UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

———————

FORM 10-Q

———————

(Mark One)



þQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended February 28, 2011



OR



oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to



XUN ENERGY, INC.

(Exact name of registrant as specified in its charter)



|                                              |  |                          |  |                                     
|--------------------------------------------- |  | ------------------------ |  | ------------------------------------
|Nevada                                        |  | 000-53466                |  | 26-1616719                          
|State or Other Jurisdiction of Incorporation) |  | (Commission File Number) |  | (I.R.S. Employer Identification No.)



|                                                              
|--------------------------------------------------------------
|12518 NE Airport Way
Suite 148 No, 156, Portland, Oregon 97230
|(Address of Principal Executive Offices) (Zip Code)           



|                                                
|------------------------------------------------
|(775)-200-0505                                  
|(Issuers telephone number, including area code)



|                                                                                  
|----------------------------------------------------------------------------------
|                                                                                  
|(Former name, former address and former fiscal year, if changed since last report)



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



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



|                        |       |  |                          |     
|----------------------- | ----- |  | ------------------------ | ----
|Large accelerated Filer | [   ] |  | Accelerated Filer        | [  ]
|Non-accelerated Filer   | [   ] |  | Small 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 [ ]   No[  X ]



APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY

PROCEEDINGS DURING THE PRECEDING FIVE YEARS





Indicate by check mark whether the Registrant has filed all documents and reports required to be filed by Section 12, 13, or 15 (d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.   Yes o   No o



APPLICABLE ONLY TO CORPORATE ISSUERS:



Indicate the number of shares outstanding of each of the issuers classes of Common Stock as of the latest practicable date:



312,501,000 shares of common stock are issued and outstanding as of April 19, 2011



1













XUN ENERGY, INC.



INDEX





|         |                                                                                                                                                                                  |  |      | 
|-------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | 
|         | PART I.  FINANCIAL INFORMATION                                                                                                                                                  |  | Page
|         |                                                                                                                                                                                  |  |     
|Item 1.  | Financial Statements                                                                                                                                                             |  |     
|         |                                                                                                                                                                                  |  |     
|         | Consolidated Balance Sheets at  February 28, 2011(unaudited) and May 31,  2010  (audited)                                                                                        |  | 3   
|         |                                                                                                                                                                                  |  |     
|         | Consolidated Statement of Operations for the Three and Nine  Months  ended February 28, 2011 and February 28, 2010  and from  Inception (December 20, 2007) to February 28, 2011 |  | 4   
|         |                                                                                                                                                                                  |  |     
|         | Consolidated Statements of Stockholders Equity from Inception (December 20, 2007) to February 28, 2011                                                                           |  | 5   
|         |                                                                                                                                                                                  |  |     
|         | Consolidated Statements of Cash Flows  for the Nine Months Ended February 28, 2011 and February 28, 2010 and  Cumulative since Inception to February 28, 2011  (unaudited)       |  | 6   
|         |                                                                                                                                                                                  |  |     
|         | Notes to Interim Consolidated Financial Statements as of  February 28, 2011                                                                                                      |  | 7   
|         |                                                                                                                                                                                  |  |     
|Item 2.  | Managements Discussion and Analysis of Financial Condition and Results of Operation                                                                                             |  | 15  
|         |                                                                                                                                                                                  |  |     
|Item 3.  | Quantitative and Qualitative Disclosure About Market Risk                                                                                                                        |  | 17  
|         |                                                                                                                                                                                  |  |     
|Item 4.  | Controls and Procedures                                                                                                                                                          |  | 18  
|         |                                                                                                                                                                                  |  |     
|         |                                                                                                                                                                                  |  |     
|         |                                                                                                                                                                                  |  |     
|         | PART II.  OTHER INFORMATION                                                                                                                                                     |  |     
|         |                                                                                                                                                                                  |  |     
|Item 1   | Legal Proceedings.                                                                                                                                                               |  | 19  
|         |                                                                                                                                                                                  |  |     
|Item 1A. | Risk Factors                                                                                                                                                                     |  | 19  
|         |                                                                                                                                                                                  |  |     
|Item 2.  | Unregistered Sales of Equity Securities.                                                                                                                                         |  | 19  
|         |                                                                                                                                                                                  |  |     
|Item 3.  | Defaults upon senior securities.                                                                                                                                                 |  | 19  
|         |                                                                                                                                                                                  |  |     
|Item 4.  | Submission of matters to a vote of security holders.                                                                                                                             |  | 19  
|         |                                                                                                                                                                                  |  |     
|Item 5.  | Other information                                                                                                                                                                |  | 19  
|         |                                                                                                                                                                                  |  |     
|Item 6.  | Exhibits                                                                                                                                                                         |  | 20  



2

















ITEM 1.      FINANCIAL STATMENTS



|                                     |                                                                                                                                              |                                                                      |                   |  |   |              |  |  |  |  |  |  |  | 
|------------------------------------ | -------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------- | ----------------- |  | - | ------------ |  |  |  |  |  |  |  | 
|                                     |                                                                                                                                              | XUN ENERGY, INC.  AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)    
|                                     |                                                                                                                                              | CONSOLIDATED BALANCE SHEETS
As of FEBRUARY 28, 2011 and MAY 31, 2010
|                                     |                                                                                                                                              | (Expressed in U.S. dollars)                                         
|                                     |                                                                                                                                              |                                                                      | February 28, 2011 |  |   | May 31, 2010 | 
|                                     |                                                                                                                                              |                                                                      | (unaudited)       |  |   | (audited)    | 
|                                     | ASSETS                                                                                                                                       |                                                                      |                   |  |   |              | 
|                                     |                                                                                                                                              |                                                                      |                   |  |   |              | 
|                                     | Current Assets                                                                                                                               |                                                                      |                   |  |   |              | 
|                                     | Cash                                                                                                                                         | $                                                                    | 1,954             |  | $ | 22,386       | 
|                                     | Accounts Receivable                                                                                                                          | $                                                                    | 192               |  | $ | -            | 
|                                     | Total Current Assets                                                                                                                         | $                                                                    | 2,146             |  | $ | 22,386       | 
|                                     |                                                                                                                                              |                                                                      |                   |  |   |              | 
|                                     | Intangible Assets                                                                                                                            |                                                                      |                   |  |   |              | 
|                                     | Legal and Contractual                                                                                                                        |                                                                      |                   |  |   |              | 
|                                     | Rights                                                                                                                                       | $                                                                    | 4,483             |  | $ | -            | 
|                                     | Trademarks                                                                                                                                   | $                                                                    | 20                |  | $ | -            | 
|                                     | Incorporation Costs                                                                                                                          | $                                                                    | 100               |  | $ | -            | 
|                                     | Total Legal and Contractual                                                                                                                  | $                                                                    | 4,603             |  | $ | -            | 
|                                     | Total Intangible Assets                                                                                                                      | $                                                                    | 4,603             |  | $ | -            | 
|                                     |                                                                                                                                              |                                                                      |                   |  |   |              | 
|                                     | Total Assets                                                                                                                                 | $                                                                    | 6,748             |  | $ | 22,386       | 
|                                     |                                                                                                                                              |                                                                      |                   |  |   |              | 
|LIABILITIES AND STOCKHOLDERS' EQUITY |                                                                                                                                              |                                                                      |                   |  |   |             
|                                     |                                                                                                                                              |                                                                      |                   |  |   |              | 
|                                     | Current  Liabilities                                                                                                                         |                                                                      |                   |  |   |              | 
|                                     | Accounts payable and accrued expenses                                                                                                        | $                                                                    | 34,344            |  | $ | 3,177        | 
|                                     | Loan payable                                                                                                                                 | $                                                                    | 34,300            |  | $ | 60,000       | 
|                                     | Total Current Liabilities                                                                                                                    | $                                                                    | 68,644            |  | $ | 63,177       | 
|                                     |                                                                                                                                              |                                                                      |                   |  |   |              | 
|                                     | Stockholders' Equity (Deficit)                                                                                                               |                                                                      |                   |  |   |              | 
|                                     | Preferred Stock, par value $0.0001, 50,000,000 shares authorized,                                                                            |                                                                      |                   |  |   |              | 
|                                     | none issued and outstanding                                                                                                                  | $                                                                    | -                 |  | $ | -            | 
|                                     | Common Stock, par value $0.0001, 5,000,000,000 shares authorized,                                                                            |                                                                      |                   |  |   |              | 
|                                     | 512,501,000 and 510,416,000 shares issued and outstanding, respectively                                                                      | $                                                                    | 51,250            |  | $ | 51,042       | 
|                                     | Paid in Capital                                                                                                                              | $                                                                    | 119,308           |  | $ | 9,166        | 
|                                     | Deficit Accumulated During the Development Stage                                                                                             | $                                                                    | (232,454)         |  | $ | (100,999)    | 
|                                     | Total Stockholders' Equity (Deficit)                                                                                                         | $                                                                    | (61,896)          |  | $ | (40,791)     | 
|                                     |                                                                                                                                              |                                                                      |                   |  |   |              | 
|                                     | Total Liabilities and Stockholders' Equity (Deficit)                                                                                         | $                                                                    | 6,748             |  | $ | 22,386       | 
|                                     | *1 - The number of issued and outstanding shares of common stock has been adjusted to reflect an 80:1 forward split effective August 3, 2010 |                                                                      |                   |  |   |              | 



