UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



FORM 10-Q



(Mark One)



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

For the quarterly period ended February 29, 2012



OR



[  ]

TRANSITION 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  [X]   No   ̈



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



|                        |       |  |                          |     
|----------------------- | ----- |  | ------------------------ | ----
|Large accelerated Filer | [   ] |  | Accelerated Filer        | [  ]
|Non-accelerated Filer   | [   ] |  | 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: 312,568,500 shares of common stock are issued and outstanding as of April 20, 2012.



1





XUN ENERGY, INC.



INDEX





|         |                                                                                                                                                                                |  |      | 
|-------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ---- | 
|         | PART I.  FINANCIAL INFORMATION                                                                                                                                                |  | Page
|         |                                                                                                                                                                                |  |     
|Item 1.  | Financial Statements                                                                                                                                                           |  |     
|         |                                                                                                                                                                                |  |     
|         | Consolidated Balance Sheets at  February 29, 2012 (unaudited) and May 31,  2011  (audited)                                                                                     |  | 3   
|         |                                                                                                                                                                                |  |     
|         | Consolidated Statement of Operations for the Three and Nine  Months ended February 29, 2012 and February 28, 2011 and from  Inception (December 20, 2007) to February 29, 2012 |  | 4   
|         |                                                                                                                                                                                |  |     
|         | Consolidated Statements of Stockholders Equity from Inception (December 20, 2007) to February 29, 2012                                                                         |  | 5   
|         |                                                                                                                                                                                |  |     
|         | Consolidated Statements of Cash Flows  for the Nine Months Ended February 29, 2012 and February 28, 2011 and  Cumulative since Inception to February 29, 2012(unaudited)       |  | 6   
|         |                                                                                                                                                                                |  |     
|         | Notes to Interim Consolidated Financial Statements as of  February 29, 2012                                                                                                    |  | 7   
|         |                                                                                                                                                                                |  |     
|Item 2.  | Managements Discussion and Analysis of Financial Condition and Results of Operation                                                                                           |  | 18  
|         |                                                                                                                                                                                |  |     
|Item 3.  | Quantitative and Qualitative Disclosure About Market Risk                                                                                                                      |  | 22  
|         |                                                                                                                                                                                |  |     
|Item 4.  | Controls and Procedures                                                                                                                                                        |  | 22  
|         | PART II.  OTHER INFORMATION                                                                                                                                                   |  |     
|         |                                                                                                                                                                                |  |     
|Item 1   | Legal Proceedings.                                                                                                                                                             |  | 22  
|         |                                                                                                                                                                                |  |     
|Item 1A. | Risk Factors                                                                                                                                                                   |  | 22  
|         |                                                                                                                                                                                |  |     
|Item 2.  | Unregistered Sales of Equity Securities and Use of Proceeds.                                                                                                                   |  | 22  
|         |                                                                                                                                                                                |  |     
|Item 3.  | Defaults Upon Senior Securities.                                                                                                                                               |  | 23  
|         |                                                                                                                                                                                |  |     
|Item 4.  | Mine Safety Disclosures.                                                                                                                                                       |  | 23  
|         |                                                                                                                                                                                |  |     
|Item 5.  | Other Information                                                                                                                                                              |  | 23  
|         |                                                                                                                                                                                |  |     
|Item 6.  | Exhibits                                                                                                                                                                       |  | 23  





2



ITEM 1.      FINANCIAL STATEMENTS



|                                          
|------------------------------------------
|XUN ENERGY, INC. AND SUBSIDIARIES         
|(A DEVELOPMENT STAGE COMPANY)             
|CONSOLIDATED BALANCE SHEETS               
|As of FEBRUARY 29, 2012  and  MAY 31, 2011
|(Expressed in U.S. dollars)               



| |                                                                         |   |                   |   |              | 
| | ----------------------------------------------------------------------- | - | ----------------- | - | ------------ | 
| |                                                                         |   | February 29, 2012 |   | May 31, 2011 | 
| |                                                                         |   | (unaudited)       |   | (audited)    | 
| | ASSETS                                                                  |   |                   |   |              | 
| | Current Assets:                                                         |   |                   |   |              | 
| | Cash                                                                    | $ | 179               | $ | 25,069       | 
| | Other Current Assets                                                    | $ | -                 | $ | 283          | 
| | Total Current Assets                                                    | $ | 179               | $ | 25,352       | 
| | Fixed Assets:                                                           |   |                   |   |              | 
| | Property, Plant and Equipment, net depletion                            | $ | 2,393             | $ | 18,840       | 
| | Total Fixed Assets                                                      | $ | 2,393             | $ | 18,840       | 
| | Other Assets:                                                           |   |                   |   |              | 
| | Intangible Assets - Legal and Contractual                               |   |                   |   |              | 
| | Rights                                                                  | $ | 432,713           | $ | 5,583        | 
| | Trademarks                                                              | $ | 20                | $ | 20           | 
| | Incorporation Costs                                                     | $ | 170               | $ | 100          | 
| | Total Legal and Contractual                                             | $ | 432,903           | $ | 5,703        | 
| | Total Intangible Assets                                                 | $ | 432,903           | $ | 5,703        | 
| | Other Long Term Assets                                                  |   |                   |   |              | 
| | Bonds                                                                   | $ | 500               | $ | 500          | 
| | Total Long Term Assets                                                  | $ | 500               | $ | 500          | 
| | Total Other Assets                                                      | $ | 433,403           | $ | 6,203        | 
| | Total Assets                                                            | $ | 435,974           | $ | 50,395       | 
| |                                                                         |   |                   |   |              | 
| | LIABILITIES AND STOCKHOLDERS' EQUITY                                    |   |                   |   |              | 
| | Current  Liabilities:                                                   |   |                   |   |              | 
| | Accounts payable and accrued expenses                                   | $ | 818,957           | $ | 510,808      | 
| | Loan payable                                                            | $ | 496,095           | $ | 59,500       | 
| | Loan payable - Related Party                                            | $ | -                 | $ | 25,000       | 
| | Total Current Liabilities                                               | $ | 1,315,052         | $ | 595,308      | 
| | Long Term Liabilities:                                                  |   |                   |   |              | 
| | Notes - 3 Years and Less                                                | $ | 116,214           | $ | 115,737      | 
| | Notes - 3 Years and Less Related Party                                  | $ | 9,423             | $ | 9,384        | 
| | Total Long Term Liabilities                                             | $ | 125,637           | $ | 125,121      | 
| | Total Liabilities                                                       | $ | 1,440,689         | $ | 720,429      | 
| | 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,       |   |                   |   |              | 
| | 312,568,500 and 312,501,000 shares issued and outstanding, respectively | $ | 31,257            | $ | 31,250       | 
| | Paid in Capital                                                         | $ | 20,069            | $ | 14,308       | 
| | Accumulated Deficit                                                     | $ | (1,056,041)       | $ | (715,592)    | 
| | Total Stockholders' Equity (Deficit)                                    | $ | (1,004,715)       | $ | (670,034)    | 
| | Total Liabilities and Stockholders' Equity (Deficit)                    | $ | 435,974           | $ | 50,395       | 
| |                                                                         |   |                   |   |              | 









