**U.S.
      SECURITIES AND EXCHANGE COMMISSION**




**Washington,
      D.C. 20549**









**FORM
      10-QSB**







Quarterly
      Report under Section 12(b) or 12(g) of


The
      Securities Act of 1934




For
      the
      Period ended July 31, 2007


Commission
      File Number 333-145967




**PAX
      BIOFUELS INC.**


(Name
      of
      small business issuer in its charter)




**DELAWARE**
            **98-0543691**(State
                of incorporation)
            (Employer
                ID Number)





**1278
      Laurel Road**


**North
      Saanich, B.C.**


**Canada
      V8L 5K8**


**(250)
      655-3776**


(Address
      and telephone number of principal executive offices)




Check
      whether the registrant (1) has filed all reports required to be filed by Section
      13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12
      months (or for such shorter period that the registrant was required to file
      such
      reports), and (2) has been subject to such filing requirements for the past
      90
      days.




Yes
x No
o .




Check
      whether the registrant is a shell company (as defined in Rule 12b-2 of the
      Exchange Act).




Yes
x No
o .




There
      were 10,713,000 shares of Common Stock $.001 par value, outstanding, as
      of December 3, 2007.





**PAX
      BIOFUELS INC.**


**(A
      Development Stage Company)**




**INTERIM
      FINANCIAL STATEMENTS**




**July
      31, 2007**


**(Unaudited)**
  **PART
                  I.**
              
              **FINANCIAL
                  INFORMATION**
              
              
              **1**ITEM
                  1.
              
              Financial
                  Information
              
              
              1Balance
                  Sheets
              
              
              1Statement
                  of Operations
              
              
              2Statement
                  of Cash Flows
              
              
              3ITEM
                  2.
              
              Management’s
                  Discussion and Analysis or Plan of Operation
              
              
              9ITEM
                  3.
              
              Controls
                  and Procedures
              
              
              11**PART
                  II.**
              
              **OTHER
                  INFORMATION**
              
              
              **12**ITEM
                  1.
              
              Legal
                  Proceedings
              
              
              12ITEM
                  2.
              
              Unregistered
                  Sale of Securities
              
              
              12ITEM
                  3.
              
              Default
                  of Senior Securities
              
              
              12ITEM
                  4.
              
              Submission
                  of Matters to a Vote of Security Holders
              
              
              12ITEM
                  5.
              
              Other
                  Information
              
              
              12ITEM
                  6.
              
              Exhibits
                  and Reports on Form 8-K
              
              
              13**SIGNATURES**
              
              
              
              
              **14**
  
  **PART
        I.**  **FINANCIAL
        INFORMATION**
  **ITEM
        1.**  **Financial
        Information**
  **PAX
        BIOFUELS INC.**
 **(A
        Development Stage Company)**
 **Balance
        Sheets**
  **July
                  31,**
                **2007**
              
              **April
                  30,**
                **2007***(Unaudited)***ASSETS****Current
                  Assets**Cash
              
              $
              1,787
              
              $
              231,787
              
              
              23Equipment,
                  net
              
              
              2,162
              
              
              1,662$
              3,949
              
              $
              1,685**LIABILITIES
                  AND STOCKHOLDERS' EQUITY****Current
                  Liabilities**Accounts
                  payable and accrued liabilities
              
              $
              3,373
              
              $
              534Due
                  to related parties
              
              
              36,719
              
              
              18,021$
              40,092
              
              $
              18,555**STOCKHOLDERS'
                  DEFICIT**Common
                  Stock (Note 2)**Authorized:**100,000,000
                  common shares authorized, with a $0.001 par value**Issued:**10,673,000
                  common shares issued and outstanding
              
              $
              10,673
              
              $
              10,663Subscriptions
                  receivable
              
              
              (35,188
              )
              
              (53,670
              )Additional
                  Paid-In capital
              
              
              66,627
              
              
              65,637Deficit
                  accumulated during the development stage
              
              
              (78,255
              )
              
              (39,500
              )$
              (36,143
              )
              $
              (16,870
              )$
              3,949
              