The Accompanying Notes Are An Integral Part Of These Financial Statements

3













|                                                                                                     
|-----------------------------------------------------------------------------------------------------
|XUN ENERGY, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
|FOR THE YEARS ENDED
FEBRUARY 28, 2011  and  2009 and CUMULATIVE FROM INCEPTION
(Unaudited)           
|(Expressed in U.S. dollars)                                                                          



|                                                                                                                                             |  |   |                                              |  |   |                                              |  |   |                                             |  |   |                                             |  |   |                                                    | 
|-------------------------------------------------------------------------------------------------------------------------------------------- |  | - | -------------------------------------------- |  | - | -------------------------------------------- |  | - | ------------------------------------------- |  | - | ------------------------------------------- |  | - | -------------------------------------------------- | 
|                                                                                                                                             |  |   | For the three months ended February 28, 2011 |  |   | For the three months ended February 28, 2010 |  |   | For the nine months ended February 28, 2011 |  |   | For the nine months ended February 28, 2010 |  |   | December 20, 2007 (Inception) To February 28, 2011 | 
|                                                                                                                                             |  |   |                                              |  |   |                                              |  |   |                                             |  |  
|                                                                                                                                             |  |   |                                              |  |   |                                              |  |   |                                             |  |  
|                                                                                                                                             |  |   |                                              |  |   |                                              |  |   |                                             |  |   |                                             |  |   |                                                    | 
|Revenue                                                                                                                                      |  |   |                                              |  |   |                                              |  |   |                                             |  |   |                                             |  |   |                                                    | 
|Revenue - Operations                                                                                                                         |  | $ | -                                            |  | $ | -                                            |  | $ | -                                           |  | $ | -                                           |  | $ | -                                                  | 
|Total Revenue                                                                                                                                |  | $ | -                                            |  | $ | -                                            |  | $ | -                                           |  | $ | -                                           |  | $ | -                                                  | 
|                                                                                                                                             |  |   |                                              |  |   |                                              |  |   |                                             |  |   |                                             |  |   |                                                    | 
|Expenses                                                                                                                                     |  |   |                                              |  |   |                                              |  |   |                                             |  |   |                                             |  |   |                                                    | 
|                                                                                                                                             |  |   |                                              |  |   |                                              |  |   |                                             |  |   |                                             |  |   |                                                    | 
|Filing Fees                                                                                                                                  |  | $ | 758                                          |  | $ | 200                                          |  | $ | 2,735                                       |  | $ | 600                                         |  | $ | 6,855                                              | 
|General and Administrative                                                                                                                   |  | $ | 13,529                                       |  | $ | 320                                          |  | $ | 22,092                                      |  | $ | 1169                                        |  | $ | 44,110                                             | 
|Professional Fees                                                                                                                            |  | $ | 52,225                                       |  | $ | 1,500                                        |  | $ | 104,048                                     |  | $ | 5,000                                       |  | $ | 178,317                                            | 
|Loss before income taxes                                                                                                                     |  | $ | (66,512)                                     |  | $ | (2,020)                                      |  | $ | (128,874)                                   |  | $ | (6,769)                                     |  | $ | (229,282)                                          | 
|                                                                                                                                             |  |   |                                              |  |   |                                              |  |   |                                             |  |   |                                             |  |   |                                                    | 
|Other income (expense)                                                                                                                       |  | $ | 48                                           |  | $ | -                                            |  | $ | (2,580)                                     |  | $ | -                                           |  | $ | (3,172)                                            | 
|                                                                                                                                             |  |   |                                              |  |   |                                              |  |   |                                             |  |   |                                             |  |   |                                                    | 
|Provision for Income Taxes                                                                                                                   |  | $ | -                                            |  | $ | -                                            |  | $ | -                                           |  | $ | -                                           |  | $ | -                                                  | 
|                                                                                                                                             |  |   |                                              |  |   |                                              |  |   |                                             |  |   |                                             |  |   |                                                    | 
|Net (Loss)                                                                                                                                   |  | $ | (66,463)                                     |  | $ | (2,020)                                      |  | $ | (131,455)                                   |  | $ | (6,769)                                     |  | $ | (232,454)                                          | 
|                                                                                                                                             |  |   |                                              |  |   |                                              |  |   |                                             |  |   |                                             |  |   |                                                    | 
|Basic and Diluted                                                                                                                            |  |   |                                              |  |   |                                              |  |   |                                             |  |   |                                             |  |   |                                                    | 
|(Loss) per Common Shares                                                                                                                     |  |   | A                                            |  |   | a                                            |  |   | a                                           |  |   | A                                           |  |   |                                                    | 
|                                                                                                                                             |  |   |                                              |  |   |                                              |  |   |                                             |  |   |                                             |  |   |                                                    | 
|Weighted Average                                                                                                                             |  |   |                                              |  |   |                                              |  |   |                                             |  |   |                                             |  |   |                                                    | 
|Number of Common Shares*1                                                                                                                    |  |   | 512,472,583                                  |  |   | 510,416,000                                  |  |   | 511,105,533                                 |  |   | 510,416,000                                 |  |   |                                                    | 
|                                                                                                                                             |  |   |                                              |  |   |                                              |  |   |                                             |  |   |                                             |  |   |                                                    | 
|a = Less than ($0.01) per share                                                                                                              |  |   |                                              |  |   |                                              |  |   |                                             |  |   |                                             |  |   |                                                    | 
|*1 - The number of issued and outstanding shares of common stock has been adjusted to reflect an 80:1 forward split effective August 3, 2010 |  |   |                                              |  |   |                                              |  |   |                                             |  |   |                                             |  |   |                                                    | 