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 THREE AND NINE MONTHS ENDED FEBRUARY 29, 2012,  AND FEBRUARY 28, 2011
and CUMULATIVE FROM INCEPTION
|(Unaudited)                                                                                                
|(Expressed in U.S. dollars)                                                                                
|                                                                                                           



| |                                                                                                                                              |  |   |                                              |  |   |                                              |  |   |                                             |  |   |                                             |  |   |                                                    | 
| | -------------------------------------------------------------------------------------------------------------------------------------------- |  | - | -------------------------------------------- |  | - | -------------------------------------------- |  | - | ------------------------------------------- |  | - | ------------------------------------------- |  | - | -------------------------------------------------- | 
| |                                                                                                                                              |  |   |                                              |  |   |                                              |  |   |                                             |  |   |                                             |  |   |                                                    | 
| |                                                                                                                                              |  |   | For the three months ended February 29, 2012 |  |   | For the three months ended February 28, 2011 |  |   | For the
nine
months ended February 29, 2012 |  |   | For the
nine months ended February 28, 2011 |  |   | December 20, 2007 (Inception) To February 29, 2012 | 
| |                                                                                                                                              |  |   |                                              |  |   |                                              |  |   |                                             |  |  
| |                                                                                                                                              |  |   |                                              |  |   |                                              |  |   |                                             |  |  
| |                                                                                                                                              |  |   |                                              |  |   |                                              |  |   |                                             |  |   |                                             |  |   |                                                    | 
| | Revenue                                                                                                                                      |  |   |                                              |  |   |                                              |  |   |                                             |  |   |                                             |  |   |                                                    | 
| | Revenue - Operations                                                                                                                         |  | $ | -                                            |  | $ | -                                            |  | $ | -                                           |  | $ | -                                           |  | $ | 4,637                                              | 
| | Total Revenue                                                                                                                                |  | $ | -                                            |  | $ | -                                            |  | $ | -                                           |  | $ | -                                           |  | $ | 4,637                                              | 
| |                                                                                                                                              |  |   |                                              |  |   |                                              |  |   |                                             |  |   |                                             |  |   |                                                    | 
| | Cost of Goods Sold                                                                                                                           |  | $ | -                                            |  | $ | -                                            |  | $ | -                                           |  | $ | -                                           |  | $ | 1,653                                              | 
| |                                                                                                                                              |  |   |                                              |  |   |                                              |  |   |                                             |  |   |                                             |  |   |                                                    | 
| | Gross Profit                                                                                                                                 |  | $ | -                                            |  | $ | -                                            |  | $ | -                                           |  | $ | -                                           |  | $ | 2,984                                              | 
| |                                                                                                                                              |  |   |                                              |  |   |                                              |  |   |                                             |  |   |                                             |  |   |                                                    | 
| | Expenses                                                                                                                                     |  |   |                                              |  |   |                                              |  |   |                                             |  |   |                                             |  |   |                                                    | 
| | General and Administrative                                                                                                                   |  | $ | 124,133                                      |  | $ | 66,512                                       |  | $ | 320,232                                     |  | $ | 128,874                                     |  | $ | 1,035,515                                          | 
| | Loss before income taxes                                                                                                                     |  | $ | (124,133)                                    |  | $ | (66,512)                                     |  | $ | (320,232)                                   |  | $ | (128,874)                                   |  | $ | (1,032,531)                                        | 
| |                                                                                                                                              |  |   |                                              |  |   |                                              |  |   |                                             |  |   |                                             |  |   |                                                    | 
| | Other income (expense)                                                                                                                       |  | $ | (171)                                        |  | $ | 48                                           |  | $ | (20,217)                                    |  | $ | (2,580)                                     |  | $ | (23,510)                                           | 
| |                                                                                                                                              |  |   |                                              |  |   |                                              |  |   |                                             |  |   |                                             |  |   |                                                    | 
| | Provision for Income Taxes                                                                                                                   |  | $ | -                                            |  | $ | -                                            |  | $ | -                                           |  | $ | -                                           |  | $ | -                                                  | 
| |                                                                                                                                              |  |   |                                              |  |   |                                              |  |   |                                             |  |   |                                             |  |   |                                                    | 
| | Net (Loss)                                                                                                                                   |  | $ | (124,304)                                    |  | $ | (66,463)                                     |  | $ | (340,450)                                   |  | $ | (131,455)                                   |  | $ | (1,056,041)                                        | 
| |                                                                                                                                              |  |   |                                              |  |   |                                              |  |   |                                             |  |   |                                             |  |   |                                                    | 
| | Basic and Diluted                                                                                                                            |  |   |                                              |  |   |                                              |  |   |                                             |  |   |                                             |  |   |                                                    | 
| | (Loss) per Common Shares                                                                                                                     |  |   | a                                            |  |   | a                                            |  |   | a                                           |  |   | a                                           |  |   |                                                    | 
| |                                                                                                                                              |  |   |                                              |  |   |                                              |  |   |                                             |  |   |                                             |  |   |                                                    | 
| | Weighted Average                                                                                                                             |  |   |                                              |  |   |                                              |  |   |                                             |  |   |                                             |  |   |                                                    | 
| | Number of Common Shares*1                                                                                                                    |  |   | 312,557,743                                  |  |   | 512,472,583                                  |  |   | 312,557,743                                 |  |   | 511,105,533                                 |  |   |                                                    | 
| |                                                                                                                                              |  |   |                                              |  |   |                                              |  |   |                                             |  |   |                                             |  |   |                                                    | 
| | 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)