              $
              1,685
  **Accompanying
        Notes Are an Integral Part of the Financial Statements**
  1
  **PAX
          BIOFUELS INC.**
 **(A
          Development Stage Company)**
 Statement
        of Operations
 **(Unaudited)**
  **Three
                  Months Ended**
                **July
                  31, 2007**
              
              **February
                  5, 2007**
                **(inception)
                  to**
                **July
                  31, 2007****Expenses**Bank
                  service charges
              
              $
              81
              
              $
              105Management
                  fees
              
              
              18,138
              
              
              34,802Office
                  supplies
              
              
              632
              
              
              860Professional
                  fees
              
              
              18,859
              
              
              19,839Communications
              
              
              264
              
              
              264Travel
              
              
              828
              
              
              22,788Advertising
              
              
              -
              
              
              16Foreign
                  exchange gain
              
              
              (47
              )
              
              (419
              )Net
                  Loss
              
              $
              (38,755
              )
              $
              (78,255
              )Net
                  Loss Per Share - Basic and Diluted
              
              $
              (0.00
              )
              $
              (0.01
              )Weighted
                  Average Shares Outstanding - Basic and Diluted
              
              $
              10,204,459
              
              $
              10,126,300
 Accompanying
        Notes Are an Integral Part of
        the Financial Statements
  2
  **PAX
          BIOFUELS INC.**
 **(A
          Development Stage Company)**
 Statement
        of Cash Flows
 **(Unaudited)**
  **Three
                  Months Ended**
                **July
                  31, 2007**
              
              **Feb.
                  5, 2007**
                **(inception)
                  to**
                **July
                  31, 2007****Cash
                  Flows From Operating Activities**Net
                  loss
              
              $
              (38,755
              )
              $
              (78,255
              )**Change
                  in operating assets and liabilities**Accounts
                  payable and accrued liabilities
              
              $
              2,839
              
              $
              3,373Due
                  to related parties
              
              
              18,698
              
              
              36,719Net
                  Cash Used In Operating Activities
              
              $
              (17,218
              )
              $
              (38,163
              )**Cash
                  Flows From Financing Activities**Proceeds
                  from issuance of common stock
              
              $
              19,482
              
              $
              42,112Net
                  Cash Provided By Financing Activities
              
              $
              19,482
              
              $
              42,112**Cash
                  Flows From Investing Activities**Purchase
                  of equipment
              
              $
              500
              
              $
              2,162Net
                  Cash Used In Investing Activities
              
              $
              500
              
              $
              2,162Increase
                  in Cash
              
              $
              1,764
              
              $
              1,787Cash
                  - Beginning
              
              
              23
              
              
              -Cash
                  - Ending
              
              $
              1,787
              
              $
              1,787**Supplemental
                  cash flow disclosures****Cash
                  Paid For:**Interest
              
              
              -
              
              
              -Income
                  tax
              
              
              -
              
              
              --
              
              
              -
 **Accompanying
          Notes Are an Integral Part of the Financial
          Statements**
  3
  **PAX
        BIOFUELS INC.**
 **(A
        Development Stage Company)**
  **Note
        1.**  **Nature
        and Continuance of Operations**
  Pax
        Biofuels Inc. (the “Company”) was incorporated in the State of Delaware on
        February 5, 2007. The Company is in the development stage.
  The
        Company intends to produce biodiesel through construction of a plant in Serbia.
        The Company anticipates that its primary source of revenue will be the sale
        of
        biodiesel, both in blended and unblended forms with petroleum-based diesel
        fuel.
        The Company intends to produce and sell biodiesel fuel primarily to wholesalers
        who purchase pure biodiesel (known as B100) or blended fuel such as B20 (which
        is a blend of 20 percent biodiesel, and petrodiesel). The Company’s sales will
        be dependent on the volume and price of the biodiesel fuel it sells in the
        future. The selling prices the Company realizes in the future for its biodiesel
        will be closely linked to market prices of petroleum-based diesel fuel, the
        supply and demand for biodiesel, as well as the tax incentives offered by
        the
        governments of Serbia and other European countries for the production and
        blending of alternative fuels. The Company is also seeking other opportunities
        in the clean energy sector.
  The
        Company’s financial statements have been prepared on a going concern basis which
        assumes the Company will be able to realize its assets and discharge its
        liabilities in the normal course of business for the foreseeable future.
        The
        Company has incurred losses since inception resulting in an accumulated deficit
        of $78,255 as at July 31, 2007 and further losses are anticipated in the
        development of its business raising substantial doubt about the Company’s
        ability to continue as a going concern. The ability to continue as a going
        concern is dependent upon the Company generating profitable operations in
        the
        future and/or to obtain the necessary financing to meet its obligations and
        repay its liabilities arising from normal business operations when they come
        due. Management intends to finance operating costs over the next twelve months
        with loans from directors and/or private placements of the Company’s common
        stock.
  The
        Company filed a registration statement on form SB-2 (the “SB-2”) with the United
        States Securities and Exchange Commission (the “SEC”) that was declared
        effective on September 25, 2007. Pursuant to the SB-2, the Company registered
        1,013,000 shares of the common stock held by certain existing shareholders.
  **Note
        2.**  **Summary
        of Significant Accounting Policies**
  **Basis
        of Presentation**
 
