (unaudited)
 
 Note 3 – Summary of Significant Accounting Policies (Continued)
 
 Impairment or Disposal of Long-Lived Assets
 
 The Company accounts for the impairment or disposal of long-lived assets according to ASC 360 “Property, Plant and Equipment”. ASC 360 clarifies the accounting for the impairment of long-lived assets and for long-lived assets to be disposed of, including the disposal of business segments and major lines of business. Long-lived assets are reviewed when facts and circumstances indicate that the carrying value of the asset may not be recoverable. When necessary, impaired assets are written down to estimate fair value based on the best information available. Estimated fair value is generally based on either appraised value or measured by discounting estimated future cash flows. Considerable management judgment is necessary to estimate discounted future cash flows. Accordingly, actual results could vary significantly from such estimates.
 
 Fair Value of Financial Instruments
 
 FASB ASC 820, Fair Value Measurements and Disclosures, establishes a framework for measuring fair value and expands disclosures about fair value measurements.  ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.  ASC 820 states that a fair value measurement should be determined based on the assumptions the market participants would use in pricing the asset or liability.  In addition, ASC 820 specifies a hierarchy of valuation techniques based on whether the types of valuation information (“inputs”) are observable or unobservable.  Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances.
 
 The three broad levels defined by ASC 820 hierarchy are as follows:
 
 Level 1 – quoted prices for identical assets or liabilities in active markets.
 Level 2 – pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reported date.
 Level 3 – valuations derived from methods in which one or more significant inputs or significant value drivers are unobservable in the markets.
 
 These financial instruments are measured using management’s best estimate of fair value, where the inputs into the determination of fair value require significant management judgment to estimation. Valuations based on unobservable inputs are highly subjective and require significant judgments.  Changes in such judgments could have a material impact on fair value estimates.  In addition, since estimates are as of a specific point in time, they are susceptible to material near-term changes.  Changes in economic conditions may also dramatically affect the estimated fair values.
 
 Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of May 31, 2010. The respective carrying value of certain financial instruments approximated their fair values due to the short-term nature of these instruments. These financial instruments include amounts due from affiliate, accounts payable and accrued expenses and amounts due to officer. The fair value of the Company’s notes payable is estimated based on current rates that would be available for debt of similar terms which is not significantly different from its stated value.
 
 Revenue Recognition
 
 The Company recognized revenue on arrangements in accordance with ASC Topic 605, “Revenue Recognition”   (“ASC Topic 605”).  Under ASC Topic 605, revenue is recognized only when the price is fixed and determinable, persuasive evidence of an arrangement exists, the service is performed and collectability of the resulting receivable is reasonably assured.  Revenue is recognized when the products are received and accepted by the customer.
 
 
  Fox Petroleum Inc. and Subsidiaries
 (A Development Stage Company)
 Notes to Consolidated Financial Statements
 May 31, 2010
 (unaudited)
 
 Note 3 – Summary of Significant Accounting Policies (Continued)
 
 Stock Based Compensation
 
 The Company accounts for Stock-Based Compensation under ASC 718 “Compensation – Stock Compensation”, which addresses the accounting for transactions in which an entity exchanges its equity instruments for goods or services, with a primary focus on transactions in which an entity obtains employee services in share-based payment transactions. ASC 718-10 is a revision to SFAS No. 123, "Accounting for Stock-Based Compensation," and supersedes Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to Employees," and its related implementation guidance. ASC 718-10 requires measurement of the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award (with limited exceptions). Incremental compensation costs arising from subsequent modifications of awards after the grant date must be recognized.
 
 The Company accounts for stock-based compensation awards to non-employees in accordance with ASC 505-50 “Equity-Based Payments to Non-Employees” ("ASC 505-50"). Under ASC 505-50, the Company determines the fair value of the warrants or stock-based compensation awards granted as either the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. Any stock options issued to non-employees are recorded in expense and additional paid-in capital in shareholders' equity/(deficit) over the applicable service periods using variable accounting through the vesting dates based on the fair value of the options at the end of each period.
 
 The Company has not adopted a stock option plan and has not granted any stock options as of May 31, 2010.
 
 Income Taxes
 
 Income taxes are accounted for under the liability method of accounting for income taxes.  Under the liability method, future tax liabilities and assets are recognized for the estimated future tax consequences attributable to differences between the amounts reported in the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.  Future tax assets and liabilities are measured using enacted or substantially enacted income tax rates expected to apply when the asset is realized or the liability settled.  The effect of a change in income tax rates on future income tax liabilities and assets is recognized in income in the period that the change occurs.  Future income tax assets are recognized to the extent that they are considered more likely than not to be realized.
 
 The FASB has issued ASC 740 “Income Taxes” (formerly, Financial Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” – An Interpretation of FASB Statement No. 109 (FIN 48)).  ASC 740 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with prior literature FASB Statement No. 109, Accounting for Income Taxes.  This standard requires a company to determine whether it is more likely than not that a tax position will be sustained upon examination based upon the technical merits of the position. If the more-likely-than-not threshold is met, a company must measure the tax position to determine the amount to recognize in the financial statements.
 
 As a result of the implementation of this standard, the Company performed a review of its material tax positions in accordance with recognition and measurement standards established by FASB ASC 740 and concluded that the tax position of the Company has not met the more-likely-than-not threshold as of May 31, 2010.
 
 Foreign Currency Translation
 
 The unaudited consolidated financial statements are presented in United States dollars.  In accordance with ASC 830 ‘‘Foreign Currency Matters’’, foreign denominated monetary assets and liabilities are translated into their United States dollar equivalents using foreign exchange rates which prevailed at the balance sheet date.  Non-monetary assets and liabilities are translated at the exchange rates prevailing at the transaction date.  Revenue and expenses are translated at average rates of exchange during the year.  Gains or losses resulting from foreign currency transactions are included in results of operations.  Translation adjustments are included in Accumulated Other Comprehensive Income (Loss).
 
 
  Fox Petroleum Inc. and Subsidiaries
 (A Development Stage Company)
 Notes to Consolidated Financial Statements
 May 31, 2010
 (unaudited)
 
 Note 3 – Summary of Significant Accounting Policies (Continued)
 
 Basic and Diluted Income (Loss) Per Share
 
 The Company computes income (loss) per share in accordance with ASC 260, "Earnings per Share", which requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the statement of operations.  Basic EPS is computed by dividing income (loss) available to common shareholders by the weighted average number of shares outstanding during the period.  Diluted EPS gives effect to all dilutive potential shares of common stock outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method.  In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants.  Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive.  Dilutive loss per share has not been presented because as of May 31, 2010 and 2009, respectively, there were no common share equivalents outstanding.
 
 Segment Information
 
 In accordance with the provisions of ASC 280-10, “Disclosures about Segments of an Enterprise and Related Information”, the Company is required to report financial and descriptive information about its reportable operating segments.  The Company operates in only one operating segment as of May 31, 2010.
 
 Accounting Standards Codification
 
 In September 2009, the Financial Accounting Standards Board (“FASB”) issued ASC 105, formerly FASB Statement No. 168, the FASB Accounting Standards Codification (“Codification”) and the Hierarchy of Generally Accepted Accounting Principles (“GAAP”), a replacement of FASB Statement No. 162 (“SFAS 168”). SFAS 168 establishes the Codification as the single source of authoritative GAAP in the United States, other than rules and interpretive releases issued by the SEC. The Codification is a reorganization of current GAAP into a topical format that eliminates the current GAAP hierarchy and establishes instead two levels of guidance — authoritative and non-authoritative. All non-grandfathered, non-SEC accounting literature that is not included in the Codification will become non-authoritative. The FASB’s primary goal in developing the Codification is to simplify user access to all authoritative GAAP by providing all the authoritative literature related to a particular accounting topic in one place. The Codification was effective for interim and annual periods ending after September 15, 2009. As the Codification was not intended to change or alter existing GAAP, it did not have a material impact on the Company’s consolidated financial statements.
 