| |                                                                                                                                              |  |               |   |          |   |                            |   |                                                  |   |             | 
| | -------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------- | - | -------- | - | -------------------------- | - | ------------------------------------------------ | - | ----------- | 
| |                                                                                                                                              |  |               |   |          |   |                            |   |                                                  |   |             | 
| |                                                                                                                                              |  |               |   |          |   | Additional Paid in Capital |   | Deficit Accumulated During the Development Stage |   |             | 
| |                                                                                                                                              |  | 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                      | $ | 0                                                | $ | 3,300       | 
| | For purchase of Accounts Receivable                                                                                                          |  | 1,259,000     | $ | 126      | $ | 62,824                     | $ | 0                                                | $ | 62,950      | 
| | For cash November 30, 2010                                                                                                                   |  | 741,000       | $ | 74       | $ | 36,976                     | $ | 0                                                | $ | 37,050      | 
| | Common stock issued  to Directors                                                                                                            |  | 37,500        | $ | 4        | $ | 5,946                      | $ | 0                                                | $ | 5,950       | 
| | Common stock issued  to Consultant                                                                                                           |  | 10,000        | $ | 1        | $ | 1,099                      | $ | 0                                                | $ | 1,100       | 
| | Common stock retirement                                                                                                                      |  | (200,000,000) | $ | (20,000) | $ | (105,000)                  | $ | 0                                                | $ | (125,000)   | 
| | Net loss for the period                                                                                                                      |  | 0             | $ | 0        | $ | 0                          | $ | (614,592)                                        | $ | (614,592)   | 
| | Balance, May 31, 2011                                                                                                                        |  | 312,501,000   | $ | 31,250   | $ | 14,308                     | $ | (715,592)                                        | $ | (670,034)   | 
| | Common stock issued  to Directors                                                                                                            |  | 37,500        | $ | 4        | $ | 4,956                      | $ | 0                                                | $ | 4,960       | 
| | Common stock issued  to Directors                                                                                                            |  | 30,000        | $ | 3        | $ | 805                        | $ | 0                                                | $ | 808         | 
| | Net loss for the period                                                                                                                      |  |               |   |          |   |                            | $ | (340,450)                                        |   | (340,450)   | 
| | Balance, February 29, 2012                                                                                                                   |  | 312,568,500   | $ | 31,257   | $ | 20,069                     | $ | (1,056,041)                                      | $ | (1,004,715) | 
| | *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

|                                                                                                
|------------------------------------------------------------------------------------------------
|(A DEVELOPMENT STAGE COMPANY)                                                                   
|CONSOLIDATED STATEMENTS OF CASH FLOWS                                                           
|FOR THE NINE MONTHS ENDED FEBRUARY 29, 2012, AND FEBRUARY 28, 2011
and CUMULATIVE FROM INCEPTION
|(Unaudited)                                                                                     



| |                                                     |   |                                             |   |                                             |   |                                                    | 
| | --------------------------------------------------- | - | ------------------------------------------- | - | ------------------------------------------- | - | -------------------------------------------------- | 
| |                                                     |   | For the nine months ended
February 29, 2012 |   | For the nine months ended
February 28, 2011 |   | December 20, 2007 (Inception) to February 29, 2012 | 
| |                                                     |   |                                             |   |                                            
| |                                                     |   |                                             |   |                                            
| | Operating Activities                                |   |                                             |   |                                             |   |                                                    | 
| | Net (Loss)                                          | $ | (340,450)                                   | $ | (131,455)                                   | $ | (1,056,041)                                        | 
| | Adjustments to reconcile net loss to                |   |                                             |   |                                             |   |                                                    | 
| | net cash used by operating activities               |   |                                             |   |                                             |   |                                                    | 
| | Share based compensation                            | $ | 5,768                                       | $ | 10,350                                      | $ | 16,118                                             | 
| | Corporate Overhead allocated to Fixed Assets        | $ | -                                           | $ | -                                           | $ | (2,322)                                            | 
| | Depletion                                           | $ | -                                           | $ | -                                           | $ | 835                                                | 
| | Accrued Interest on Notes 3 Years and Less          | $ | 516                                         | $ | -                                           | $ | 637                                                | 
| | Forfeited leases                                    | $ | 19,701                                      | $ | -                                           | $ | 19,701                                             | 
| | Changes in net assets and liabilities-              |   |                                             |   |                                             |   |                                                    | 
| | Accounts receivable and accrued receivables         | $ | -                                           | $ | (192)                                       | $ | -                                                  | 
| | Accounts payable and accrued liabilities            | $ | 308,150                                     | $ | 31,167                                      | $ | 818,957                                            | 
| | Net Cash Used By Operating Activities               | $ | (6,315)                                     | $ | (90,129)                                    | $ | (202,115)                                          | 
| |                                                     |   |                                             |   |                                             |   |                                                    | 
| | INVESTING ACTIVITIES                                |   |                                             |   |                                             |   |                                                    | 
| | Purchase of Fixed Assets                            | $ | -                                           | $ | -                                           | $ | (17,637)                                           | 
| | Purchase of Intangible Assets                       | $ | (430,170)                                   | $ | (4,603)                                     | $ | (435,873)                                          | 
| | Purchase of Long Term Assets                        | $ | -                                           | $ | -                                           | $ | (500)                                              | 
| | Net Cash Used By Investing Activities               | $ | (430,170)                                   | $ | (4,603.00)                                  | $ | (454,009)                                          | 
| |                                                     |   |                                             |   |                                             |   |                                                    | 
| | FINANCING ACTIVITIES                                |   |                                             |   |                                             |   |                                                    | 
| | Proceeds from issuance of common stock              | $ | -                                           | $ | 100,000                                     | $ | 160,208                                            | 
| | Repayment of loans                                  | $ | (25,000)                                    | $ | (81,000)                                    | $ | (106,000)                                          | 
| | Proceeds from loans                                 | $ | 436,595                                     | $ | 55,300                                      | $ | 602,095                                            | 
| | Cash Provided by Financing Activities               | $ | 411,595                                     | $ | 74,300                                      | $ | 656,303                                            | 
| |                                                     |   |                                             |   |                                             |   |                                                    | 
| | Net Increase in Cash                                | $ | (24,890)                                    | $ | (20,432)                                    | $ | 179                                                | 
| |                                                     |   |                                             |   |                                             |   |                                                    | 
| | Cash, Beginning of Period                           | $ | 25,069                                      | $ | 22,386                                      | $ | -                                                  | 
| |                                                     |   |                                             |   |                                             |   |                                                    | 
| | Cash, End of Period                                 | $ | 179                                         | $ | 1,954                                       | $ | 179                                                | 
| |                                                     |   |                                             |   |                                             |   |                                                    | 
| | SUPPLEMENTAL DISCLOSURE WITH RESPECT TO CASH FLOWS: |   |                                             |   |                                             |  
| | Cash paid for income taxes                          | $ | -                                           | $ | -                                           | $ | -                                                  | 
| | Cash paid for interest                              | $ | -                                           | $ | -                                           | $ | 222                                                | 
| |                                                     |   |                                             |   |                                             |   |                                                    | 
| | NON-CASH FINANCING AND INVESTING ACTIVITIES:        |   |                                             |   |                                             |  
| | Inventory - non cash capitalization                 | $ | -                                           | $ | -                                           | $ | 283                                                | 