 The
        accompanying unaudited interim financial statements are presented in United
        States dollars and have been prepared in accordance with United States generally
        accepted accounting principles for interim financial information and with
        the
        instructions to Form 10-QSB of Regulation S-B. Certain information and footnote
        disclosures normally included in financial statements prepared in accordance
        with accounting principles generally accepted in the United States of America
        have been condensed or omitted pursuant to such rules and regulations. The
        interim unaudited financial statements should be read in conjunction with
        the
        audited financial statements as of April 30, 2007 included in the SB-2. In
        the
        opinion of Management, all adjustments considered necessary for a fair
        presentation, consisting solely of normal recurring adjustments, have been
        made.
        Operating results for the three months ended July 31, 2007 are not necessarily
        indicative of the results that may be expected for the entire fiscal year
        ending
        April 30, 2008.
 
 4
  **PAX
          BIOFUELS INC.**
 **(A
          Development Stage Company)**
 **Note
        2.**  **Summary
        of Significant Accounting Policies (continued)**
  **Revenue
        Recognition**
  The
        Company recognizes reproduction and distribution revenue in accordance with
        the
        SEC's Staff Accounting Bulletin No. 104 (“SAB 104”), “Revenue Recognition in
        Financial Statements.” Revenue is recognized only when the price is fixed or
        determinable, persuasive evidence of an arrangement exists and collectibility
        is
        reasonably assured. As of July 31, 2007, the Company has not generated any
        revenues.
  **Development
        Stage**
  The
        Company is a development stage company as defined in the Statement of Financial
        Accounting Standards (“SFAS”) No. 7, “Development Stage Enterprises,” as it is
        devoting substantially all of its efforts to establish a new business and
        planned principal operations have not commenced.
  **Use
        of Estimates and Assumptions**
  The
        preparation of financial statements in conformity with generally accepted
        accounting principles requires management to make 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
        and
        the reported amounts of revenues and expenses during the period. Actual results
        could differ from those estimates.
  **Foreign
        Currency Translation**
  The
        financial statements are presented in United States dollars. In accordance
        with
        SFAS No. 52, “Foreign Currency Translation,” 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 on
        the
        transaction date. Revenue and expenses are translated at average rates of
        exchange during the year. Gains and losses arising on translation are included
        in comprehensive income, as a separate component of stockholders’ equity.
        Foreign currency transaction gain or losses are included in net loss.
  **Fair
        Value of Financial Instruments**
  The
        carrying value of cash and accounts payable and accrued liabilities and amounts
        due to related parties approximates their fair value because of the short
        maturity of these instruments. Unless otherwise noted, it is management’s
        opinion that the Company is not exposed to significant interest, currency
        or
        credit risks arising from these financial statements.
  **Income
        Taxes**
  The
        Company follows the liability method of accounting for income taxes. Under
        this
        method, deferred income tax assets and liabilities are recognized for the
        estimated tax consequences attributable to differences between the financial
        statement carrying values and their respective income tax basis (temporary
        differences). The effect on deferred income tax assets and liabilities of
        a
        change in tax rates is recognized in income in the period that includes the
        enactment date.
  5
 **PAX
          BIOFUELS INC.**
 **(A
          Development Stage Company)**
 **Note
        2.**  **Summary
        of Significant Accounting Policies (continued)**
  **Basic
        and Diluted Loss per Share**
  The
        Company computes loss per share in accordance with SFAS No. 128, “Earnings per
        Share” which requires presentation of both basic and diluted earnings per share
        on the face of the statement of operations. Basic loss per share is computed
        by
        dividing net loss available to common stockholders by the weighted average
        number of outstanding common shares during the period. Diluted loss per share
        gives effect to all dilutive potential common shares outstanding during the
        period. Dilutive loss per share excludes all potential common shares if their
        effect is anti-dilutive. The Company has no potential dilutive instruments
        and
        accordingly basic loss per share is equal to dilutive loss per
        share.
  **Equipment**
  Equipment
        is recorded at cost. Depreciation is provided using the declining balance
        method
        at 30% per year.
  The
        Company evaluates the recoverability of equipment whenever events or changes
        in
        circumstances indicate that carrying amount of the asset may not be recovered.
        The Company determines impairment by comparing the undiscounted future cash
        flows estimated to be generated by these assets to their respective carrying