The Accompanying Notes Are An Integral Part Of These Financial Statements











4

| |                                                                                                                                              |                                                                                                                             |                             |  |   |        |  |   |                            |              |   |                                                  |  |   |           |  |  |  |  | 
| | -------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------- | --------------------------- |  | - | ------ |  | - | -------------------------- | ------------ | - | ------------------------------------------------ |  | - | --------- |  |  |  |  | 
| |                                                                                                                                              | XUN ENERGY, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited)
| |                                                                                                                                              |                                                                                                                             | (Expressed in U.S. dollars)
| |                                                                                                                                              |                                                                                                                             |                             |  |   |        |  |   |                            |              |   | Deficit Accumulated During the Development Stage |  |   |           | 
| |                                                                                                                                              |                                                                                                                             |                             |  |   |        |  |   | Additional Paid in Capital |              |   |                                                  |  |   |          
| |                                                                                                                                              |                                                                                                                             | Common Stock                |  |   |        |  |   |                            | Total Equity |  
| |                                                                                                                                              |                                                                                                                             | Shares*1                    |  |   | Amount |  |   |                            |              |   |                                                  | 
| | Inception December 20, 2007                                                                                                                  |                                                                                                                             | -                           |  | $ | -      |  | $ | -                          |              | $ | -                                                |  | $ | -         | 
| | Common stock issued  to Directors                                                                                                            |                                                                                                                             | 400,000,000                 |  | $ | 40,000 |  | $ | (35,000)                   |              | $ | -                                                |  | $ | 5,000     | 
| | For cash December 20, 2007                                                                                                                   |                                                                                                                             |                             |  |   | -      |  |   | -                          |              |   |                                                  |  |   | -         | 
| | at 0.001 per share                                                                                                                           |                                                                                                                             |                             |  |   |        |  |   |                            |              |   |                                                  |  |   |           | 
| | Private placement closed on                                                                                                                  |                                                                                                                             |                             |  |   |        |  |   |                            |              |   |                                                  |  |   |           | 
| | March 31 at 0.04 per share                                                                                                                   |                                                                                                                             | 110,416,000                 |  | $ | 11,042 |  | $ | 44,166                     |              | $ | -                                                |  | $ | 55,208    | 
| | Net loss for the year                                                                                                                        |                                                                                                                             |                             |  |   |        |  |   |                            |              | $ | (85)                                             |  | $ | (85)      | 
| | Balance, May 31, 2008                                                                                                                        |                                                                                                                             | 510,416,000                 |  | $ | 51,042 |  | $ | 9,166                      |              | $ | (85)                                             |  | $ | 60,123    | 
| | Net loss for the year                                                                                                                        |                                                                                                                             |                             |  |   |        |  |   |                            |              | $ | (50,170)                                         |  | $ | (50,170)  | 
| | Balance, May 31, 2009                                                                                                                        |                                                                                                                             | 510,416,000                 |  | $ | 51,042 |  | $ | 9,166                      |              | $ | (50,255)                                         |  | $ | 9,953     | 
| | Net loss for the year                                                                                                                        |                                                                                                                             |                             |  |   |        |  |   |                            |              | $ | (50,744)                                         |  | $ | (50,744)  | 
| | Balance, May 31, 2010                                                                                                                        |                                                                                                                             | 510,416,000                 |  | $ | 51,042 |  | $ | 9,166                      |              | $ | (100,999)                                        |  | $ | (40,791)  | 
| | Common stock issued  to Directors                                                                                                            |                                                                                                                             | 37,500                      |  | $ | 4      |  | $ | 3,296                      |              | $ |                                                  |  | $ | 3,300     | 
| | For purchase of Accounts Receivable                                                                                                          |                                                                                                                             | 1,259,000                   |  | $ | 126    |  | $ | 62,824                     |              | $ |                                                  |  | $ | 62,950    | 
| | For cash November 30, 2010                                                                                                                   |                                                                                                                             | 741,000                     |  | $ | 74     |  | $ | 36,976                     |              | $ |                                                  |  | $ | 37,050    | 
| | Common stock issued  to Directors                                                                                                            |                                                                                                                             | 37,500                      |  | $ | 4      |  | $ | 5,946                      |              | $ |                                                  |  | $ | 5,950     | 
| | Common stock issued  to Consultant                                                                                                           |                                                                                                                             | 10,000                      |  | $ | 1      |  | $ | 1,099                      |              | $ |                                                  |  | $ | 1,100     | 
| | Net loss for the period                                                                                                                      |                                                                                                                             |                             |  |   |        |  |   |                            |              | $ | (131,455)                                        |  | $ | (131,455) | 
| | Balance, February 28, 2011                                                                                                                   |                                                                                                                             | 512,501,000                 |  | $ | 51,250 |  | $ | 119,308                    |              | $ | (232,454)                                        |  | $ | (61,896)  | 
| | *1 - The number of issued and outstanding shares of common stock has been adjusted to reflect an 80:1 forward split effective August 3, 2010 |                                                                                                                             |                             |  |   |        |  |   |                            |              |   |                                                  |  |   |           | 