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 29, 2012



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 began production of oil on one of its leases. Subsequently, the Company acquired two additional oil and gas leases and forfeited two leases resulting in net three oil and gas leases as February 29, 2012.



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.



On February 6, 2012, the Company established a subsidiary in the State of Florida.



NATURE OF BUSINESS

The Company is engaged primarily in the acquisition, workover development, and production of oil and gas properties. Such activities are concentrated in North American onshore, primarily in the United States in the State of Kentucky. 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.



NOTE  2. SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES



BASIS OF ACCOUNTING



FISCAL YEAR



The Companys consolidated 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 (USA GAAP).



UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS



The interim consolidated financial statements of Xun Energy, Inc. as of February 29, 2012, and for the nine months then ended, and cumulative from inception, are unaudited. However, in the opinion of management, the interim consolidated 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 29, 2012, and the results of its consolidated operations and its cash flows for the nine months ended February 29, 2012, and February 28, 2011, and cumulative from inception. These results are not necessarily indicative of the results expected for the calendar year ending May 31, 2012. 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, 2011, filed with the SEC for additional information, including significant accounting policies.



INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS)



The Company has adopted the International Financial Reporting Standards code of accounts. However, the Companys consolidated statements are completed using USA GAAP.



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.



CASH EQUIVALENTS



7



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



USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS

The preparation of financial statements in conformity with USA GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual amounts could differ from these estimates, and changes in these estimates are recorded when known. Significant items subject to such estimates and assumptions include the following:



|                                                                                                   
|---------------------------------------------------------------------------------------------------
|·
estimates of proved reserves and related estimates of the present value of future net revenues;  
|·
the carrying value of oil and gas properties;                                                    
|·
estimates of the fair value of reporting units and related assessment of goodwill for impairment;
|·
income taxes;                                                                                    
|·
asset retirement obligations;                                                                    
|·
legal and environmental risks and exposures.                                                     



PROPERTY AND EQUIPMENT



The Company follows the successful efforts (SE) cost method of accounting for its oil and gas properties. Accordingly, only those expenses associated with successfully locating new oil and natural gas reserves are capitalized. For unsuccessful (or "dry hole") results, the associated operating costs are immediately charged against revenues for that period.



All costs incidental to the acquisition, exploration, and development of oil and gas properties, including costs of undeveloped leasehold, and leasehold equipment, are capitalized.



Internal costs incurred that are directly identified with acquisition, exploration and development activities undertaken by the Company for its own account, and that are not related to production, general corporate overhead or similar activities, are also capitalized.



Interest costs incurred and attributable to unproved oil and gas properties under current evaluation and major development projects of oil and gas properties are also capitalized. All costs related to production activities, including workover costs incurred solely to maintain or increase levels of production from an existing completion interval, are charged to expense as incurred.



Indirect costs, such as General and Administrative costs, are allocated to capital costs at a rate of 10% of the direct costs associated with the acquisition, exploration, and development activities undertaken by the Company for its own account.



Capitalized costs are depleted by an equivalent unit-of-production cost method, converting gas to oil at the ratio of six thousand cubic feet of gas to one barrel of oil. Depletion is calculated using the capitalized costs, including estimated asset retirement costs, plus the estimated future expenditures (based on current costs) to be incurred in developing or working over an oil or gas well,  proved reserves, net of estimated salvage values. We are currently using a depletion cost of $9.1324 per barrel based on our estimated cost to workover an oil well at an average cost of $50,000 per well with an expected recovery of 5,475 barrels of oil equivalent from the oil or gas well.



Depletion is charged for each barrel of oil equivalent until the oil or gas well is no longer deemed economical for production of oil or gas. An over recovery of depletion by the Company may result from oil and gas wells producing more than 5,475 barrels of oil equivalent on workover wells. The over-recovery will be charged to income on a quarterly basis after the Company reviews the over-recovery and deducts an allowance for remediation, well capping and abandonment and future maintenance or workover costs.



Costs associated with unproved properties are excluded from the depletion calculation until it is determined whether or not proved reserves can be assigned to such properties. The Company assesses its unproved properties for impairment quarterly. Significant unproved properties are assessed individually.