 Effect of Recent Accounting Pronouncements
 
 The Company reviews new accounting standards as issued. No new standards had any material effect on these consolidated financial statements. The accounting pronouncements issued subsequent to the date of these financial statements that were considered significant by management were evaluated for the potential effect on these consolidated financial statements. Management does not believe any of the subsequent pronouncements will have a material effect on these consolidated financial statements as presented and does not anticipate the need for any future restatement of these consolidated financial statements because of the retro-active application of any accounting pronouncements issued subsequent to May 31, 2010 through the date these financial statements were issued.
 
 
  Fox Petroleum Inc. and Subsidiaries
 (A Development Stage Company)
 Notes to Consolidated Financial Statements
 May 31, 2010
 (unaudited)
 
 Note 4 – Oil and Gas Interests
 
 The Company has oil and gas interests in the North Sea and the United States and has not yet determined whether these properties contain reserves that are economically recoverable. Oil and gas interests consisted of the following at May 31, 2010 and February 28, 2010:
 
 May 31 and February 28, 2010United


UnitedStates


Kingdom


TotalUnproved properties:acquistion costs

$
3,701,871


$
23,439


$
3,725,310exploration costs


2,347,394



4,084,668



6,432,0626,049,265



4,108,107



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


(5,938,576
)


(4,108,107
)


(10,046,683
)Less: Incidental revenue


(110,689
)


-



(110,689
)$
-


$
-


$
-
 
 The Company is currently re-evaluating the feasibility of continued exploration of its interests in the North Sea and the United States.
 
 North Slope, Alaska, United States
 
 On May 29, 2007, the Company entered into a Lease Purchase and Sale Agreement with a company to acquire a combined 100% working interest in 12 state-issued oil and gas leases in the North Slope of Alaska.  These leases are subject to a royalty of 16.66667% to the State of Alaska and a private royalty equal to 5% of net revenue.  In consideration for the oil and gas leases, the Company issued 4,000,000 restricted common shares of the Company valued at $1,001,702, the transferor’s historical cost.  The valuation is based the SEC Staff Accounting Bulletin, Topic 5, G.
 
 Pursuant to underlying agreements on the property, the Company is obligated to drill one test well to at least 10,000 feet on or before November 14, 2011, four test wells to at least 4,000 feet on or before February 20, 2012, and one test well to at least 4,000 feet on or before January 16, 2012.  The Company is currently unable to quantify an estimate of the cost of these wells.
 
 By a purchase agreement dated October 10, 2007 and amended November 2, 2007, the Company acquired 8 additional oil and gas leases in the North Slope of the State of Alaska for $850,000 including cash of $250,000 and $600,000 paid by the issuance of 80,000 common shares of the Company.  The fair value of the shares issued was $964,000 (based on the quoted market price of the Company’s common shares on the transaction date) and consequently a further $364,000 has been recorded for this portion of the purchase agreement.  These leases are subject to a royalty of 16.66667% to the State of Alaska and a private royalty equal to 5%.  Two of the leases acquired pursuant to this agreement are part of the Cook Inlet project described below.
 
 On January 30, 2009, the Company entered into an agreement with the original lease vendors (the “Payers”) regarding twelve of the North Slope oil and gas leases (the “Twelve Leases”). Under the terms of the Agreement, the Payers agreed to use their best efforts to make, on the Company's behalf, annual rental payments for the Twelve Leases totaling up to $64,980 on or before the February 1, 2009 due date.
 
 The Company agreed to repay to the Payers by March 2, 2009 any portion of the Payments made by the Payers (the "Repayment Amount"). The Repayment Amount is subject to an 18% interest rate per annum. The Company also granted the Payers a security interest in the Company's right, title, and interest in the Twelve Leases. The Company further agreed to transfer and assign its right, title, and interest in the Twelve Leases to the Payers in the event of the Company's failure to pay the Repayment Amount in a timely manner.
 
 The Company failed to pay the Repayment Amount and by an agreement dated May 14, 2009, the Payers agreed to extend the repayment date until August 14, 2009 in return for the lease assignment documents for the Twelve Leases being executed and delivered into escrow.
 
 
 
 Fox Petroleum Inc. and Subsidiaries
 (A Development Stage Company)
 Notes to Consolidated Financial Statements
 May 31, 2010
 (unaudited)
 
 Note 4 – Oil and Gas Interests (Continued)
 
 North Slope, Alaska, United States (Continued)
 
 The Company entered into an agreement dated May 16, 2009 with the Payers in respect of five of the remaining North Slope oil and gas leases (the “Five Leases”).  Pursuant to this agreement, the Payers made annual lease payments totaling $25,126 for the Five Leases on behalf of the Company.  The amount paid on behalf of the Company is subject to an 18% interest rate per annum. The Company also executed an assignment to the Payers of the Company's right, title, and interest in the Five Leases to be delivered into escrow in the event the Company fails to repay the payers by August 14, 2009.
 
 The Company could provide no assurance that it would be able to obtain financing arrangements to repay the Payers by August 14, 2009 and consequently, all costs incurred of $2,401,282 were written off on the statement of operations during the year ended February 28, 2009.  During the years ended February 28, 2010, the Company failed to repay the Payers by the due date and assignment of the related leases to the Payers was triggered. Consequently, the fees were no longer payable and outstanding lease fees and accrued interest of $98,400 were recorded as a gain on recovery of payables.
 
 Anglesey, North Sea, United Kingdom
 
 Pursuant to a farm-in agreement dated June 8, 2007, the Company agreed to acquire a 33.33% interest in two UK petroleum production licenses (“Licenses”).  The Licenses are located in the UK North Sea and have since been merged into one traditional license.  As consideration for the Licenses, the Company agreed to fund 100% of the seismic costs and its 33.33% share of the License budget costs as agreed by the parties.  The Company also has the option to acquire an additional 26.67% interest in the Licenses by paying an additional 46.67% of the dry-hole costs of an exploration well.
 
 The option is effective from completion of the transfer of the assigned interest to the Company and shall continue to be valid and exercisable until 28 days after receipt by the Company of the processed seismic data and final interpretation.
 
 During the year ended February 28, 2010, the Company returned the Licenses to the UK government and consequently all costs incurred of $2,512,856 were written-off on the statement of operations during the year ended February 28, 2010.
 
 Spears Gas Well, Texas, United States
 
 Pursuant to a subscription agreement dated October 9, 2007, the Company acquired a 22.5% joint venture interest in a gas well called the Spears Gas Unit 2, Well #1 in the Gomez Field, Pecos County, Texas in consideration for US$500,000.
 
 As at February 28, 2010 and 2011, the gas well is shut-in awaiting further financing.
 
 Cook Inlet, Alaska, United States
 
 By a purchase agreement dated October 10, 2007, the Company acquired 6 oil and gas leases located in Cook Inlet of the State of Alaska for $750,000, payable in installments on or before March 7, 2008.  At February 28, 2008, the Company had paid $750,000.  Included in these leases were 3 unissued leases that the vendors owned the rights thereto.  The leases are subject to a royalty of 16.66667% to the State of Alaska and a private royalty equal to 5% of net revenue.
 
 Subsequent to February 28, 2009, the Company entered into an agreement dated May 29, 2009 with the Payers in respect of three these oil and gas leases (the “Three Leases”).  Pursuant to this agreement, the Payers made annual lease payments totaling $25,780 for the Three Leases on behalf of the Company.  The amount paid on behalf of the Company is subject to an 18% interest rate per annum. The Company also executed an assignment to the Payers of the Company's right, title, and interest in the Five Leases to be delivered into escrow in the event the Company fails to repay the payers by August 14, 2009.
 