The Accompanying Notes Are An Integral Part Of These Financial Statements



5











XUN ENERGY, INC. AND SUBSIDIARIES

|                                                                                          |  |                                                                            |   |                                             |  |   |                                             |  |   |                                                    |  | 
|----------------------------------------------------------------------------------------- |  | -------------------------------------------------------------------------- | - | ------------------------------------------- |  | - | ------------------------------------------- |  | - | -------------------------------------------------- |  | 
|CONSOLIDATED STATEMENTS OF CASH FLOWS
(A DEVELOPMENT STAGE COMPANY)                      
|FOR THE PERIOD ENDED FEBRUARY 28, 2011 and 2009 and CUMULATIVE FROM INCEPTION
(Unaudited)
|(Expressed in U.S. dollars)                                                              
|                                                                                          |  |                                                                            |   | For the nine months ended February 28, 2011 |  |   | For the nine months ended February 28, 2010 |  |   | December 20, 2007 (Inception) To February 28, 2011 | 
|                                                                                          |  |                                                                            |   |                                             |  |   |                                             | 
|                                                                                          |  |                                                                            |   |                                             |  |   |                                             | 
|                                                                                          |  | Operating Activities                                                       |   |                                             |  |   |                                             |  |   |                                                    | 
|                                                                                          |  | Net (Loss)                                                                 | $ | (131,455)                                   |  | $ | (6769)                                      |  | $ | (232,454)                                          | 
|                                                                                          |  | Adjustments to reconcile net loss to net cash used by operating activities |   |                                             |  |   |                                             |  |   |                                                    | 
|                                                                                          |  | Share based Compensation                                                   | $ | 10,350                                      |  | $ | -                                           |  | $ | 10,350                                             | 
|                                                                                          |  | Changes in net assets and liabilities-                                     |   |                                             |  |   |                                             |  |   |                                                    | 
|                                                                                          |  | Accounts receivable and accrued receivables                                | $ | (192)                                       |  | $ | -                                           |  | $ | (192)                                              | 
|                                                                                          |  | Accounts payable and accrued liabilities                                   | $ | 31,167                                      |  | $ | 120                                         |  | $ | 34,344                                             | 
|                                                                                          |  | Net Cash Used By Operating Activities                                      | $ | (90,129)                                    |  | $ | (6,649)                                     |  | $ | (187,952)                                          | 
|                                                                                          |  |                                                                            |   |                                             |  |   |                                             |  |   |                                                    | 
|                                                                                          |  | INVESTING ACTIVITIES                                                       |   |                                             |  |   |                                             |  |   |                                                    | 
|                                                                                          |  | Purchase of Intangible Assets                                              | $ | (4,603)                                     |  | $ | -                                           |  | $ | (4,603)                                            | 
|                                                                                          |  |                                                                            |   |                                             |  |   |                                             |  |   |                                                    | 
|                                                                                          |  | FINANCING ACTIVITIES                                                       |   |                                             |  |   |                                             |  |   |                                                    | 
|                                                                                          |  | Proceeds from issuance of common stock                                     | $ | 100,000                                     |  | $ | -                                           |  | $ | 160,208                                            | 
|                                                                                          |  | Repayment of loans                                                         | $ | (81,000)                                    |  | $ | -                                           |  | $ | (81,000)                                           | 
|                                                                                          |  | Proceeds from loans                                                        | $ | 55,300                                      |  | $ | 25                                          |  | $ | 115,300                                            | 
|                                                                                          |  | Cash Provided by Financing Activities                                      | $ | 74,300                                      |  | $ | -                                           |  | $ | 194,508                                            | 
|                                                                                          |  |                                                                            |   |                                             |  |   |                                             |  |   |                                                    | 
|                                                                                          |  | Net Increase (Decrease) in Cash                                            | $ | (20,432)                                    |  | $ | (6,624)                                     |  | $ | 1,954                                              | 
|                                                                                          |  |                                                                            |   |                                             |  |   |                                             |  |   |                                                    | 
|                                                                                          |  | Cash, Beginning of Period                                                  | $ | 22,386                                      |  | $ | 9,953                                       |  | $ | -                                                  | 
|                                                                                          |  |                                                                            |   |                                             |  |   |                                             |  |   |                                                    | 
|                                                                                          |  | Cash, End of Period                                                        | $ | 1,954                                       |  | $ | 3,329                                       |  | $ | 1,954                                              | 
|                                                                                          |  |                                                                            |   |                                             |  |   |                                             |  |   |                                                    | 
|                                                                                          |  | Supplemental disclosure with respect to cash flows:                        |   |                                             |  |   |                                             |  |  
|                                                                                          |  | Cash paid for income taxes                                                 | $ | -                                           |  | $ | -                                           |  | $ | -                                                  | 
|                                                                                          |  | Cash paid for interest                                                     | $ | -                                           |  | $ | -                                           |  | $ | -                                                  | 
|                                                                                          |  |                                                                            |   |                                             |  |   |                                             |  |   |                                                    | 



The Accompanying Notes Are An Integral Part Of These Financial Statements



6











XUN ENERGY, INC. AND SUBSIDIARIES

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FEBRUARY 28, 2011



NOTE 1. ORGANIZATION AND DESCRIPTION OF BUSINESS



The Company was incorporated under the laws of the state of Nevada on December 20, 2007 as Real Value Estates, Inc. On July 20, 2010, the Company changed its name to Xun Energy, Inc.



On February 7, 2011, the Company established two subsidiaries in the State of Kentucky.



The Company acquired three oil and gas leases in the State of Kentucky on February 28, 2011 and subsequent to the 9 months ending February 28, 2011 began production of crude oil on one of its leases. The Company is engaged in the business of oil and gas exploration and production of crude oil. The Company is focusing its efforts on re-entering existing oil and gas wells that previously produced oil and gas or are producing oil and gas.



As of February 28, 2011, the Company was a development stage enterprise, the Company discloses the deficit accumulated during the development stage and the cumulative statements of operations and cash flow from inception to the current balance sheet date. On April 18, 2011, the Company filed a Form 8-k with the SEC disclosing that the Company is no longer a shell and has completed a workover program on one of its wells.



NOTE  2. SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES



BASIS OF ACCOUNTING



FISCAL YEAR



The Companys financial statements are prepared using the accrual method of accounting. The Company has elected a May 31 fiscal year end.



PRINCIPLES OF CONSOLIDATION



The Consolidated Financial Statements include the accounts of Xun Energy, Inc. and its subsidiaries. All significant intercompany accounts and transactions have been eliminated. The consolidated financial statements are presented in accordance with the accounting principles generally accepted in the United States.



UNAUDITED INTERIM FINANCIAL STATEMENTS



The interim financial statements of Xun Energy, Inc. and subsidiaries as of February 28, 2011, and for the nine months then ended, and cumulative from inception, are unaudited. However, in the opinion of management, the interim financial statements include all adjustments, consisting only of normal recurring adjustments, necessary to present fairly Xun Energy, Inc.s consolidated financial position as of February 28, 2011, and the results of its consolidated operations and its cash flows for the nine months ended February 28, 2011, and 2009, and cumulative from inception. These results are not necessarily indicative of the results expected for the calendar year ending May 31, 2011. The accompanying consolidated financial statements and notes thereto do not reflect all disclosures required under accounting principles generally accepted in the United States of America. Refer to the Companys audited financial statements as of May 31, 2010, filed with the SEC for additional information, including significant accounting policies.



EARNINGS PER SHARE



Basic earnings (loss) per share amount are computed by dividing the net income (loss) by the weighted average number of common shares outstanding.  Diluted earnings (loss) per share are the same as basic earnings (loss) per share due to the lack of dilutive items in the Company.



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CASH EQUIVALENTS



The Company considers all highly liquid investments with maturity of three months or less when purchased to be cash equivalents.



ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS



The carrying value of the Companys financial instruments, consisting of accounts payable and accrued liabilities approximate their fair value due to the short-term maturity of such 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



Income taxes are provided in accordance with FASB ASC 740.  A deferred tax asset or liability is recorded for all temporary differences between financial and tax reporting and net operating loss carry forwards.  Deferred tax expense (benefit) results from the net change during the year of deferred tax assets and liabilities.



Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion of all of the deferred tax assets will be realized.  Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.



USE OF ESTIMATES



The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 revenue and expenses during the reporting period. Actual results could differ from those estimates.



NOTE 3.   ADVERTISING



The Companys policy regarding advertising is to expense advertising when incurred. The Company had not incurred any advertising expense as of February 28, 2011.



NOTE 4.   GOING CONCERN



The accompanying financial statements have been prepared assuming that the Company will continue as a going concern.  The Company has net losses for the period from inception (December 20, 2007) to February 28, 2011. This condition raises substantial doubt about the Companys ability to continue as a going concern. The Companys continuation as a going concern is dependent on its ability to meet its obligations, to obtain additional financing as may be required and ultimately to attain profitability.  The financial statements do not include any adjustments that might result from the outcome of this uncertainty.



Management is planning to raise additional funds through debt or equity offerings. There is no guarantee that the Company will be successful in these efforts. There is no guarantee that the Company will be successful generating profits from its oil and gas operations that commenced subsequent to February 28, 2011.



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NOTE 5.   RELATED PARTY TRANSACTIONS



The officers and directors of the Company are involved in other business activities and may, in the future, become involved in other business opportunities. If a specific business opportunity becomes available, such persons may face a conflict in selecting between the Company and their other business interests. The Company has not formulated a policy for the resolution of such conflicts.