No gain or loss is recognized upon disposal of oil and gas properties unless such disposal significantly alters the relationship between capitalized costs and proved reserves.



Depreciation and amortization of other property and equipment, including corporate and other midstream assets and leasehold improvements, are provided using the straight-line method based on estimated useful lives ranging from three to 39 years. Interest costs incurred and attributable to major midstream and corporate construction projects are also capitalized.



The Company recognizes liabilities for retirement obligations associated with tangible long-lived assets, such as producing well sites, when there is a legal obligation associated with the retirement of such assets and the amount can be reasonably estimated. The initial measurement of an asset retirement obligation is recorded as a liability at its fair value, with an offsetting asset retirement cost recorded as an increase to the associated property and equipment on the consolidated balance sheet. If the fair value of a recorded asset retirement obligation changes, a revision is recorded to both the asset retirement obligation and the asset retirement cost. The asset retirement cost is depreciated using a systematic and rational method similar to that used for the associated property and equipment.



8



EXPLORATION



The Company does not explore for oil and gas deposits. The Company may drill a new well, which is categorized as an offset well to an existing well that is producing oil or gas. The Companys current business model does not include wild cat or exploratory drilling.



DEVELOPMENT



The Companys development program consists of re-entering or completing a workover on an oil or gas well that has a historical evidence of oil or gas production or that is currently producing oil and gas. 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 at a fractional output compared to when the oil and gas wells first came into production and perform a workover program on the well. Workover activities include one or more of a variety of remedial operations on a producing well or inactive well to try to increase production. All costs of a workover are capitalized and amortized (depletion) on a per unit of barrel equivalent of production.



RESERVES



The Company does not have proven reserves of oil or gas on its current oil and gas leases.



REVENUE RECOGNITION



Oil and gas sales are recognized when production is sold to a purchaser at a fixed or determinable price, delivery has occurred, title has transferred, and collectability of the revenue is probable. Delivery occurs and title is transferred when production has been delivered to a pipeline, railcar, or truck or a tanker lifting has occurred. Cash received relating to future production is deferred and recognized when all revenue recognition criteria are met. Taxes assessed by governmental authorities on oil and gas sales are included in the Cost of Goods in the accompanying consolidated statements of operations.



GENERAL AND ADMINISTRATIVE EXPENSES



General and administrative expenses are reported net of amounts reimbursed by working interest owners of the oil and gas properties operated by the Company and net of amounts capitalized pursuant to the full cost method of accounting.



ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS



The carrying value of the Companys financial instruments, consisting of accounts payable, accrued liabilities, promissory notes and long-term notes approximate their fair value due to the short-term and long term obligations 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.



RECLAMATION BONDS



Included in Other Assets as of February 29, 2012, is a Bond with the State of Kentucky for $500. The State of Kentucky requires a bond to be posted for each well should the Company fail to perform with the proper plugging and abandonment of any well. Bond deposits vary by the well depth.



9



NOTE 3. PROPERTY, PLANT AND EQUIPMENT



Property and equipment consists of the following:



|               |              |           |           |                 
|-------------- | ------------ | --------- | --------- | ----------------
|Asset Category | Capital Cost | Depletion | Allowance | Net Fixed Assets
|Oil Wells      | $2,393       | $0.0      | $0.0      | $2,393          



NOTE 4. ADVERTISING



The Companys policy regarding advertising is to expense advertising when incurred. The Company had not incurred any advertising expense as of February 29, 2012.



NOTE 5. 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 29, 2012. 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.



NOTE 6.   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, the Company sold 80,000,000 (post forward split) shares of its common stock to Ms. Marina Karpilovski, the Company's former President and a director, for cash payment to the Company of $1,000. The Company believes this issuance was exempt from registration under Regulation S of the Securities Act of 1933 (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 the Company in accordance with the requirements of the Securities Act.



On December 20, 2007 pursuant to the terms of a subscription agreement, the Company sold 320,000,000 (post forward split) shares of its common stock to Mr. Michael Zazkis, the Company's former Secretary, Treasurer, and a director, for cash payment to the Company of $4,000. The Company believes this issuance was exempt from registration under Regulation S of the Securities Act of 1933 (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 the Company in accordance with the requirements of the Securities Act.



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 140 million shares of the Companys common stock at a price of $87,500 or $0.000625 per share. On May 31, 2011, Mr. Matousek assigned the Note Payable to Comtax Services, Inc.



The Company issued an aggregate of 30,000 shares for the nine months ending February 29, 2012 with an average price of $0.269 per share to management and the board pursuant to a Management and Financial Service Agreement with Mr. Peter Matousek and a Board Member Compensation Agreement with Mr. Peter Matousek and Mr. Donald Lynch, refer to NOTE 18: EXECUTIVE AND BOARD COMPENSATION for additional detail.



Prior to June 1, 2011, the Company's President, CEO and Director, Jerry G. Mikolajczyk, performed services for the Company pursuant to a consulting contract through a consulting agency, Comtax Services, Inc. ("Comtax"). From April 1, 2010 to February 28, 2011, Comtax charged a fixed monthly fee of $2,500, a minimum of 10 hours per month for Mr. Mikolajczyk, an aggregate of $27,500 for the 11 months for Mr. Mikolajczyks services to the Company. For the period March 1, 2011 to May 31, 2011, Comtax charged the Company an aggregate of $387,275 (1,106.5 hours) for the services of Mr. Mikolajczyk. The Company is indebted to Comtax in the  aggregate amount of $737,086 as of February 29, 2012 which consists of loans payable - $196,095, (refer to  NOTE 12), trade payables $434,741 and Long Term Note Payable  Less than 3 years - $106,250. Comtax acquired the Long Term Notes Payable  Less than 3 years for $87,500 from the Company's former President and CEO, Peter Matousek, (refer to  NOTE 14), and for $18,750 from two other shareholders. Comtax is the largest creditor to the Company comprising of 51.2% of the Companys total liabilities.