 
 
 Fox Petroleum Inc. and Subsidiaries
 (A Development Stage Company)
 Notes to Consolidated Financial Statements
 May 31, 2010
 (unaudited)
 
 Note 4 – Oil and Gas Interests (Continued)
 
 Cook Inlet, Alaska, United States (Continued)
 
 The Company could provide no assurance that it would be able to obtain financing arrangements to repay the Payers by August 14, 2009 and consequently, all costs incurred of $1,061,727 were written-off on the statement of operations during the year ended February 28, 2009.  During the years ended February 28, 2010, the Company failed to repay the Payers by the due date and the assignment of the related leases to the Payers was triggered. Consequently, outstanding lease fees and accrued interest of $26,743 were recorded as a gain on write off of amounts payable.
 
 Bourbon, North Sea, United Kingdom
 
 On November 16, 2007, the Company entered into a farm-out agreement dated November 8, 2007 wherein the Company would be assigned a total of 46% interest in a license block in the UK North Sea.  In consideration for the assignment, the Company must pay for 89% of the cost of drilling and exploration well.
 
 The Company is also required to pay for 46% of license costs.  On January 24, 2008, the Company agreed to jointly participate with another company to identify a potential farm-in or acquisition opportunity and transferred a 4.6% carried interest in the license block to that company until a full development plan is approved by the U.K. government.  Thereafter, that company will be responsible for its 4.6% share of the costs (10% of the Company’s interest).  Subsequent to the transfer, this company became related to the Company as two of its beneficial owners became directors of the Company.
 
 During the year ended February 28, 2009, the license holders terminated the Farm-out agreement effective February 27, 2009. Consequently, all costs incurred of $1,419,627 were written off on the statement of operations during the year ended February 28, 2009.
 
 Geneseo-Edwards, Kansas, United States
 
 By a letter agreement dated February 27, 2008, the Company purchased an 80% net revenue interest in three oil leases in Ellsworth County, Kansas, USA by the payment of $80,000.  The leases are subject to a landowner royalty of 12.5% and an overriding royalty of 7.5% retained by vendors.  The Company was required to drill at least one well on each lease before the leases expire on November 19, 2008, November 19, 2009 and November 30, 2009 or pay the vendor a penalty of $150,000.
 
 During the year ended February 28, 2009 the Company had drilled four wells on these leases and earned incidental revenue of $90,689 from two of these wells, which was credited against oil and gas interests on the consolidated balance sheet as a result of the wells not yet reaching full commercial production.  Since January 2009 production has been suspended due to the need for implementation of water disposal facilities for which further funding is not currently available.
 
 During the year ended February 28, 2009, two trade creditors issued mechanical liens against the oil and gas leases and its facilities for non-payment of outstanding invoices totaling $528,079.
 
 During the year period ended February 28, 2010, the Company assigned its interest in these oil and gas leases to a creditor in return for a loan rescheduling (Note 5) and entering into an agreement not to sue the Company for defaulting on a loan agreement.  The creditor also received 15,000,000 common shares pledged as security from the Company’s treasury against the notes payable.
 
 Pursuant to the above, costs incurred of $1,975,567 were written-off on the statement of operations and deficit for the year ended February 28, 2009 leaving a net book value of $20,000 recovered during the year period ended February 28, 2010 for the sale of certain furniture and equipment held for use on the property.
 
 UK Onshore, United Kingdom
 
 On June 3, 2008, the Company was granted a 90% interest in four UK petroleum production licenses, located in the south of England.  In order to maintain the licenses, the Company must undertake seismic exploration estimated to cost $500,000 within the six year term of the license.
 
 
 
 Fox Petroleum Inc. and Subsidiaries
 (A Development Stage Company)
 Notes to Consolidated Financial Statements
 May 31, 2010
 (unaudited)
 
 Note 4 – Oil and Gas Interests (Continued)
 
 UK Onshore, United Kingdom (Continued)
 
 Pursuant to a letter agreement dated September 5, 2008, the Company will pay 100% of all costs, expenses, liabilities and obligations arising in respect of operations conducted in respect of each license block until a filed development plan is formally approved by the UK Secretary of State responsible for such matters, for the development of a discovery of petroleum in the blocks. Thereafter, the Company will each be responsible for 90% of all costs, expenses, liabilities and obligations.
 
 25 th Round License Blocks 13/17 & 210/20e, United Kingdom
 
 Pursuant to a letter agreement dated September 5, 2008, the Company was granted a 90% interest in an application made for four UK petroleum production licenses.  In order to maintain the licenses, the Company must carry out geological and seismic modeling before forming up a drilling location and must begin drilling within the four year term of the license.
 
 Pursuant to the letter agreement, the Company will pay 100% of all costs, expenses, liabilities and obligations arising in respect of operations conducted in respect of each license block until a filed development plan is formally approved by the UK Secretary of State responsible for such matters, for the development of a discovery of petroleum in the blocks. Thereafter, the Company will each be responsible for 90% of all costs, expenses, liabilities and obligations.
 
 On November 12, 2008, the Company was formally notified by the UK Department of Energy and Climate Change (DECC) of its success in the 25th Seaward Licensing Round Awards, the rights to explore and develop the block 13/17 concession in the North Sea by the UK government.
 
 On May 1, 2009, the Company received notification from the UK Department of Energy and Climate Change that this Secretary of State’s offer of this license in the 25th round had been withdrawn due to fact that they consider there to have been a material change in the circumstances relating to the Company having adequate funding arrangements already in place. Consequently, all costs incurred of $87,354 were written-off on the statement of operations and deficit for the year ended February 28, 2009.
 
 Note 5 – Notes Payable
 
 Notes payable at May 31 and February 28, 2010 consisted of:
  May 31,


February 28,2010


2010Debentures payable

$
4,412,333


$
4,412,333Promissory notes


450,000



450,000Loan agreement


450,000



450,000$
5,312,333


$
5,312,333
 
 
  Fox Petroleum Inc. and Subsidiaries
 (A Development Stage Company)
 Notes to Consolidated Financial Statements
 May 31, 2010
 (unaudited)
 
 Note 5 – Notes Payable (Continued)
 
 Debentures Payable
 
 Debentures payable consisted of the following at May 31 and February 28, 2010:
  May 31,


February 28,2010


2010Convertible debentures payable

$
3,500,000


$
3,500,000Liquidating damages


912,333



912,333Financing costs


(75,545
)


(75,545
)Amortization of financing costs


75,545



75,545$
4,412,333


$
4,412,333
 Pursuant to an Amendment to Securities Purchase Agreement, Secured Debenture, Registration Rights Agreement and Security Agreement dated October 31, 2008 ("Amendment Agreement"), the Company amended a Securities Purchase Agreement, Debentures, a Registration Rights Agreement, an Escrow Agreement and a Pledge and Escrow Agreement ("Original Agreements") all originally dated June 24, 2008.  Under the Amendment Agreement the Company issued three secured convertible debentures totaling $3,500,000 consisting of two “Amended Debentures” and one “New Debenture”:
 
 (i)           Amended Debentures - $2,500,000
 
 The Original Debenture which was a $2,500,000 senior secured convertible note was amended on November 11, 2008 into two debentures each of which are for a total principal amount of $1,250,000 (the “Amended Debentures).
 
 The Amended Debentures bear interest at 10% per annum, compounded monthly. The principal and any unpaid accrued interest owing on the debentures are convertible into common stock of the Company in the event of a default or at the option of the holder at the rate of the lesser of i) 100% of the volume weighted average stock price (“VWAP”) on the date of issuance and ii) at 85% of the lowest daily closing VWAP as quoted by Bloomberg L.P. during the 5 trading days immediately preceding the conversion date.  The Amended Debentures also contain a redemption option whereby the Company can redeem the Amended Debentures provided its common stock is trading below 100% of the VWAP as quoted by Bloomberg L.P on October 31, 2008 by paying the unpaid principal and interest accrued and a prepayment premium of 15%. The Company must redeem the entire principal amount outstanding on one of the Amended Debentures on April 30, 2009 at a 15% redemption premium; however, there is no mandatory redemption premium on the second Amended Debenture.
 