On December 20, 2007, pursuant to the terms of a subscription agreement, we sold 80,000,000 (post forward split) shares of our common stock to Ms. Marina Karpilovski, the Company's former President and a director, for cash payment to us of $1,000. We believe this issuance was deemed to be exempt under Regulation S of the Securities Act, as no advertising or general solicitation was employed in offering the securities, the offering and sale was made only to Ms. Karpilovski who is a non-U.S. citizen, and transfer was restricted by us in accordance with the requirements of the Securities Act.



On December 20, 2007 pursuant to the terms of a subscription agreement, we sold 320,000,000 (post forward split) shares of our common stock to Mr. Michael Zazkis, the Company's former Secretary, Treasurer and a director, for cash payment to us of $4,000. We believe this issuance was deemed to be exempt under Regulation S of the Securities Act, as no advertising or general solicitation was employed in offering the securities, the offering and sale was made only to Mr. Zazkis who is a non-U.S. citizen, and transfer was restricted by us in accordance with the requirements of the Securities Act.



The Company issued an aggregate of 75,000 shares for the fiscal year with an average price of $0.123 per share to the Executive and Board pursuant to a Management and Financial Service Agreement with Mr. Peter Matousek and a Member Compensation Agreement with Mr. Peter Matousek and Mr. Donald Lynch, refer to NOTE 14: EXECUTIVE AND BOARD COMPENSATION for additional detail.



NOTE 6.  INCOME TAXES



The Company uses the liability method, where deferred tax assets and liabilities are determined based on the expected future tax consequences of temporary differences between the carrying amounts of assets and liabilities for financial and income tax reporting purposes.   During fiscal 2010, 2009 and 2008, the Company incurred net losses and, therefore, has no tax liability.  The net deferred tax asset of approximately $81,359 (assuming a 35% effective tax rate) generated by the loss carry-forward has been fully reserved.



NOTE 7.  NET OPERATING LOSSES



As of February 28, 2011, the Company has a net operating loss carry-forward of approximately $232,454, which will expire 20 years from the date the loss was incurred.



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NOTE 8. STOCKHOLDERS EQUITY



AUTHORIZED



The Company is authorized to issue 5,000,000,000 shares of $0.0001 par value common stock and 50,000,000 shares of preferred stock, par value $0.0001. All common stock shares have equal voting rights, are non-assessable and have one vote per share. Voting rights are not cumulative and, therefore, the holders of more than 50% of the common stock could, if they choose to do so, elect all of the directors of the Company.



On July 20, 2010, the Company filed a Certificate of Amendment to the Companys certificate of incorporation with the Nevada Secretary of State which increased the Companys authorization to issue 5,000,000,000 shares of $0.0001 par value common stock, refer to NOTE 12: CORPORATE ACTION.



ISSUED AND OUTSTANDING



On December 20, 2007, the Company issued 400,000,000 (post forward split) common shares to its Directors for cash of $5,000.



Since inception (December 20, 2007) to November 30, 2009, the Company accepted subscriptions for 110,416,000 (post forward split) common shares from 37 investors under a private placement which closed on March 31, 2008. The private placement was not subject to any minimum investment and was priced at $0.0005 per share (post forward split). The Company accepted the subscriptions on various dates throughout the year.



The Company issued an aggregate of 75,000 shares for the fiscal year with an average price of $0.123 per share to the Executive and Board pursuant to a Management and Financial Service Agreement with Mr. Peter Matousek and a Member Compensation Agreement with Mr. Peter Matousek and Mr. Donald Lynch, refer to NOTE 14: EXECUTIVE AND BOARD COMPENSATION for additional detail.



The Company issued 1,259,000 common shares on November 30, 2010 for $62,950.00 for Accounts Receivable assignment, refer to NOTE 15: ACCOUNTS RECIEVABLE PURCHASE.



The Company issued 741,000 common shares on November 30, 2010 for $37,050.00 cash in a negotiated transaction with an investor to fund the ongoing operations of the Company.



The Company issued 10,000 common shares on February 28, 2011 for $1,100.00 pursuant to an Oil and Gas Field Operations Services agreement with the Company.



Subsequent to February 28, 2011, the Company entered into Redemption Agreement on March 28, 2011 with Peter Matousek, the Companys president and director, which provides in part for the Company to redeem from Mr. Matousek a total of 140 million shares of the Companys common stock at a price of $87,500 or $0.000625 per share. Also on March 28, 2011 the Company entered into similar redemption agreements with four other shareholders which in total provide for the redemption of 60 million shares of the Companys common stock. The purchase price for the 60 million totaled $37,500 or $0.000625 per share. With the redemption of the 200 million shares, the Company will have 312,501,000 shares of common stock issued and outstanding.



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NOTE 9: RECENT ACCOUNTING PRONOUNCEMENTS



In April 2010, the FASB issued ASU No. 2010-17, Revenue RecognitionMilestone Method (ASU 2010-017). ASU 2010-017 provides guidance in applying the milestone method of revenue recognition to research or development arrangements. This guidance concludes that the milestone method is a valid application of the proportional performance model when applied to research or development arrangements. Accordingly, an entity can make an accounting policy election to recognize a payment that is contingent upon the achievement of a substantive milestone in its entirety in the period in which the milestone is achieved. The guidance is effective for fiscal years, and interim periods within those years, beginning on or after June 15, 2010. The adoption of this accounting standard had no impact on the Company's financial position or results of operations.

In February 2010, the FASB issued amended guidance on subsequent events. Under this amended guidance, SEC filers are no longer required to disclose the date through which subsequent events have been evaluated in originally issued and revised financial statements. This guidance was effective immediately and the Company adopted these new requirements upon issuance of this guidance.

In January 2010, the FASB issued Accounting Standards Update (ASU) No. 2010-06, Fair Value Measurements and Disclosures (Topic 820)Improving Disclosures about Fair Value Measurements (ASU No. 2010-06). ASU No. 2010-06 requires: (1) fair value disclosures of assets and liabilities by class; (2) disclosures about significant transfers in and out of Levels 1 and 2 on the fair value hierarchy, in addition to Level 3; (3) purchases, sales, issuances, and settlements be disclosed on gross basis on the reconciliation of beginning and ending balances of Level 3 assets and liabilities; and (4) disclosures about valuation methods and inputs used to measure the fair value of Level 2 assets and liabilities. ASU No. 2010-06 becomes effective for the first financial reporting period beginning after December 15, 2009, except for disclosures about purchases, sales, issuances, and settlements of Level 3 assets and liabilities which will be effective for fiscal years beginning after December 15, 2010. The adoption of this accounting standard had no impact on the Company's financial position or results of operations.

In October 2009, the FASB issued ASU No. 2009-13, Revenue Recognition (Topic 605)Multiple-Deliverable Revenue Arrangements: a consensus of the FASB Emerging Issues Task Force (ASU 2009-13). ASU 2009-13 establishes a selling-price hierarchy for determining the selling price of each element within a multiple-deliverable arrangement. Specifically, the selling price assigned to each deliverable is to be based on vendor-specific objective evidence (VSOE) if available, third-party evidence, if VSOE is unavailable, and estimated selling prices if neither VSOE or third-party evidence is available. In addition, ASU 2009-13 eliminates the residual method of allocating arrangement consideration and instead requires allocation using the relative selling price method. ASU 2009-13 will be effective prospectively for multiple-deliverable revenue arrangements entered into, or materially modified, in fiscal years beginning on or after June 15, 2010 The adoption of this accounting standard had no impact on the Company's financial position or results of operations.