10



Mr. Mikolajczyk was an officer of Comtax until his resignation on May 31, 2011 and terminated his consulting contract with Comtax as of May 31, 2011 prior to accepting his executive and director positions with the Company.



NOTE 7.  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 2012, 2011, 2010, 2009 and 2008, the Company incurred net losses and, therefore, has no tax liability. The net deferred tax asset of approximately $369,615 (assuming a 35% effective tax rate) generated by the loss carry-forward has been fully reserved.



The Company files income tax returns in the United States and the state of Kentucky. All tax years are closed by expiration of the statute of limitations.



The Company did not identify any material uncertain tax positions on tax returns filed. The Company did not recognize any interest or penalties for unrecognized tax benefits.



NOTE 8.  NET OPERATING LOSSES



As of February 29, 2012, the Company has a net consolidated operating loss carry-forward of approximately $1,056,041, which will expire 20 years from the date the loss was incurred. Included in the net operating loss is the forfeiture of the Gross and Neely Leases in the amount of $19,701, as a result of the Company's failure to commence work on the oil and gas leases on or before June 30, 2011 and September 2, 2011, respectively.



NOTE 9. 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 16: CORPORATE ACTION.



On November 30, 2011, the Board of Directors of the Company approved the allocation of 4,000,000 of the 50,000,000 authorized Preferred Shares of the Company as Series A Preferred Shares with the following rights:



|                                                                                             
|---------------------------------------------------------------------------------------------
|·
Convertible to 100 common stock shares of the Company for each one Series A Preferred Share
|·
Voting rights equal to 100 votes for each Series A Preferred Share                         



The consideration for one Series A Preferred Share is set at $0.50.



ISSUED AND OUTSTANDING



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



Since inception (December 20, 2007) to November 30, 2009, the Company accepted subscriptions for 110,416,000 (post forward split) common stock 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 1,259,000 common shares on November 30, 2010 for $62,950 for Accounts Receivable assignment, refer to NOTE 19: ACCOUNTS RECEIVABLE PURCHASE.



The Company issued 741,000 common shares on November 30, 2010 for $37,050 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 pursuant to an Oil and Gas Field Operations Services agreement with the Company.



11



The Company redeemed on March 28, 2011, 140 million shares of the Companys common stock at a price of $87,500 or $0.000625 per share from Peter Matousek, the Companys president and director, at the time. Also on March 28, 2011, the Company redeemed 60 million shares of the Companys common stock from four shareholders at a price of $37,500 or $0.000625 per share. With the redemption of the 200 million common stock shares, the Company reduced its issued and outstanding shares to 312,501,000 common stock shares as of March 28, 2011.



The Company authorized and approved the issuance of an aggregate of 112,500 common stock shares for the fiscal year ending May 31, 2011 with an average price of $0.1263 per share to management and the board pursuant to a Management and Financial Service Agreement with Mr. Peter Matousek and a Board Member Compensation Agreement with Mr. Peter Matousek and Mr. Donald Lynch. During the fiscal year ending May 31, 2011, the Company issued 75,000 of the 112,500 common stock shares to the management and the board with the remaining 37,500 common stock shares issued on June 6, 2011.



The Company authorized and approved an aggregate of 105,000 common stock shares for the nine months ended February 29, 2012 with an average price of $0.0231 per share to the management and the board pursuant to Board Member Compensation Agreements with Mr. Peter Matousek, Mr. Donald Lynch, Mr. Jerry G. Mikolajczyk and Mr. Kevin M. Grapes, refer to NOTE 18: EXECUTIVE AND BOARD COMPENSATION for additional detail. The Company issued 30,000 of the 105,000 common stock shares to the board on September 12, 2011.



NOTE 10: RECENT ACCOUNTING PRONOUNCEMENTS



In May 2011, the FASB issued ASU 2011-04, "Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and International Financial Reporting Standards ("IFRSs")." Under ASU 2011-04, the guidance amends certain accounting and disclosure requirements related to fair value measurements to ensure that fair value has the same meaning in U.S. GAAP and in IFRS and that their respective fair value measurement and disclosure requirements are the same. ASU 2011-04 is effective for public entities during interim and annual periods beginning after December 15, 2011. Early adoption is not permitted. The Company does not believe that the adoption of ASU 2011-04 will have a material impact on the Company's consolidated results of operation and financial condition.



In June 2011, the FASB issued ASU No. 2011-05, "Comprehensive Income (ASC Topic 220): Presentation of Comprehensive Income," ("ASU 2011-05") which amends current comprehensive income guidance. This accounting update eliminates the option to present the components of other comprehensive income as part of the statement of shareholders' equity. Instead, comprehensive income must be reported in either a single continuous statement of comprehensive income which contains two sections, net income and other comprehensive income, or in two separate but consecutive statements. ASU 2011-05 will be effective for public companies during the interim and annual periods beginning after Dec. 15, 2011 with early adoption permitted. The Company does not believe that the adoption of ASU 2011-05 will have a material impact on the Company's consolidated results of operation and financial condition.



There were various other updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries. None of the updates are expected to a have a material impact on the Company's financial position, results of operations or cash flows.



NOTE 11: CHANGE OF CONTROL



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



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 Takeover, 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.



12



On May 31, 2011, Mr. Jerry G. Mikolajczyk, the Company's President, CEO and Director, acquired 180,000,000 common stock shares of the Company from Mr. Peter Matousek, former President, CEO and Director of the Company. The acquisition by Mr. Mikolajczyk gave him control of 57.6% of the issued and outstanding shares of the Company. Subsequent to May 31, 2011, Mr. Mikolajczyk acquired additional shares directly and indirectly in the Company. As of Mr. Mikolajczyks last Form 4 filed with the SEC on February 3, 2012, he is beneficial owner of 190,515,521or 61%, of the issued and outstanding shares of the Company.



NOTE 12: LOAN PAYABLE



The Company had a loan in the amount of $60,000, which consisted of two unsecured Promissory Notes, which accrued interest at 8% 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 19: ACCOUNTS RECEIVABLE PURCHASE for additional detail.