 In consideration for the holder's agreement to extend the maturity date of the original convertible debt from October 24, 2008 to April 30, 2009, the Company cancelled the original 500,000 warrants issued in connection with the Original Debenture and replaced them with 2,000,000 warrants with a term of 5 years and a decreased exercise price of $0.001 .
 
 The exercise price is subject to an adjustment if, during the term of the warrants, the Company issues shares, options or convertible securities for consideration less than the exercise price, then the exercise price will be adjusted to 85% of such consideration.  Additional warrants will be issued if the Company becomes in default under the transaction agreements.
 
 The Company determined the allocation of the net proceeds of the Original convertible debenture based on the relative fair value of the convertible debenture, the 500,000 share purchase warrants and the 200,000 common shares.  The fair value of the warrants of $910,000 and the common shares of $580,000 were determined using the Black-Scholes valuation model and the quoted market price of the shares on the date of issuance, respectively.
 
 The resulting discount of $839,292 was being accreted over the term of the debenture. The assumptions used in the Black-Scholes calculation are as follows:  expected life – 5 years; volatility – 78.26%; Dividend rate – 0%; and risk free interest rate is 0.95%.
 
 
 Fox Petroleum Inc. and Subsidiaries
 (A Development Stage Company)
 Notes to Consolidated Financial Statements
 May 31, 2010
 (unaudited)
 
 Note 5 – Notes Payable (Continued)
 
 Debentures Payable (Continued)
 
 The Company recorded a beneficial conversion feature of $1,388,320 with respect to the Original Debentures pursuant to EITF 98-5 Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios.  The conversion feature was contingently exercisable in an event of default of the debenture; which occurred on October 24, 2008 when the debenture came due but was not repaid by the Company.  Therefore the amount was recorded as a financing fee during the year ended February 28, 2009.
 
 The Company determined the allocation of the net proceeds of the Amended Debentures based on the relative fair value of the convertible debenture, the share purchase warrants and the common shares.  The fair value of the warrants of $1,578,000 and the common shares of $1,975,000 were determined using the Black-Scholes valuation model and the quoted market price of the shares on the date of issuance, respectively.  The resulting discount of $1,736,200 was being accreted over the term of the debentures. The assumptions used in the Black-Scholes calculation are as follows:  expected life – 5 years; volatility – 78.26%; Dividend rate – 0%; and risk free interest rate is 3.52%.
 
 (i)           Amended Debentures - $2,500,000 (Continued)
 
 The Company was required to pay to the investor at closing of the Original Agreements: $17,500 in legal costs, a $10,000 due diligence fee, a 7% commitment fee and a 2% facility fee, 500,000 share purchase warrants and 200,000 shares of common stock.  Finder’s fees of $150,000 and 52,265 share purchase warrants were paid to Partners Consulting in connection with the Original Agreements pursuant to a finder agreement dated February 15, 2008.  This amount is included in fees payable in stock and warrants at May 31, 2010 and February 28, 2010.  The warrants expire three years from the date of issuance.
 
 At the closing of the Amended Debentures, the Company also issued 2,500,000 shares of common stock.
 
 In no event shall the Holder be entitled to convert this Debenture for a number of shares of Common Stock in excess of that number of shares of Common Stock which, upon giving effect to such conversion, would cause the aggregate number of shares of Common Stock beneficially owned by the Holder and its affiliates to exceed 9.99% of the outstanding shares of the Common Stock following such conversion without the approval of the Company.
 
 Upon the occurrence of an Event of Default by the Company, the Holder has the option to elect that the interest due and payable be paid in cash or in stock at the rate of 85% of the lower of:  (i) the VWAP on the date the interest payment is due; or (ii) if the interest payment is not made when due, the VWAP on the date the interest payment is made.
 
 The Debentures are secured by all of the assets and property of the Company and its subsidiaries pursuant to a Security Agreement.  The debentures were further secured by a Pledge and Escrow Agreement pursuant to which 15,000,000 common shares of the Company to be held in escrow on behalf of the investor.
 
 Further, the debenture is subject to a currency adjustment clause whereby the exchange rate between the US Dollar and the Euro will be fixed at the date of closing and if the exchange rate moves unfavorably for the holder of the debenture, the Company will be required to adjust conversion and redemption rates to compensate the holder for any such loss.
 
 The debenture also contains certain restrictions on the Company for new share or debt issuances as long as any principal or interest amount remains outstanding on the debenture.
 
 As at May 31, 2010, the Company had not repaid the $1,250,000 debenture that matured on April 30, 2009.
 
 
  
 Fox Petroleum Inc. and Subsidiaries
 (A Development Stage Company)
 Notes to Consolidated Financial Statements
 May 31, 2010
 (unaudited)
 
 Note 5 – Notes Payable (Continued)
 
 Debentures Payable (Continued)
 
 (ii)           New Debenture - $1,000,000
 
 The New Debenture and has a principal amount of $1,000,000 and matures on October 31, 2010 (the “New Debenture”).  The New Debenture bears interest at a rate of 10% per annum compounded monthly.  The principal and any unpaid accrued interest owing on the debentures are convertible into common stock of the Company in the event of a default or at the option of the holder at the rate of the lesser of i) 100% of the volume weighted average stock price on the date of issuance and ii) at 85% of the lowest daily closing VWAP as quoted by Bloomberg L.P. during the 5 trading days immediately preceding the conversion date.
 
 The Company may redeem any or all of the New Debenture at any time, provided that the Common Stock is trading below the Fixed Price at the time the Company gives the Holder the redemption notice, by paying the unpaid principal and interest accrued and a prepayment premium of 15% redemption premium on the amount redeemed.  In any case, the Company must redeem the $1,000,000 debenture maturing October 31, 2010 in equal monthly installments commencing January 31, 2009 until maturity at a 15% redemption premium.
 
 At the closing of the New Debentures the Company incurred: $7,500 in legal costs, a $45,000 commitment fee, a $1,000 due diligence fee
 
 The Company recorded a beneficial conversion feature of $1,710,300 with respect to the Original Debentures.  The amount was being amortized over the term of the debentures, however after an event of default (see below), the entire amount was immediately recognized into income as a financing fee during the year ended February 28, 2009.
 
 Pursuant to the securities purchase agreement, the Company entered into a freestanding investor registration rights agreement dated June 24, 2008 and amended October 31, 2008.  Under the terms of this agreement, the Company must have registered at least three (3) times the number of shares which are anticipated to be issued upon conversion of the Debentures issued and shares of common stock issuable to the purchaser upon exercise of the warrants.  The Company has the obligation to use their best efforts to keep the registration of these securities effective by the SEC until all of the securities had been sold by the purchaser.  Failure to meet this obligation would result in the Company incurring liquidated damages in the amount of 2% of the liquidated value of the debentures for each 30 day period registration of the securities is not effective.
 
 Under the provisions of FSP EITF 00-19-2 “Accounting for Registration Payment Arrangements (“EITF 00-19-2”), the Company is required to separately recognize and measure a contingent obligation in respect of the liquidating damages in accordance with FASB No.5 “Accounting for Contingencies” and FSB Interpretation No.14 “Reasonable Estimation of the Amount of a Loss”.  At May 31, 2010, an amount of $912,333 (February 28, 2010 - $912,333) has been recognized as the Company has determined that a loss is probable because the Company has failed to maintain effectiveness of its registration statement.
 
 Included in accrued interest at May 31, 2010 is $537,500 (February 28, 2010 - $450,000) for accrued interest and redemption premiums on these debentures payable.
 
 During the three months ended May 31, 2010 and the year ended February 28, 2010, the Company failed to make any of the required redemption payments on the New Debenture.  This triggered a default, which resulted in all of the debentures immediately becoming due and payable and the remaining discounts on the debentures were immediately recognized in income.
 
 As consideration for entering into negotiations to effect a loan rescheduling and the holder entering into an agreement not to sue, the Company assigned its interest in certain oil and gas leases to the holder (Note 4(f)).  The holder also received the 15,000,000 common shares pledged as security against for debentures valued at $4,650,000, based on the quoted market price of the Company’s common shares on the date they were released from escrow.
 