        amounts.
  **Stock-based
        Compensation**
  The
        Company has not adopted a stock option plan and has not granted any stock
        options from its inception. Accordingly, no stock-based compensation has
        been
        recorded to date.
  **Recent
        Accounting Pronouncements**
  In
        February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
        Financial Assets and Financial Liabilities.” This Statement permits entities to
        choose to measure many financial assets and financial liabilities at fair
        value.
        Unrealized gains and losses on items for which the fair value option has
        been
        elected are reported in earnings. SFAS No. 159 is effective for fiscal years
        beginning after November 15, 2007. The Company is currently assessing the
        impact
        of SFAS No. 159 on its financial position and results of
        operations.
  In
        September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for Defined
        Benefit Pension and Other Postretirement Plans.” This Statement requires an
        employer to recognize the over funded or under funded status of a defined
        benefit post retirement plan (other than a multiemployer plan) as an asset
        or
        liability in its statement of financial position, and to recognize changes
        in
        that funded status in the year in which the changes occur through comprehensive
        income. SFAS No. 158 is effective for fiscal years ending after December
        15,
        2006. The adoption of SFAS No. 158 had no impact on the financial position
        or
        result of operations of the Company.
  In
        September 2006, the FASB issued SFAS No. 157, “Fair Value Measures.” This
        Statement defines fair value, establishes a framework for measuring fair
        value
        in generally accepted accounting principles (GAAP), expands disclosures about
        fair value measurements, and applies under other accounting pronouncements
        that
        require or permit fair value measurements. SFAS No. 157 does not require
        any new
        fair value measurements. However, the FASB anticipates that for some entities,
        the application of SFAS No. 157 will change current practice. SFAS No. 157
        is
        effective for financial statements issued for fiscal
  6
 **PAX
          BIOFUELS INC.**
 **(A
          Development Stage Company)**
 **Note
        2.**  **Summary
        of Significant Accounting Policies (continued)**
  years
        beginning after November 15, 2007. The Company is currently evaluating the
        impact of SFAS No. 157 but does not expect that it will have a material impact
        on its financial statements.
  In
        September 2006, the SEC issued SAB No. 108, “Considering the Effects of
        Prior Year Misstatements when Quantifying Misstatements in Current Year
        Financial Statements.” SAB No. 108 addresses how the effects of prior year
        uncorrected misstatements should be considered when quantifying misstatements
        in
        current year financial statements. SAB No. 108 requires companies to quantify
        misstatements using a balance sheet and income statement approach and to
        evaluate whether either approach results in quantifying an error that is
        material in light of relevant quantitative and qualitative factors. SAB No.
        108
        is effective for periods ending after November 15, 2006. The adoption of
        SAB No.
        108 had no impact on the financial position or result of operations of the
        Company.
  **Note
        3.**  **Related
        Party Transactions**
  As
        of
        July 31, 2007,  $36,719
        was owed to the directors for expenses incurred on the Company’s behalf. The
        amounts owed to the related parties are unsecured, non-interest bearing and
        have
        no set terms of repayment. During the period ended July 31, 2007, management
        fees were paid to a company controlled by one of the directors.
  **Note
        4.**  **Common
        Stock**
  As
        of
        July 31, 2007, the Company’s authorized capital consisted of 100,000,000 shares
        of common stock with par value of $0.001.
  Upon
        formation, the Company issued 5,000,000 shares to Hammond Management
        Corporation, a company controlled by its President, Paul Leslie Hammond,
        and
        5,000,000 shares to Scientific Biofuel Solutions Ltd., a company controlled
        by
        its Chairman, Miodrag Andric. These shares were valued at $0.001 per share
        or
        $10,000 in the aggregate, based upon par value.
  On
        March
        16, 2007, the Company issued 82,000 common shares at $0.10 per share for
        cash
        proceeds of $8,200. On February 28, 2007, the Company issued 581,000 common
        shares at $0.10 per share for proceeds of $58,100 of which $35,187 was due
        to
        the Company at July 31, 2007.
  During
        the three months ended July 31, 2007 the Company issued 10,000 common shares
        for
        total cash proceeds of $1,000.
  At
        July
        31, 2007, $1,886 was owed to Hammond Management Corporation and $34,832 was
        owed
        to Scientific Biofuels Solutions Ltd. for expenses incurred on the Company’s
        behalf. The amounts owed are unsecured, non-interest bearing and have no
        set
        terms of repayment.
  During
        the three months ended July 31, 2007, management fees of $18,138 were paid
        to
        Hammond Management Corporation.
  7
  **PAX
        BIOFUELS INC.**
 **(A
        Development Stage Company)**