The Company has non-interest bearing loans in the amount of $196,095 with Comtax. The loans from Comtax have been provided to the Company as working capital. Comtax is a shareholder of the Company with a stock  position of 3.58% in the Company.



The Company has two Promissory Notes, one for $100,000 and the second for $200,000, with Altmann Revocable Living Trust, Rlt. ("Altmann"), totaling $300,000 due on or before May 14, 2012 with interest calculated at 8%. The $200,000 Promissory Note is subject to verification of bank deposits, cancelled checks or other reasonable evidence of funds from Altmann . advanced to or for the benefit of Borrower (Crockett Energy Corporation) prior to the date of the Promissory Note, February 14, 2012. The verification relates to funds used for the benefit of the acquisition costs of the West Crockett Oil and Gas leases by Crockett Energy Corporation ("CEC"). The Company entered into a Purchase Agreement with Altmann on February13, 2012 for the acquisition of 100% of Altmann's interest in CEC, refer to NOTE 23, AQUISITION OF CROCKETT ENERGY CORPORATION, which resulted in a negotiated assumption by the Company of the loans that CEC had with Altmann.



NOTE 13: LOAN PAYABLE  RELATED PARTY



The Company had a non-interest bearing loan in the amount of $25,000 from Jerry G. Mikolajczyk, the Company's President, CEO, and Director on May 31, 2011. The loan was due on July 10, 2011, but was extended to July 29, 2011. The $25,000 was provided to the Company on May 10, 2011, and deposited into an Escrow Account for the purpose of facilitating an Offer to Purchase dated May 10, 2011 with Lea Kennedy d/b/a LuxemBarings. The $25,000 was returned to the Company from the Escrow Agent on July 27, 2011 and paid back to Mr. Mikolajczyk on July 29, 2011.



NOTE 14: LONG TERM LIABILITIES  NOTES  3 YEARS AND LESS



On March 28, 2011, the Company entered into a 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. On May 31, 2011, Mr. Matousek assigned his Note Payable issued under the Redemption Agreement to Comtax.



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 at a purchase price $37,500, 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 the maturity date of March 31, 2014



NOTE 15: LONG TERM LIABILITIES  NOTES  3 YEARS AND LESS  RELATED PARTY



The Company's President, CEO and Director, Mr. Jerry G. Mikolajczyk, acquired a Note Payable issued by the Company in the amount of $9,375 from one of its shareholders on July 15, 2011. The principal, $9,375, will accrue interest at the rate of 0.55% (IRS Short Term AFR  April 2011) per annum, until the maturity date of March 31, 2014



NOTE 16: CORPORATE ACTION



A Certificate of Amendment to the Certificate of Incorporation (Certificate of Amendment) was authorized and approved by the Companys Board of Directors and a majority of its shareholders on May 15, 2010 and provided for:

·

A change in the Company's 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.



13



On July 20, 2010, the Company filed the Certificate of Amendment with the Nevada Secretary of State.



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.



NOTE 17: COMMITMENTS



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 a Management and Financial Service Agreement for Mr. Jerry G. Mikolajczyk for a 12-month period commencing on June 1, 2011 and ending May 31, 2012. Mr. Mikolajczyk was hired through a service company which will be paid $120,000 in exchange for the services of Mr. Mikolajczyk. 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 if 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 Management and Financial Service Agreement with Mr. Peter Matousek for a 12-month period commencing June 1, 2011 and ending May 31, 2012 whereby Mr. Matousek will be paid $90,000 in cash payments. 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.



NOTE 18: EXECUTIVE AND BOARD COMPENSATION



The Company entered into Board Member Compensation Agreements with Kevin M. Grapes and Jerry G. Mikolajczyk as directors of the Company for a term of one year ending August 31, 2012. Both Mr. Grapes and Mr. Mikolajczyk will receive 5,000 shares per month of the Companys common stock in consideration for them serving on the Companys Board of Directors. The common stock will be valued based on the average of the 5 trading day close price prior to each month end. This amount includes all costs related to the engagement as Director of the Company except for third party or travel expenses.



The Company authorized and approved the issuance of an aggregate of 105,000 shares for the nine months ended February 29, 2012 with an average price of $0.0231 per share to the Board pursuant to Board Member Compensation Agreements with Mr. Peter Matousek, Mr. Donald Lynch, Mr. Jerry G. Mikolajczyk and Mr. Kevin M. Grapes. The Company issued 30,000 of the 105,000 shares to the Board as of February 29, 2012.



The table below represents the shares issued to the 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          | -         | 15,000  | 15,000    | 15,000      | $0.0500 | $750.00   | $1.50   | $748.50  
|July          | -         | 15,000  | 15,000    | 30,000      | $0.0181 | $271.50   | $1.50   | $270.00  
|August        | -         | 15,000  | 15,000    | 45,000      | $0.0127 | $190.50   | $1.50   | $189.00  
|Quarter Total | -         | 45,000  | 45,000    | -           | -       | $1,212.00 | $4.50   | $1,207.50
|September     | -         | 10,000  | 10,000    | 55,000      | $0.0098 | $98.00    | $1.00   | $97.00   
|October       | -         | 10,000  | 10,000    | 65,000      | $0.0050 | $50.00    | $1.00   | $49.00   
|November      | -         | 10,000  | 10,000    | 75,000      | $0.0020 | $20.00    | $1.00   | $19.00   
|Quarter Total | -         | 30,000  | 30,000    | -           | -       | $168.00   | $3.00   | $165.00  
|December      | -         | 10,000  | 10,000    | 85,000      | $0.0055 | $55.00    | $1.00   | $54.00   
|January       | -         | 10,000  | 10,000    | 95,000      | $0.0113 | $113.00   | $1.00   | $112.00  
|February      | -         | 10,000  | 10,000    | 105,000     | $0.0879 | $879.00   | $1.00   | $878.00  
|Quarter Total | -         | 30,000  | 30,000    | -           | -       | $1,047.00 | $3.00   | $1,044.00
|Year Total    | -         | 105,000 | 105,000   | -           | -       | $2,427.00 | $10.50  | $2,416.50





NOTE 19: 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. The $62,950 equals 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 12.