 
  Fox Petroleum Inc. and Subsidiaries
 (A Development Stage Company)
 Notes to Consolidated Financial Statements
 May 31, 2010
 (unaudited)
 
 Note 5 – Notes Payable (Continued)
 
 Promissory Notes
 
 On April 2, 2008 the Company was loaned $250,000 by the issuance of a promissory note, to be paid on the earlier of (i) the date that the Company obtains equity financing from a third party in the minimum amount of $1,000,000 net to the Company, or (ii) April 1, 2009.  For the period from the date of advance of the loan up to and including the date that the loan is repaid, interest will accrue on the balance of principal outstanding at the rate of 10% per annum, compounded monthly. Interest will be payable in a balloon payment on the date the loan is repaid. The note is unsecured.  As at May 31, 2010, this loan has not been repaid as the lender has agreed to extend the terms of the loan until the Company is able to obtain further financing.
 
 On May 6, 2008 the Company was loaned $150,000 by the issuance of a promissory note, to be paid on the earlier of (i) the date that the Company obtains equity financing from a third party in the minimum amount of $1,000,000 net to the company, or (ii) May 1, 2009.  For the period from the date of advance of the loan up to and including the date that the loan is repaid, interest will accrue on the loan on the balance of principal outstanding at the rate of 10% per annum, compounded monthly.  Interest will be payable in a balloon payment on the date the loan is repaid. The note is unsecured.  As at May 31, 2010, this loan has not been repaid as the lender has agreed to extend the terms of the loan until the Company is able to obtain further financing.
 
 On May 23, 2008 the Company was loaned $50,000 by the issuance of a promissory note, to be paid on the earlier of (i) the date that the Company obtains equity financing from a third party in the minimum amount of $1,000,000 net to the company, or (ii) May 23, 2009.  For the period from the date of advance of the loan up to and including the date that the loan is repaid, interest will accrue on the loan on the balance of principal outstanding at the rate of 10% per annum, compounded monthly. Interest will be payable in a balloon payment on the date the loan is repaid. The note is unsecured.  As at May 31, 2010, this loan has not been repaid as the lender has agreed to extend the terms of the loan until the Company is able to obtain further financing.
 
 Included in accrued interest at May 31, 2010 is $157,657 (February 28, 2010 - $144,100) for accrued interest on these notes payable.
 
 Loan Agreement
 
 On May 30, 2008 the Company was loaned $450,000 pursuant to a loan agreement.  The principal and interest is to be paid on the earlier of (i) cash being available from operations, (ii) the date that the Company obtains equity or debt financing from a third party in the minimum amount of $1,000,000, or (iii) November 30, 2008.  This loan bears interest at 12% per annum, calculated annually.  The loan is secured by the Company’s assets.  As additional compensation for the loan, the Company issued to the lender 150,000 common shares of the Company.  The fair value of these shares was determined to be $514,500 based on the quoted market price of the shares on the date of issuance and was recorded as a financing fee on the consolidated statement of operations for the year ended February 28, 2009.  As at May 31, 2010, this loan has not been repaid as the lender has agreed to extend the terms of the loan until the Company is able to obtain further financing.
 
 Included in accrued interest at May 31, 2010 is $180,098 (February 28, 2010 - $163,598) for accrued interest on these notes payable.
 
 Note 6 – Related Party Transactions
 
 Included in accounts payable and accrued liabilities at May 31, 2010 and February 28, 2010 is $1,070,732 owed to directors of the Company and companies with directors in common for expenses incurred on behalf of the Company and for unpaid management and consulting fees.
 
 The amounts due to related parties are unsecured, non-interest bearing and have no specific terms for repayment.  These amounts were due to the director of the Company and a company controlled by a director of the Company.
 
 
  Fox Petroleum Inc. and Subsidiaries
 (A Development Stage Company)
 Notes to Consolidated Financial Statements
 May 31, 2010
 (unaudited)
 
 Note 6 – Related Party Transactions (Continued)
 
 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 – Stockholders’ Deficit
 
 Effective January 11, 2007 the Company effected a forward stock spilt of the authorized, issued and outstanding shares of common stock on a six new for one old basis. Authorized capital increased from 75,000,000 common shares to 450,000,000 common shares. Effective April 21, 2008 the Company effected a reverse stock split of authorized, issued and outstanding shares of common stock on a one new for five old basis. Authorized capital decreased from 450,000,000 to 90,000,000 and outstanding common stock decreased from 74,841,228 to 14,968,246 shares.
 
 On May 17, 2007, the Company entered into a share issuance agreement with a subscriber that will allow the subscriber to advance up to $8,000,000 to the Company in exchange for units of the Company.  The units will be issued at a price equal to 80% of the volume-weighted average of the closing price of common share for the 10 banking days immediately preceding the date of the notice.  Each unit will consist of one common share of the Company and one common share purchase warrant.  Each common share purchase warrant will entitle the subscriber to purchase one additional common share at 125% of the price of the units for a period of three years.  Should the Company seek alternative sources of financing this subscriber has the right to approve the terms.
 
 Shares issued under the agreement were as follows:
 
 Number of


Issue


TotalIssue Date

Units


Price


ProceedsMay 17, 2007


377,358


$
5.30


$
2,000,000August 1, 2007


31,056


$
8.05



250,000September 18, 2007


44,199


$
9.05



400,000September 18, 2007


52,133


$
10.55



550,000September 27, 2007


28,708


$
10.45



300,000October 26, 2007


16,381


$
12.21



200,000October 26, 2007


21,097


$
11.85



250,000October 26, 2007


35,897


$
9.75



350,000November 28, 2007


47,337


$
8.45



400,000January 16, 2008


43,478


$
3.45



150,000January 24, 2008


96,154


$
5.20



500,000January 30, 2008


48,387


$
3.10



150,000February 11, 2008


89,286


$
2.80



250,000February 26, 2008


96,774


$
3.10



300,0001,028,245






$
6,050,000
 
 
  Fox Petroleum Inc. and Subsidiaries
 (A Development Stage Company)
 Notes to Consolidated Financial Statements
 May 31, 2010
 (unaudited)
 
 Note 7 – Stockholders’ Deficit (Continued)
 
 On November 5, 2008, the Company entered into a subscription agreement with Carbon Energy Investments Limited (“Carbon Energy”) for the sale of 80,000,000 shares of common stock at a price of $0.50 per share for the aggregate price of $40,000,000. Carbon Energy agreed to pay for the shares as follows:
 
 ●
$15,000,000 on or before November 30, 2008 (later amended to December 12, 2008);●
$15,000,000 on or before January 31, 2009; and●
$10,000,000 on or before March 31, 2009.
 
 
 On November 5, 2008, the Company entered into an agreement to purchase shares in Alaska Oil & Gas Resources Limited (“Alaska Oil & Gas”) with Carbon Energy. Carbon Energy is the sole owner of Alaska Oil & Gas. Pursuant to the agreement, the Company agreed to acquire 100% of the issued shares of Alaska Oil & Gas from Carbon Energy in consideration for $57,500,000, $250,000 of which was to be paid in cash and the remainder by the issuance of 57,250,000 shares of common stock. On the same day, two of the Company’s directors were appointed as directors of Alaska Oil & Gas.
 
 On November 28, 2008, the Company entered into an amendment agreement with Carbon Energy relating to purchase of Alaska Oil & Gas whereby it was agreed that the consideration to be paid pursuant to the agreement was varied such that the consideration would amount to $57,500,000, payable by the issuance of 2,000,000 shares of common stock within three business days of November 2008 (issued subsequently) and 55,500,000 shares on completion of the transaction.
 
 On December 3, 2008, the Company entered into a letter agreement with Carbon Energy whereby Carbon Energy agreed to return 2,000,000 shares of common stock to the company upon demand unless certain conditions are fulfilled or waived. The conditions are, among others, that Carbon Energy must complete in full the subscription agreement dated November 5, 2008 except that the first $20,000,000 must be paid to the company on or before December 7, 2008 and that Carbon Energy must sell to the Company Alaska Oil & Gas which must own certain oil and gas leases pursuant to the agreement relating to the purchase of Alaska Oil & Gas.
 