In August 2009, the FASB issued ASU No. 2009-05, Fair Value Measurements and Disclosures (Topic 820)Measuring Liabilities at Fair Value (ASU 2009-05). ASU 2009-05 provides guidance in measuring the fair value of a liability when a quoted price in an active market does not exist for an identical liability or when a liability is subject to restrictions on its transfer. ASU 2009-15 was effective for the Company beginning with the quarter ended December 31, 2009. The adoption of this accounting standard had no impact on the Company's financial position or results of operations.

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NOTE 10: CHANGE OF CONTROL



On February 9, 2010 certain shareholders sold and transferred an aggregate of 400,000,000 (post forward split) shares of Common Stock representing approximately 78.37% of the issued and outstanding shares of the Company to certain buyers (Buyers), at $0.000625 per share, post forward split, for an aggregate purchase price of $250,000 (the Purchase Price). Such transaction is hereinafter referred to as the Takeover or the Transaction.



The table below represents the ownership and percentage of control by each of the new shareholders:



|                                                |                                                                                              |                                                                          |                        
|----------------------------------------------- | -------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------ | -----------------------
|Name of
Beneficial Owner                        | Class of Voting Stock                                                                        | Number of Shares (Post Forward Split) of Voting Stock Beneficially Owned | Percentage of Class (1)
|Donald Lynch                                    | Common Stock                                                                                 | 80,000,000                                                               | 15.67%                 
|Peter Matousek                                  | Common Stock                                                                                 | 320,000,000                                                              | 62.69%                 
|All Officers & Directors As a Group (2 Persons) | Common Stock                                                                                 | 400,000,000                                                              | 78.37% (1)             
|                                                | (1)
Based on 510,416,000 (post forward split) shares of Common Stock issued and outstanding. |                                                                         



In connection with the Agreement, there was a change in the majority of the Companys Board of Directors. Upon the consummation of the Takeover, Marina Karpilovski President and Director, and Michael Zazkis, Secretary, Treasurer  & Director resigned and Mr. Donald Lynch was appointed as Director and Executive Officer of the Company and Mr. Mr. Peter Matousek was appointed as Director and Executive Officer of the Company.



NOTE 11: LOAN PAYABLE



The Company had a loan in the amount of $60,000.00 which consisted of two unsecured Promissory Notes which accrued interest at 8 per cent per annum with Global Power and Water Industries, Inc. (GPWI). On November 30, 2010, the Company acquired from a third party shareholder the Accounts Receivable of $147,965, discounted, from GPWI, the Promissory Notes holder. The Company offset the Promissory Notes against the Accounts Receivable purchased, pursuant to a successful civil action by the seller of the Accounts Receivable. Refer to NOTE 15: ACCOUNTS RECEIVABLE PURCHASE for additional detail.



NOTE 12: CORPORATE ACTION



A Certificate of Amendment to the Certificate of Incorporation was authorized by the Companys Board of Directors on May 15, 2010 and approved by the written consent of the holders of a majority of the Companys shareholders owning a majority of the outstanding issued and outstanding voting shares. The Certificate of Amendment provided for the Company to:



·

Change its name from Real Value Estates, Inc. to Xun Energy, Inc.;

·

Increase the number of authorized shares of its common stock from 100 million shares $0.0001 par value to 5 billion shares of common stock, $0.0001 par value; and

·

An 80:1 forward split of the Companys issued and outstanding common stock.



On July 20, 2010, the Company filed a Certificate of Amendment to the Companys certificate of incorporation with the Nevada Secretary of State to effect the name change to Xun Energy, Inc. and to increase the authorized common stock to 5 billion shares of common stock, $0.0001 par value.



On August 3, 2010, the corporate action became effective whereby the 6,380,200 issued and authorized shares of common stock were forward split resulting in 510,416,000 issued and outstanding shares of common stock.



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NOTE 13: COMMITMENTS



The Company entered into a Management and Financial Service Agreement with the interim CEO for a 6 month period ending August 31, 2010 whereby the interim CEO was paid $5,000 per month. The Financial Service Agreement was not renewed by the Company when the Financial Service Agreement ended on November 30, 2010. There was no disagreement between the Company and Mr. Kushner regarding the Companys operations or accounting.



The Company entered in a Management and Financial Service Agreement with Mr. Wayne St. Cyr as the Executive Vice President, Marketing and Strategic Development on December 21, 2010 for a ten day period ending December 31, 2010 which was extended for a 12 month term to December 31, 2011, whereby the Executive Vice President, Marketing and Strategic Development is paid $10,000 per month.



The Company entered into Oil and Gas Field Operations Agreement with Michael Grubb whereby Mr. Grubb will be paid $5,000.00 per month to provide his services exclusively as Manager of Field Operations for the Companys wholly owned subsidiaries in its Oil and Gas operations in Kentucky. The term of the Oil and Gas Field Operations Agreement is for 6 months and is renewable by the Company.



NOTE 14: EXECUTIVE AND BOARD COMPENSATION



The Company entered into a Management and Financial Service Agreement with Mr. Peter Matousek for a 12 month period ending August 31, 2011 whereby Mr. Matousek will be paid $30,000 in cash payments and 2,500 shares per month in stock of the Company. The stock will be valued based on the average of the 5 trading day close price prior to each month end. The terms and conditions will be renegotiated upon the successful consummation of a Business Combination through the acquisition of, or merger or consolidation with, a company that has substantial additional capital and or operating revenues; or the Company is able to finance operating expenses with additional debt or through equity financing of not less than $5,000,000.



The Company entered into a Board Member Compensation Agreement with Mr. Peter Matousek and Mr. Donald Lynch for a 12 month period ending August 31, 2011 whereby Mr. Matousek and Mr. Lynch will each be paid 5,000 shares per month in stock of the Company. The stock will be valued based on the average of the 5 trading day close price prior to each month end. The terms and conditions will be renegotiated upon the successful consummation of a Business Combination through the acquisition of, or merger or consolidation with, a company that has substantial additional capital and or operating revenues; or the Company is able to finance operating expenses with additional debt or through equity financing of not less than $5,000,000. The table below represents the shares issued to the Executive and Board with the 5-Day Average Share Closing Price:



|                |           |        |           |             |         |           |         |          
|--------------- | --------- | ------ | --------- | ----------- | ------- | --------- | ------- | ---------
|                |           |        |           | Fiscal Year | 5-Day   |           | Par     |          
|                | Shares    | Total  | Aggregate | Share       |         | Value     | Paid In
|Month           | Executive | Board  | Shares    | Shares      | Average | Cost      | $0.0001 | Capital  
|June            | -         | -      | -         | -           | -       | -         | -       | -        
|July            | -         | -      | -         | -           | -       | -         | -       | -        
|August          | -         | -      | -         | -           | -       | -         | -       | -        
|Quarter Total   | -         | -      | -         | -           | -       | -         | -       | -        
|September       | 2,500     | 10,000 | 12,500    | 12,500      | $0.1500 | $1,875.00 | $1.25   | $1,873.75
|October         | 2,500     | 10,000 | 12,500    | 25,000      | $0.0600 | $750.00   | $2.50   | $747.50  
|November        | 2,500     | 10,000 | 12,500    | 37,500      | $0.0540 | $675.00   | $3.75   | $671.25  
|Quarter Total   | 7,500     | 30,000 | 37,500    | 37,500      | $0.0880 | $3,300.00 | $7.50   | $3,292.50
|December        | 2,500     | 10,000 | 12,500    | 50,000      | $0.1440 | $1,800.00 | $5.00   | $1,795.00
|January         | 2,500     | 10,000 | 12,500    | 62,500      | $0.2220 | $2,775.00 | $6.25   | $2,768.75
|February        | 2,500     | 10,000 | 12,500    | 75,000      | $0.1100 | $1,375.00 | $7.50   | $1,367.50
|Quarter Total   | 7,500     | 30,000 | 37,500    | 75,000      | $0.1587 | $5,950.00 | $18.75  | $5,931.25
|9 months ending | 15,000    | 60,000 | 75,000    | 75,000      | $0.1233 | $9,250.00 | $26.25  | $9,223.75



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NOTE 15: ACCOUNTS RECEIVABLE PURCHASE



The Company, on November 30, 2010, entered into an Accounts Receivable Assignment (the Assignment) with Comtax Services Inc. (Comtax) whereby Comtax assigned to the Company $147,965 in accounts receivable due Comtax from Global Power and Water Industries, Inc. (GPWI)  in consideration for 1,259,000 common shares of the Company at a share price of $.05 for a total of $62,950.00. The $62,950 to Comtax represents the monies owed by the Company to GPWI in the form of Promissory Notes and interest due in March 2011 and April 2011 discussed in Note 11.