The
        Company has not entered into any material transactions with any director,
        executive officer, and promoter, beneficial owner of five percent or more
        of our
        common stock, or family members of such persons.
  **Note
        5.** **Income Taxes**
  No
        provision for income taxes has been provided in these financial statements
        due
        to the net loss for the reporting period. At July 31, 2007 the Company has
        net
        operating loss carry-forwards, which expire commencing in 2027, totaling
        approximately $78,255.
  8
  **ITEM
        2.**  **Management’s
        Discussion and Analysis or Plan of Operation**
  The
        following discussion and analysis of the financial condition and results
        of our
        operations should be read in conjunction with our financial statements and
        the
        notes thereto. The results shown herein are not necessarily indicative of
        the
        results to be expected for any future periods.
  You
        should read the following discussion and analysis in conjunction with the
        Consolidated Financial Statements filed with our SB-2, which was filed with
        the
        Securities and Exchange Commission on September 10, 2007, and the Notes thereto,
        and the other financial data appearing elsewhere on this quarterly report
        on
        Form 10-QSB.  The information set forth in Management’s Discussion and
        Analysis or Plan of Operation (“MD&A”) contains certain
“forward-looking statements,” including, among others (i) expected changes in
        the Company’s revenues and profitability, (ii) prospective business
        opportunities and (iii) the Company’s strategy for financing its business.
        Forward-looking statements are statements other than historical information
        or
        statements of current condition. Some forward-looking statements may be
        identified by use of terms such as “believes,” “anticipates,” “intends” or
“expects.” These forward-looking statements relate to the plans, objectives and
        expectations of the Company for future operations. Although we believe that
        our
        expectations with respect to the forward-looking statements are based upon
        reasonable assumptions within the bounds of our knowledge of our business
        and
        operations, in light of the risks and uncertainties inherent in all future
        projections, the inclusion of forward-looking statements in this report should
        not be regarded as a representation by the Company or any other person that
        our
        objectives or plans will be achieved.
  **Plan
        of Operations** ****
  Pax
        Biofuels Inc. (the “Company”, “Pax Biofuels”, “we” or “us”) was formed on
        February 5, 2007, in the state of Delaware. We intend to be in the business
        of
        producing and distributing biodiesel fuel. We intend to construct and operate
        a
        30,000 metric ton per year biodiesel processing plant to be fed with a rapeseed
        oil crushing plant which we also intend to construct and operate. Our plant
        will
        be located in Serbia, formerly part of Yugoslavia. We do not expect to generate
        any revenue until we begin operating the proposed biodiesel plant.
  We
        anticipate that our primary source of revenue will be the sale of biodiesel,
        both in blended and unblended forms with petroleum-based diesel fuel. We
        intend
        to produce and sell biodiesel fuel primarily to wholesalers who purchase
        pure
        biodiesel (known as B100) or blended fuel such as B20 (which is a blend of
        20
        percent biodiesel, and petrodiesel). Our sales will be dependent on the volume
        and price of the biodiesel fuel we sell in the future. The selling prices
        we
        realize in the future for our biodiesel will be closely linked to market
        prices
        of petroleum-based diesel fuel, the supply and demand for biodiesel, as well
        as
        the tax incentives offered by governments of Serbia and other European countries
        for the production and blending of alternative fuels.
 