 On November 26, 2008, the Company issued 50,000,000 shares of restricted common stock to Carbon Energy in consideration for $25,000,000 to be received pursuant to the above-mentioned subscription agreement.
 
 On December 2, 2008, the Company issued an additional 2,000,000 shares of restricted common stock to Carbon Energy pursuant to the terms of the amendment agreement for $1,000,000 to be received.
 
 The Company never received payment for the shares issued to Carbon and Carbon never completed on the sale of Alaska Oil & Gas.  As a result, the shares that were previously subscribed were cancelled during the year ended February 28, 2009 along with the agreements to purchase Alaska Oil & Gas.  The Company is currently reviewing its legal position and any associated remedies relating to the above.
 
 On November 26, 2008, the Company issued 50,000,000 shares of restricted common stock to Carbon Energy in consideration for $25,000,000 to be received pursuant to the above-mentioned subscription agreement.
 
 On December 2, 2008, the Company issued an additional 2,000,000 shares of restricted common stock to Carbon Energy pursuant to the terms of the amendment agreement for $1,000,000 to be received.
 
 The Company never received payment for the 52,000,000 shares issued to Carbon.  As a result, the shares that were previously subscribed were cancelled during the three months ended May 31, 2011.
 
 
 
 Fox Petroleum Inc. and Subsidiaries
 (A Development Stage Company)
 Notes to Consolidated Financial Statements
 May 31, 2010
 (unaudited)
 
 Note 7 – Stockholders’ Deficit (Continued)
 
 Common Stock Purchase Warrants
 
 Changes in the Company’s common stock purchase warrants for the three months ended May 31, 2010 and the year ended February 28, 2010 are as follows:
  Three months ended


Year endedFebruary 28, 2011


February 28, 2010Weighted





WeightedAverage





AverageNumber of


Exercise


Number of


ExerciseWarrants


Price


Warrants


PriceBalance at beginning of period


3,048,246


$
2.53



3,048,246


$
2.53Warrants issued


-


$
-



-


$
-Warrants exercised


-


$
-



-


$
-Warrants expired


(77,358
)

$
6.65



-


$
-Balance at end of period


2,970,888


$
1.91



3,048,246


$
2.53
 The remaining average life of the warrants at May 31, 2010 and February 28, 2010 was 2.71 and 2.61 years, respectively.
 
 A finder's fee of $60,000 and 52,265 share purchase warrants exercisable at $2.87 for a period of three years from the date of issuance (6% of proceeds) were paid to Partners Consulting in connection with the Original Debenture (Note 5(e)) pursuant to a finder agreement dated February 15, 2008.  The fair value of the warrants was determined using the Black-Scholes valuation model.  The assumptions used in the Black-Scholes calculation are as follows:  expected life – 3 years; volatility – 192%; Dividend rate – 0%; and risk free interest rate is 1.0%.
 
 A finder's fee of $60,000 and 76,923 share purchase warrants exercisable at $0.78 for a period of three years from the date of issuance (6% of additional proceeds) were paid to Partners Consulting in connection with the Amended Debentures (Note 5(e) pursuant to a finder agreement dated February 15, 2008.  The fair value of the warrants was determined using the Black-Scholes valuation model.  The assumptions used in the Black-Scholes calculation are as follows:  expected life – 3 years; volatility – 192.6%; Dividend rate – 0%; and risk free interest rate is 1.0%.
 
 Note 8 – Commitments
 
 By agreements dated June 8, 2007, the Company agreed to pay three directors of the Company a total amount of $20,000 per month for an indefinite period for consulting and management services to the Company.  The agreements may be terminated at any time with cause and with three months’ notice without cause.  On October 19, 2007 two of these agreements were amended from $12,000 to £9,000 ($17,900) per month and from $5,000 per month to £7,000 ($13,900).  Effective June 1, 2008, these agreements were amended from £9,000 to £15,000 per month and from £7,000 to £12,500 per month. All other terms remained the same. Effective June 1, 2009, the agreement for £12,500 per month was terminated.  Effective March 1, 2010, the agreement for £15,000 per month was terminated.
 
 
  Fox Petroleum Inc. and Subsidiaries
 (A Development Stage Company)
 Notes to Consolidated Financial Statements
 May 31, 2010
 (unaudited)
 
 Note 8 – Commitments (Continued)
 
 On May 8, 2008 the Company entered into a consulting agreement with Partners Consulting Inc. (“PCI”), a Florida Corporation, to introduce the Company to potential new investors. The consideration payable to PCI is warrants to purchase 50,000 shares of common stock due upon signing the agreement.  In addition, PCI will receive 6% of the gross proceeds from any potential financing, payable in cash and share purchase warrants equal to 6% of the gross proceeds.  In the event a financing is facilitated through an investment banker introduced by PCI, PCI will instead receive 3% of the gross proceeds, payable in cash and share purchase warrants equal to 3% of the gross proceeds.  All warrants will have a cashless exercise and will be priced at market value as of the date of the financing and with a minimum expiry period of three years. The consulting agreement was for a period of one year.
 
 At May 31, 2010 and February 28, 2010, the Company had not yet issued the warrants for 50,000 common shares due upon signing of the agreement but the fair value of these warrants was determined to be $4,364, which was included in fees payable in stock and warrants at May 31, 2010 and February 28, 2010.  The fair value of these warrants was determined to be $7,344 at February 28, 2009 and, consequently an amount of $2,982 has been shown as a credit to consulting fees for the year ended February 28, 2010. These warrants are exercisable at $2.77 and will expire three years from the date of issuance.  The fair value of these warrants was determined using the Black Scholes valuation model.  The assumptions used in the Black-Scholes calculation are as follows:  expected life – 3 years; volatility – 192%; Dividend rate – 0%; and risk free interest rate is 1.0%.
 
 On May 21, 2008, the Company signed a letter of commitment whereby the Company agreed to commit to the use of a drilling rig commencing no earlier than October 1, 2008 for a total cost of $8,910,000 which has been accrued in accounts payable and accrued liabilities as at May 31 and February 28, 2010.  The Company also committed to enter into a well project management and integrated services contract for the management of a well program on the rig.  The Company is also obligated to pay a fee of 1.75% of the operating rig rate in acknowledgement of the value provided with the rig opportunity, if the Company uses the rig, but not the integrated project management services. The Company also incurred and accrued penalties of $2,000,000 as compensation for lost revenues of the rig owners for its failure to fulfill its obligations under the rig provision contract and may be liable to pay up to an additional $2,000,000 for its share of additional costs incurred by the rig owners during the Company’s allotted rig slot.
 
 This additional $2,000,000 amount is subject to a commercial discussion between the parties involved and has been accrued at February 28, 2011 and 2010 as it is likely that will be incurred. A total of $12,910,000 was recorded as a loss on failure to perform obligations under oil & gas commitments and has been charged to the statement of operations during the year ended February 28, 2009.
 
 By a bonus agreement dated May 22, 2008, the Company agreed to issue 5,000 common shares and £5,000 ($10,000) (paid during the year ended February 29, 2008) to an officer and director of the Company as a performance bonus. At February 28, 2008, the Company had not yet issued the shares due.  The fair value of the shares was determined to be $22,150, which was included in fees payable in stock and warrants at May 31 and February 28, 2010.
 
 During the year ended February 28, 2010, the Company recorded a recovery of $8,500 in consulting fees for the change in fair value of 50,000 common shares issuable pursuant to Board of Advisors (“BOA”) agreements dated November 17, 2007 as compensation to the members of the BOA.  An amount of $6,500 is included in fees payable in stock and warrants at May 31 and February 28, 2010 for these shares.
 