Since entering the Assignment, Comtax has filed a civil action on December 16, 2010, Case Number 05-2010-CA-064575, with the County of Brevard, in the State of Florida, seeking judgment against GPWI for $147,965.00 plus interest, costs and other relief this court deems just and proper. On January 22, 2011, Comtax was awarded a Clerk of Courts default judgment, Brevard County, Florida. On April, 12, 2011, Judge Tanya B. Rainwater of the Circuit Court of the 18th Judicial Circuit, Brevard County, Florida, granted final judgment in favor of Comtax in the amount of $151,269.41 against GPWI.



NOTE 16: TERMINATED LETTER OF INTENT



On December 9, 2010 the Company executed a Letter of Intent with Global Energy Acquisitions, LLC (GEA) which provided in part for the Company to acquire from GEA a 51% gross royalty interest in up to 500 producing oil wells in Kentucky. Closing of the transaction was subject to completion by each party of their own due diligence and the negotiation and execution of a definitive agreement.



After further review, GEA elected to terminate the Letter of Intent and neither party will be under any contractual obligation to the other with respect to closing the transaction. However, the Company remains subject to certain provisions of the Letter of Intent following its termination including, but not limited to the binding conditions of the Letter of Intent until January 31, 2012.



NOTE 17: SUBSEQUENT EVENTS



On March 28, 2011 the Company entered into Redemption Agreement with Peter Matousek, the Companys president and director, which provides in part for the Company to redeem from Mr. Matousek a total of 140 million shares of the Companys common stock at a price of $87,500 or $0.000625 per share. The terms of the stock redemption agreement is a non callable 3 year note.  The principal will accrue interest at the rate of 0.55% (IRS Short Term AFR  April 2011) per annum, until March 31, 2014 (the Maturity Date). Principal plus all accrued interest will be due on the Maturity Date.



Also on March 28, 2011 the Company entered into similar redemption agreements with four other shareholders which in total provide for the redemption of 60 million shares of the Companys common stock. The purchase price for the 60 million totaled $37,500 or $0.000625 per share.



With the redemption of the 200 million shares, the Company will have 312,501,000 shares of common stock issued and outstanding.



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ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS



CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION



This Quarterly Report on Form 10-Q for the quarterly period ended February 28, 2011 contains forward-looking statements. Generally, the words believes, anticipates, may, will, should, expect, intend, estimate, continue, and similar expressions or the negative thereof or comparable terminology are intended to identify  forward-looking statements which include, but are not limited to, statements concerning the Companys expectations regarding its working capital requirements, financing requirements, business prospects, and other statements of expectations, beliefs, future plans and strategies, anticipated events or trends, and similar expressions concerning matters that are not historical facts. Such statements are subject to certain risks and uncertainties, including the matters set forth in this Quarterly Report or other reports or documents the Company files with the Securities and Exchange Commission from time to time, which could cause actual results or outcomes to differ materially from those projected.



These forward-looking statements were based on various factors and were derived utilizing numerous assumptions and other factors that could cause our actual results to differ materially from those in the forward-looking statements. These factors include, but are not limited to, economic, political and market conditions and fluctuations, government and industry regulation, interest rate risk, U.S. and global competition, and other factors. Most of these factors are difficult to predict accurately and are generally beyond our control. You should consider the areas of risk described in connection with any forward-looking statements that may be made herein.



Undue reliance should not be placed on these forward-looking statements which speak only as of the date hereof. Except for our ongoing obligations to disclose material information under the Federal securities laws, we undertake no obligation to release publicly any revisions to any forward-looking statements, to report events or to report the occurrence of unanticipated events. For any forward-looking statements contained in any document, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.



OTHER PERTINENT INFORMATION



When used in this report, the terms "Xun Energy," the "Company," we," "our," and "us" refer to Xun Energy, Inc., a Nevada corporation.



Overview and History:



We were incorporated on December 20, 2007 in the State of Nevada. We are a development stage company, and to date have not earned any revenue and currently do not have any significant assets. Our original business plan was to develop a website related to the residential real estate foreclosure market, containing an online social network for those involved in foreclosures, an online database with residential real estate foreclosure property listings and a knowledge base with educational and informational materials about the foreclosure market. We planned to include foreclosure listings searchable by state, county and city throughout the United States.  We were not successful with this endeavor.



With no operations, our focus has been to effect a merger, exchange of capital stock, asset acquisition or other similar business combination.   We did not restrict our search to any particular business or industry.



In March 2010, the Company entered into a Share Exchange Agreement with Global Power and Water Industries, Inc., a company whose focus was the development and installation of high-efficiency concentrator solar cell arrays, thermal electric technologies and advanced tracking systems in China. The Agreement was terminated in May 2010 without liability.



On December 9, 2010 the Company executed a Letter of Intent with Global Energy Acquisitions, LLC (GEA) which provided in part for the Company to acquire from GEA a 51% gross royalty interest in up to 500 producing oil wells in Kentucky. Closing of the transaction was subject to completion by each party of their own due diligence and the negotiation and execution of a definitive agreement.



On February 1, 2011, GEA elected to terminate the Letter of Intent and neither party will be under any contractual obligation to the other with respect to closing the transaction. However, the Company remains subject to certain provisions of the Letter of Intent following its termination including, but not limited to the binding conditions of the Letter of Intent until January 31, 2012.



15





In February 2011 management identified several other business opportunities in the state of Kentucky. On February 7, 2011, the Company established two wholly owned subsidiaries in the State of Kentucky, Xun Oil of Kentucky, Inc. and Nux Holdings of Kentucky, Inc.



On February 28, 2011, Nux Holdings of Kentucky, Inc. entered into several different leasehold assignments with Sequachee Oil and Gas LLC (Sequachee) which provide in part for the assignment of Sequachees  leasehold rights in three leases.  As a result of the leasehold assignments, we own a 100% working interest and 75% of the net revenue interest in three separate leases. The leasehold interests are located in Lincoln, Jackson and Clay County, Kentucky.



We do not believe that the acquisitions of these leasehold interests in and of itself have resulted in a change of shell status.  Rather, we believe that further work on these leasehold interests is required before the Company will no longer be considered a shell.



Subsequent Events:



On March 16, 2011, the Company commenced a workover program on well number XUN001. During the process of working over the well, the well produced 31 barrels of crude oil. On April 15, the Company completed its workover program on well number XUN001 and has placed the well into production for crude oil.