 During
        the next 12 months we anticipate raising sufficient capital through private
        placements to be able to finance our plan of operations. Once
        finalized, we anticipate acquiring land for our plant through discussions
        and negotiations with local municipalities in Serbia. We anticipate this
        process
        will take two months and cost approximately $15,000. At that time, we will
        then
        contract for land development, plant construction and request proposals from
        contractors. We anticipate that this process will take two to three
        months. Our estimated costs are $125,000.
 
 We
        will
        also request proposals from equipment suppliers at this point and would
        anticipate placing firm orders within three months of the private
        placements.
  Following
        the establishment of firm timelines for commencing operations at the plant
        we
        anticipate being ready to execute contracts with customers and suppliers.
        Our
        management anticipates spending considerable time meeting with various farmer
        cooperatives in order to negotiate contracts for supplies of raw materials
        as
        well as re-activating contacts with buyers and commodity brokers to solicit
        firm
        orders. We anticipate our costs in this regard will be approximately
        $75,000.
  9
  As
        of the
        date of this quarterly report, we have not yet commenced any of these activities
        and there can be no assurance that we will be able to do so on the proposed
        schedule or at all.
  **Liquidity
        and Capital Resources**
  We
        have
        limited capital resources as, among other things, we are a development stage
        company with no operating history. We have not generated any revenues. We
        may
        not be able to generate sufficient revenues to become profitable. In addition,
        we may never secure the funding necessary to begin or complete construction
        of
        our biodiesel production facilities and our facilities may never commence
        significant operations. We have no agreements, commitments or understandings
        to
        secure this funding. If we do complete the construction of our biodiesel
        production facility, we may not be able to generate sufficient revenues to
        become profitable. We anticipate our company will experience substantial
        growth
        involving the construction and start-up of operations of the plant and the
        hiring of employees. This period of growth and the start-up of the plant
        are
        likely to be a significant challenge to us.
  While
        we
        have sufficient funds on hand to commence business operations, our cash reserves
        are not sufficient to meet our obligations for the next 12-month period.
        As a
        result, we will need to seek additional funding in the near future. We currently
        do not have a specific plan of how we will obtain such funding; however,
        we
        anticipate that additional funding will be in the form of equity financing
        from
        the sale of our common stock. At this time, we cannot provide investors with
        any
        assurance that we will be able to raise sufficient funding from the sale
        of our
        common stock meet our obligations over the next 12 months. We do not have
        any
        arrangements in place for any future equity financing.
  **Results
        of Operations for the Three-Month Period Ended July 31,
        2007**
  We
        did
        not earn any revenues during the three-month period ended July 31, 2007.
  We
        incurred operating expenses in the amount of $38,755 for the three-month
        period
        ended July 31, 2007. These operating expenses are comprised of general and
        administration expenses of $930, management fees of $18,138, professional
        fees
        of $18,859, and travel of $828. The professional fees were primarily incurred
        in
        connection with the preparation and filing of our SB-2. There are no comparative
        results for the prior-year three-month period as we had not yet commenced
        operations.
  Our
        net
        loss for the three-month period ended July 31, 2007,  was
        $38,755. There is no comparison to the comparative period in fiscal 2006,
        as we
        were not incorporated until February 5, 2007.
  At
        July
        31, 2007, we had total assets of $3,949 consisting of cash of $ 1,787 and
        equipment of $2,162. At the same date, we had liabilities of $40,092 consisting