 During the year ended February 28, 2010, the Company accrued $8,460 in consulting fees for the fair value of 11,000 common shares issuable to a former employee of the Company. This amount is included in fees payable in stock and warrants at May 31 and February 28, 2010
 
 
  Fox Petroleum Inc. and Subsidiaries
 (A Development Stage Company)
 Notes to Consolidated Financial Statements
 May 31, 2010
 (unaudited)
 
 
 Note 9 – Income Taxes
 
 Deferred income taxes have been provided to show the effect of temporary differences between the recognition of expenses for financial and income tax reporting purposes and between the tax basis of assets and liabilities, and their reported amounts in the consolidated financial statements.  In assessing the realizability of deferred tax assets, the Company assesses the likelihood that deferred tax assets will be recovered through tax planning strategies or from future taxable income, and to the extent that recovery is not likely or there is insufficient operating history, a valuation allowance is established.  The Company adjusts the valuation allowance in the period management determines it is more likely than not that net deferred tax assets will or will not be realized.  As of May 31, 2010 and February 28, 2010, the Company has provided a valuation allowance for all net deferred tax assets due to their current realization not being  more likely than not.
 
 The provisions for income taxes differ from the amount computed by applying the statutory federal income tax rate to Income before provision for income taxes. The source and tax effects of the differences are as follows for the three months ended May 31, 2010 and 2009:
 
 2010


2009U.S. federal statutory rate


34
%


34
%Valuation reserve


- 34
%


-34
%Total


0
%


0
%
 
 As of May 31, 2010, the Company did not recognize any assets or liabilities relative to uncertain tax positions, nor do we anticipate any significant unrecognized tax benefits will be recorded during the next 12 months.  Any interest or penalties related to unrecognized tax benefits is recognized in income tax expense. Since there are no unrecognized tax benefits as a result of tax positions taken, there are no accrued penalties or interest.
 
 Tax positions are positions taken in a previously filed tax return or positions expected to be taken in a future tax return that are reflected in measuring current or deferred income tax assets and liabilities reported in the consolidated financial statements.  Tax positions include, but are not limited to, the following:
 
 ·
An allocation or shift of income between taxing jurisdictions;·
The characterization of income or a decision to exclude reportable taxable income in a tax return; or
 
 ·
A decision to classify a transaction, entity or other position in a tax return as tax exempt.
 
 The Company reflects tax benefits only if it is more likely than not that we will be able to sustain the tax position, based on its technical merits.  If a tax benefit meets this criterion, it is measured and recognized based on the largest amount of benefit that is cumulatively greater than 50% likely to be realized.  The Company has no unrecognized tax benefits as of May 31, 2010.
 
 The Company’s practice is to recognize interest and/or penalties related to income tax matters in income tax expense. The Company had no accrual for interest or penalties on the Company’s balance sheets at May 31, 2010, and has not recognized interest and/or penalties in the statement of operations for either period.
 
 Note 8 – Subsequent Events
 
 On June 9, 2010, Richard Moore, the Company’s President / Chief Executive Officer, Secretary, Treasurer, Chief Financial Officer and a member of the Board of Directors, resigned from all positions.  Also on June 9, 2010, the Company’s Board of Directors elected Mr. William Lieberman as a member of the Board of Directors and appointed Mr. Lieberman as the Company’s President / Chief Executive Officer, Secretary, Treasurer and Chief Financial Officer.
 
 
  Fox Petroleum Inc. and Subsidiaries
 (A Development Stage Company)
 Notes to Consolidated Financial Statements
 May 31, 2010
 (unaudited)
 
 Note 8 – Subsequent Events (Continued)
 
 On July 15, 2010, the Company issued 1,750,000 in exchange for 100% of the outstanding capital stock of 1536692 Ontario, Inc., a Canadian Corporation, (“Ontario”) through a share exchange transaction to Mr. Jack Lieberman, the father of the Company’s President and Chief Executive Officer.
 
 On July 15, 2010, the Company entered into a Share Exchange Agreement (the “Resource Share Exchange Agreement”) with Resource Polymers Inc. (“Resource”), a Canadian corporation, and the shareholders of Resource to acquire 100% of the capital stock of Resource.  As of the date of this report, the acquisition has not been completed as Resource has not satisfied its conditions precedent to closing the exchange.
 
 On August 16, 2010, the Company issued 1,831,752 shares of its restricted common stock to Mr. William Lieberman, its President and Chief Executive Officer, for services rendered.  The shares were values at the market price on the date of issuance of $0.035, or a total of $64,111.
 
 The Company has evaluated subsequent events through the date the financial statements were issued and filed with Securities and Exchange Commission. The Company has determined that there are no other events that warrant disclosure or recognition in the financial statements.
 
 
  Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations.
 
 SPECIAL NOTE CONCERNING FORWARD-LOOKING STATEMENTS
 
 We believe that it is important to communicate our future expectations to our security holders and to the public.  This report, therefore, contains statements about future events and expectations which are “forward-looking statements” within the meaning of Sections 27A of the Securities Act of 1933 and 21E of the Securities Exchange Act of 1934, including the statements about our plans, objectives, expectations and prospects under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”  You can expect to identify these statements by forward-looking words such as “may,” “might,” “could,” “would,” ”will,” “anticipate,” “believe,” “plan,” “estimate,” “project,” “expect,” “intend,” “seek” and other similar expressions.  Any statement contained in this report that is not a statement of historical fact may be deemed to be a forward-looking statement.  Although we believe that the plans, objectives, expectations and prospects reflected in or suggested by our forward-looking statements are reasonable, those statements involve risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements, and we can give no assurance that our plans, objectives, expectations and prospects will be achieved.
 
 Important factors that might cause our actual results to differ materially from the results contemplated by the forward-looking statements are contained in the “Risk Factors” section of and elsewhere in our Annual Report on Form 10-K for the fiscal year ended February 28, 2010 and in our subsequent filings with the Securities and Exchange Commission.  The following discussion of our results of operations should be read together with our financial statements and related notes included elsewhere in this report.
 
 Company Overview
 
 We are a development stage company and have not generated any revenue to date. The following discussions sets forth selected financial information for the periods indicated. We have incurred recurring losses to date. Our financial statements have been prepared assuming that we will continue as a going concern and, accordingly, do not include adjustments relating to the recoverability and realization of assets and classification of liabilities that might be necessary should we be unable to continue in operation.
 
 We expect we will require additional capital to meet our long term operating requirements. We expect to raise additional capital through, among other things, the sale of equity or debt securities, however, there is no assurance that we will be successful in raising additional capital.
 
 Plan of Operation
 
 On June 9, 2010, Richard Moore, the Company’s President / Chief Executive Officer, Secretary, Treasurer, Chief Financial Officer and a member of the Board of Directors, resigned from all positions.  Also on June 9, 2010, the Company’s Board of Directors elected Mr. William Lieberman as a member of the Board of Directors and appointed Mr. Lieberman as the Company’s President / Chief Executive Officer, Secretary, Treasurer and Chief Financial Officer.
 
 As a result of the change in management, the Company is re-evaluating its current oil and gas assets and its long-term business strategy.The majority of fiscal year 2011 will be dedicated to restructuring the management and direction of the Company and developing a revised business strategy including identifying potential acquisition targets.  A substantial portion of fiscal year ended February 28, 2010 was dedicated to the North Slope and Cook Inlet projects. As of May 31, 2010, our cash and cash equivalents were $-0-.
 
 We have no access to capital to repay our debt or fund our current or ongoing operations. Unless we can secure additional capital and renegotiate the terms of our outstanding debts, we may be required to discontinue our operations at any time. We will need additional further advances and issuance of debt instruments to fund our operations over the next nine months. In connection with our future business plan, management anticipates additional increases in operating expenses and capital expenditures relating to acquisition of further interests in oil and gas assets or other acquisitions. We would finance these expenses with further issuances of securities and debt issuances. We expect we would need to raise additional capital and generate revenues to meet long-term operating requirements. Additional issuances of equity or convertible debt securities would result in dilution to our current shareholders. Further, such securities may have rights, preferences or privileges senior to our common stock. Additional financing may not be available upon acceptable terms, or at all. If we are not able to obtain additional financing on a timely basis, we will be unable to conduct our operations as planned, and we will not be able to meet our other obligations as they become due. In such event, we will be forced to scale down or perhaps even cease our operations.
 