Results Of Operations For The Three and Nine Months Ended February 28, 2011 and February 28, 2010 and from Inception (December 20, 2007) to February 28, 2010



Revenues



We have never generated any revenues from operations.  Our operations to date have been financed by the sale of our common stock and third party loans. Operating expenses for the three and nine months ended February 28, 2011 and 2010 totalled $66,512 and $128,874 and $2,020 and $6,769 respectively.  Total expenses since inception were $232,454.



The primary reason for the significant increase in our operating expenses is attributable to an increase in professional fees from $1,500 and $5,000 for the three and nine months ended February 28, 2010 to $52,225 and $104,048 for the three and nine months ended February 28, 2011.  Professional fees since inception totalled $178,317. Most of these professional fees were incurred in connection with our regulatory filings with the Securities and Exchange Commission and in connection with ongoing corporate activities.  We incurred general and administrative expenses of $13,529 and $22,092 for the three and nine months ended February 28, 2011 as compared to $320 and $1,169 for the three and nine months ended February 28, 2010.  There were no other significant expenses.



For the three months and nine months ended February 28, 2011 we incurred a net loss of $(66,463) and $(131,455) as compared to $(2,020) and $(6,769) for the three and nine months ended February 28, 2010.  Total losses since inception were $(232,454).



During the next twelve months we do not anticipate generating sufficient revenues to satisfy our operating expenses.  In which case, unless we secure additional debt or equity financing, you may lose your entire investment.



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Assets and Liabilities



At February 28, 2011 we had $1,954 in cash as compared to $22,386 at May 31, 2010.  The significant decrease in our cash holdings is attributable to managements decision to satisfy ongoing operating expenses and outstanding liabilities due and owing creditors. Total assets at February 28, 2011 totaled $6,748 as compared to $22,386 at May 31, 2010.





We continue to remain obligated to a third party creditor pursuant to a loan agreement in the amount of $34,330.  Our accounts payable at February 28, 2011 totaled $34,344 as compared to $3,177 at May 31, 2010.



Our total liabilities were $68,644 at February 28, 2011 as compared to $63,177 at May 31, 2010.





We have a working capital deficit of $66,498 as compared to a working capital deficit of $40,791 at May 31, 2010.





Our auditors have issued a going concern opinion. Unless we secure equity or debt financing, of which there can be no assurance, or our leasehold interests generate revenues sufficient to meet ongoing and accrued expenses, it is unlikely that we will be able to continue our operations in which case you will lose your investment.



Off-Balance Sheet Arrangements



We are not currently a party to, or otherwise involved with, any 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.





ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK



Not applicable.



17



ITEM 4. CONTROLS AND PROCEDURES



Item 9A. Controls and Procedures.



Evaluation of disclosure controls and procedures.



We maintain controls and procedures designed to ensure that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934 is (i) recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission and (ii) accumulated and communicated to our principal executive and principal financial officers to allow timely decisions regarding required disclosure. Based upon their evaluation of those controls and procedures performed as of February 28, 2011, the date of this report, our chief executive officer and the chief financial officer concluded that our disclosure controls and procedures were effective.



Management's annual report on internal control over financial reporting.



Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as that term is defined in Rule 13a-15(f) under the Exchange Act. Under the supervision and with the participation of our management, including our principal executive and principal financial officer, we assessed, as of February 28, 2011, the effectiveness of our internal control over financial reporting. This assessment was based on criteria established in the framework in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our assessment using those criteria, management concluded that our internal control over financial reporting as of February 28, 2011 is adequate.



Internal control over financial reporting is defined as a process designed by, or under the supervision of, our principal executive and principal financial officers and effected by our board of directors, management and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles, and includes those policies and procedures that:



|                                                                                                                                                                                                                                                                                                                              
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                              
|·
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets;                                                                                                                                                                            
|                                                                                                                                                                                                                                                                                                                              
|·
provide reasonable assurance that transactions are recorded as necessary to permit the preparation of financial statements in accordance with U.S. generally accepted accounting principles and that our receipts and expenditures are being made only in accordance with authorization of our management and directors; and
|                                                                                                                                                                                                                                                                                                                              
|·
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.                                                                                                                          



A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the internal control system are met. Because of the inherent limitations of any internal control system, no evaluation of controls can provide absolute assurance that all control issues, if any, within a company have been detected.



b)

Changes in Internal Control over Financial Reporting



During the period covered by this Quarterly Report on Form 10-Q, there was no change in our internal control over financial reporting (as such term is defined in Rules 13a-15(d) and 13d-15(d) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.



18



PART II. OTHER INFORMATION



ITEM 1.   LEGAL PROCEDINGS.





None.





ITEM 1A.   RISK FACTORS



There have been no material changes in our risk factors from those disclosed in our Form 8-k filed April 18, 2011.





ITEM 2.   UNREGISTERED SALES OF EQUITY SECURITIES.



The Company issued 7,500 common voting shares during the 3rd quarter and reserved 7,500 common voting shares on February 28, 2011 to Mr. Matousek pursuant to a Management and Financial Service Agreement with Mr. Peter Matousek for a 12 month period ending August 31, 2011 whereby Mr. Matousek will be paid $30,000 in cash payments and 2,500 shares per month in stock of the Company.



The Company issued 30,000 common voting shares during the 3rd quarter and reserved 30,000 common voting shares on February 28, 2011 to Mr. Matousek and Mr. Lynch pursuant to a Board Member Compensation Agreement with Mr. Peter Matousek and Mr. Donald Lynch for a 12 month period ending August 31, 2011 whereby Mr. Matousek and Mr. Lynch will each be paid 5,000 shares per month in stock of the Company.



The Company issued 10,000 common shares on February 28, 2011 for $1,100.00 pursuant to an Oil and Gas Field Operations Services agreement with the Company.



The issuance of the common stock was exempt from registration under Section 4(2) of the Securities Act.



At all times relevant:



- the  sale  was  made  to  a  sophisticated  or  accredited  investor;



-  we gave the purchaser the opportunity to ask questions and receive answers concerning the Companys operations and to verify the accuracy of information furnished;



- at a reasonable time prior to the sale of securities, we advised the purchaser of the limitations on resale of the securities; and



- neither we nor any person acting on our behalf sold the securities by any form of general solicitation or general advertising





ITEM 3.   DEFAULTS UPON SENIOR SECURITIES.



None



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



None.



ITEM 5.  OTHER INFORMATION



None.



19



ITEM 6.   EXHIBITS



Exhibit  No.

Description



31.1

Certificate of the Chief Executive Officer pursuant Section 302 of the Sarbanes-Oxley Act of 2002



31.2

Certificate of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002



32.1



Certificate of the Chief Executive Officer  pursuant to Section 906 of the Sarbanes-Oxley Act of 2002



32.2



Certificate of the Chief Financial  Officer  pursuant to Section 906 of the Sarbanes-Oxley Act of 2002









SIGNATURES

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

|                      |                  |                        
|--------------------- | ---------------- | -----------------------
|                      | XUN ENERGY, INC.
|                      |                  |                        
|                      |                  |                        
|Date: April  19, 2011 | By:              | /s/ Peter Matousek     
|                      |                  | Peter Matousek         
|                      |                  | Chief Executive Officer
|                      |                  |                        
|                      |                  |                        
|Date:  April 19, 2011 | By:              | /s/ Peter Matousek     
|                      |                  | Peter Matousek         
|                      |                  | Chief Financial Officer





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# Endnotes