        of accounts payable and accrued liabilities of $3,373 and amounts due to
        related
        parties of $36,719.
  **Off-Balance
        Sheet Arrangements**
  We
        have
        no off-balance sheet arrangements.
   10
  **ITEM
        3.**  **Controls
        and Procedures**
  **Evaluation
        of Disclosure Controls and Procedures**
  Under
        the
        supervision and with the participation of our management, including our
        principal executive officer and principal financial officer, we have conducted
        an evaluation of the effectiveness of the design and operation of our disclosure
        controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under
        the
        Securities and Exchange Act of 1934, as of the end of the period covered
        by this
        report. Based on this evaluation, our principal executive officer and principal
        financial officer concluded as of the evaluation date that our disclosure
        controls and procedures were effective such that the material information
        required to be included in our SEC reports is recorded, processed, summarized
        and reported within the time periods specified in SEC rules and forms relating
        to our company, particularly during the period when this report was being
        prepared.
  Additionally,
        there were no significant changes in our internal controls or in other factors
        that could significantly affect these controls subsequent to the evaluation
        date. We have not identified any significant deficiencies or material weaknesses
        in our internal controls, and therefore there were no corrective actions
        taken.
  11
  **PART
        II.**  **OTHER
        INFORMATION**
  **ITEM
        1.**  **Legal
        Proceedings**
  None.
  **ITEM
        2.**  **Unregistered
        Sale of Securities**
  On
        February 5, 2007, we sold 10,000,000 shares of common stock at a price of
        $0.001
        per share for total gross proceeds of $10,000. From February 6, 2007 to July
        31,
        2007, we sold 673,000 shares of common stock at a price of $0.10 for total
        consideration of $67,300.
  We
        relied
        upon Section 4(2) of the Securities Act of 1933, as amended for the above
        issuances. We believed that Section 4(2) was available because:
  ·
            None
                of these issuances involved underwriters, underwriting discounts
                or
                commissions;  ·
            We
                placed restrictive legends on all certificates issued;  ·
            No
                sales were made by general solicitation or advertising;
                and  ·
            The
                distributions were made only to investors who were accredited as
                defined
                in Regulation D or investors who qualified for solicitation under
                Regulation S.  **ITEM
        3.**  **Default
        of Senior Securities**
  None.
  **ITEM
        4.**  **Submission
        of Matters to a Vote of Security Holders**
  None.
  **ITEM
        5.**  **Other
        Information**
  None.
  12
  **ITEM
        6.**  **Exhibits
        and Reports on Form 8-K**
  **EXHIBITS**
  **No.**
              
              **Description****31.1**
              
              Sec.
                  302 Certification of Principal Executive Officer, Financial Officer
&
                  Accounting Officer**31.2**
              
              Sec.
                  906 Certification of Principal Executive Officer, Financial Officer
&
                  Accounting Officer
 
 There
        were no reports filed on Form 8-K during the quarter ended July 31,
        2007.
  13
   **SIGNATURES**
  Pursuant
        to the requirements of Section 13(a) 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.
  **PAX
                  BIOFUELS INC.**Date: December
                  3, 2007
              By:
              /s/ Paul Leslie HammondPrincipal
                  Executive Officer, Principal Financial Officer and Principal Accounting
                  Officer, President and Director
  14
  **EXHIBIT
        INDEX**
  **No.**
              
              **Description****31.1**
              
              Sec.
                  302 Certification of Principal Executive Officer, Financial Officer
&
                  Accounting Officer**31.2**
              
              Sec.
                  906 Certification of Principal Executive Officer, Financial Officer
&
                  Accounting Officer
 
 There
        were no reports filed on Form 8-K during the quarter ended July 31,
        2007.
  15