 
 
 Results of Operations
 
 For the Three Months Ended May 31, 2010 and 2009
 
 Revenues
 
 The Company had no revenues for the three months ended May 31, 2010 and 2009.
 
 Operating Expenses
 
 For the three months ended May 31, 2010, our operating expenses were $(514,500) compared to $5,475,763 for the three months ended May 31, 2009, representing a decrease of $5,990,263.  The decrease in operating expenses was primarily attributable to a decrease in general and administrative expenses of $329,533 (reflecting our decrease in operating activity and changes in management structure), decrease in consulting fees of $86,657, decrease in finance fees of $5,385,117 and decrease in management fees of $188,956.
 
 During the three months ended May 31, 2010, we incurred interest expense of $117,557 compared to $106,997 in the same period of 2009.
 
 Net Loss
 
 For the period from November 4, 2004 (date of inception) to May 31, 2010, we have incurred an accumulated loss of $42,342,310.
 
 Liquidity and Capital Resources
 
 Overview
 
 For the three months ended May 31, 2010, we did not incur any cash expenses as we did not generate any funds from financing activities.
 
 Liquidity and Capital Resources during the three months ended May 31, 2010 compared to the three months ended May 31, 2009
 
 As of May 31, 2010, the Company had no cash and a deficit in working capital of $23,790,136.  The Company generated no cash flow from operations for the three months ended May 31, 2010. The Company used cash of $4,835in operating activities during the three months ended May 31, 2009.
 
 No cash flows were generated from investing or financing activities for the three months ended May 31, 2010.  Cash provided by investing activities was $25,468 for the three months ended May 31, 2009 primarily due to proceeds received from oil and gas assets and a reduction in restricted cash.  Cash used in financing activities was $16,500 for the three months ended May 31, 2009 due to repayments of advances to related parties.
 
 We will require additional financing during the current fiscal year in order to pay certain general and administrative costs while we re-evaluate our business strategy.  We presently do not have sufficient financing to enable us to complete these activities and will require additional financing or loans or advances from our management and shareholders. Our actual expenditures on these activities will depend on the amount of funds we have available as a result of our financing efforts. There is no assurance that we will be able to raise the necessary financing.
 
 Going Concern
 
 Due to the uncertainty of our ability to meet our current operating and capital expenses, our independent auditors included an explanatory paragraph in their report on the consolidated financial statements for the year ended February 28, 2010 regarding concerns about our ability to continue as a going concern. Our unaudited consolidated financial statements contain additional note disclosures describing the circumstances that lead to this disclosure by our independent auditors.
 
 Our unaudited consolidated financial statements have been prepared on a going concern basis, which assumes the realization of assets and settlement of liabilities in the normal course of business. Our ability to continue as a going concern is dependent upon our ability to generate profitable operations in the future and/ or to obtain the necessary financing to meet our obligations and repay our liabilities arising from normal business operations when they become due. The outcome of these matters cannot be predicted with any certainty at this time and raise substantial doubt that we will be able to continue as a going concern. Our unaudited consolidated financial statements do not include any adjustments to the amount and classification of assets and liabilities that may be necessary should we be unable to continue as a going concern.
  
 
 There is no assurance that our operations will be profitable. The Company has conducted private placements of its common stock and has issued notes payable, which have generated funds to satisfy the initial cash requirements of its planned exploration ventures. Our continued existence and plans for future growth depend on our ability to obtain the additional capital necessary to operate either through the generation of revenue or the issuance of additional debt or equity.
 
 Off-Balance Sheet Arrangements
 
 We currently have no off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
 
 Critical Accounting Policies
 
 The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make a number of estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. Such estimates and assumptions affect the reported amounts of revenues and expenses during the reporting period. We base our estimates on historical experiences and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ materially from these estimates under different assumptions and conditions. We continue to monitor significant estimates made during the preparation of our financial statements. On an ongoing basis, we evaluate estimates and assumptions based upon historical experience and various other factors and circumstances. We believe our estimates and assumptions are reasonable in the circumstances; however, actual results may differ from these estimates under different future conditions.
 
 Our significant accounting policies are summarized in Note 3 of our financial statements. While all of these significant accounting policies impact the Company’s consolidated financial condition and results of operations, we view certain of these policies as critical. Policies determined to be critical are those policies that have the most significant impact on the Company and require management to use a greater degree of judgment and estimates. We believe that the estimates and assumptions that are most important to the portrayal of our consolidated financial condition and results of operations, in that they require subjective or complex judgments, form the basis for the accounting for mineral property costs, impairment of long-lived assets, income taxes and stock-based compensation. We believe estimates and assumptions related to these critical accounting policies are appropriate under the circumstances; however, should future events or occurrences result in unanticipated consequences, there could be a material impact on our future consolidated financial conditions or results of operations. We suggest that our significant accounting policies be read in conjunction with this Management's Discussion and Analysis of Financial Condition.
 
 Item 3.    Quantitative and Qualitative Disclosures About Market Risk.
 
 The disclosure required under this item is not required to be reported by smaller reporting companies; as such term is defined by Item 503(e) of Regulation S-K.
 
 Item 4.    Controls and Procedures.
 
 (a)
Evaluation of Disclosure Controls and Procedures
 
 The Company’s management, with the participation of the Company’s principal executive officer (“CEO”) and principal financial officer (“CFO”), evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report.  Based on this evaluation, the CEO and CFO concluded that, as of the end of such period, the Company’s disclosure controls and procedures were not effective to ensure that information that is required to be disclosed by the Company in the reports it files or submits under the Exchange Act is (i) recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to the Company’s management, including the CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.
 
 (b)
Changes in Internal Control over Financial Reporting
 
 On June 9, 2010, Richard Moore, the Company’s President / Chief Executive Officer, Secretary, Treasurer, Chief Financial Officer and a member of the Board of Directors, resigned from all positions.  Also on June 9, 2010, the Company’s Board of Directors elected Mr. William Lieberman as a member of the Board of Directors and appointed Mr. Lieberman as the Company’s President / Chief Executive Officer, Secretary, Treasurer and Chief Financial Officer.
  Other than the above disclosure, there were no changes in our internal control over financial reporting that occurred during the last fiscal quarter, which has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
 
 
 PART II – OTHER INFORMATION
 
 Item 1.    Legal Proceedings
 
 We are currently not involved in any litigation that we believe could have a material adverse effect on our financial condition or results of operations.  There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our company or any of our subsidiaries, threatened against or affecting our company, our common stock, any of our subsidiaries or of our companies or our subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect.
 
 Item 1A.  Risk Factors
 
 There have been no material changes from the risk factors previously disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended February 28, 2010, filed with the SEC on June 14, 2010.
 
 Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds.
 
 None.
 
 Item 3.    Defaults Upon Senior Securities.
 
 None.
 
 Item 4.    (Removed and Reserved).
 
 
 Item 5.    Other Information.
 
 None.
 
 
 
  Item 6.    Exhibits
 
 Exhibit No.

Description31.1

Certification by the Principal Executive Officer of Registrant pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Rule 13a-14(a) or Rule 15d-14(a)).31.2

Certification by the Principal Financial Officer of Registrant pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Rule 13a-14(a) or Rule 15d-14(a)).32.1

Certification by the Principal Executive Officer pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2

Certification by the Principal Financial Officer pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
 
 
 SIGNATURES
 
 Pursuant to the requirements of Section 13 or 15(d) 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.
 
 
 /s/ William Lieberman

August 19, 2011President and Chief Executive Officer

(Principal Executive Officer)

Chief Financial Officer

(Principal Financial Officer)

Date