14



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 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 favour of Comtax for $151,269.41 against GPWI.



The Company used the Comtax Accounts Receivable of $62,950 from GPWI and offset it against the Promissory Notes and interest payable by the Company to GPWI of $62,950, netting each other out and providing a cash flow saving of $62,950 to the Company.



NOTE 20: 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 21: OFFER TO PURCHASE LITIGATION



On May 10, 2011, the Company accepted an Offer to Purchase from Lea Kennedy d/b/a LuxemBarings ("Purchaser") to purchase $10 million of the Companys common stock based on the average of five consecutive trading days close prior to date of closing (Offer to Purchase). The Offer to Purchase was scheduled to close on or before June 24, 2011. The Purchaser failed to complete the transaction, after mutually agreed extensions of the closing date. The Company has retained legal counsel to take legal action against the Purchaser for failing to complete the purchase transaction and for damages to the Company as a result of the failure to complete the transaction. The Company has recognized losses, at cost, in the financial statements for the period ended February 29, 2012.



NOTE 22: EXECUTIVE AND BOARD CHANGES



On May 31, 2011, the Board of Directors of the Company appointed Jerry G. Mikolajczyk as a director of the Company for a three-month period ending  August 31, 2011 whereby Mr. Mikolajczyk will be paid 5,000 shares per month in common stock of the Company. The stock will be valued based on the average of the five 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 if the Company is able to finance operating expenses with additional debt or through equity financing of not less than $5,000,000.



On May 31, 2011, Mr. Matousek, the Company's President and CEO, advised that the roles and responsibilities are increasing for the Company and that Mr. Jerry G. Mikolajczyk, while as consultant to the Company, has been instrumental in developing and building the Company to its current status including funding and operations. Mr. Matousek advised that it is in the best interests for the Company and the Shareholders that Mr. Mikolajczyk have authority to continue developing the Company and have authority to make decisions at an Executive Level of the Company. Subsequently, Mr. Matousek resigned as President, CEO and CFO and the Company appointed Jerry G. Mikolajczyk as Interim President, CEO and CFO until a permanent President and CEO is recruited and a permanent CFO is recruited. The Company entered into a Management and Financial Service Agreement for Mr. Jerry G. Mikolajczyk for a 12-month period commencing on June 1, 2011 and ending May 31, 2012. Mr. Mikolajczyk is hired through a service company, and will be paid $120,000 in exchange for the services of Mr. Mikolajczyk. 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 if the Company is able to finance operating expenses with additional debt or through equity financing of not less than $5,000,000.



The Company appointed Mr. Peter Matousek as the Companys Vice-President of Investor Relations. The Company entered into a Management and Financial Service Agreement with Mr. Peter Matousek for a 12-month period commencing June 1, 2011 and ending May 31, 2012 whereby Mr. Matousek will be paid $90,000. 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 if the Company is able to finance operating expenses with additional debt or through equity financing of not less than $5,000,000.



15



On August 31, 2011, directors Peter Matousek, Donald Lynch and Jerry G. Mikolajczyk termed out. On September 1, 2011, the Company obtained the written consent of the stockholders holding a majority, 86.51%, of the outstanding voting rights of the Company (the Consent) to appoint Kevin M. Grapes and Jerry G. Mikolajczyk as directors of the Company for a term of one year ending August 31, 2012. Both Mr. Grapes and Mr. Mikolajczyk will receive 5,000 shares per month of the Companys common stock in consideration for them serving on the Companys Board of Directors. The common stock will be valued based on the average of the five trading day close price prior to each month end. This amount includes all costs related to their engagement as directors of the Company except third party or travel expenses. 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 if the Company is able to finance operating expenses with additional debt or through equity financing of not less than $5,000,000.



NOTE 23: AQUISITION OF CROCKETT ENERGY CORPORATION



On February 13, 2012, the Company entered into an agreement, Bill of Sale - ALRT, which provides in part, for the Company to acquire from Altmann Revocable Living Trust, RLT ("Altmann") 100% of all of its rights, title and interest in Common Voting Shares of Crockett Energy Corporation ("CEC") in exchange for 45 million Units of the Company at a purchase price of  $2,250,000.



A unit is defined as one common voting share and one warrant to purchase a common share of the Company. The Company's warrants in this transaction shall entitle Altmann the right to acquire one common voting share of the Company at the following exercise prices based on the following time periods:



|                                                          
|----------------------------------------------------------
|·
Exercise price of $ .50 per share prior to Nov 30, 2012;
|·
Exercise price of $1.00 per share prior to May 31, 2013;
|·
Exercise price of $2.00 per share prior to May 31, 2014;
|·
Exercise price of $2.00 per share prior to May 31, 2014;
|·
Exercise price of $3.00 per share prior to May 31, 2015;
|·
Exercise price of $4.00 per share prior to May 31, 2016.



On February 14, 2012, the Company entered into an agreement, Bill of Sale - Mikolajczyk, which provides in part, for the Company to acquire from Jerry G. Mikolajczyk,  the Company's President, CEO and Director, 100% of all of his rights, title and interest in Common Voting Shares of CEC for $1.00.



Closing of the transaction is subject to the satisfaction of conditions precedent, including but not limited to, CEC acquiring the producing West Crockett Oil and Gas leases based in Crockett County, Texas with a total acreage of 2,320.5 acres, more or less, with 100% Working Interest, 75% Net Revenue Interest and CEC, as a minimum, securing financing of $5 million to complete a 10 well drilling and development program on the West Crockett Oil and Gas Leases.



CEC, incorporated in Wyoming on November 14, 2011, is in the business of exploring, developing, operating, and investing in, acquiring, selling, managing and drilling oil and gas properties. CEC has limited assets, which includes a Purchase and Sales Agreement ("PSA"), entered into on January 31, 2012, between CEC and Edwin S. Nichols, Thad Purcell, Barry L. Benton, Vesta, LP, Sean Sassin, Renee Sassin, James C. Gibson, and Susan G. Godwin (collectively, Seller)  and  Edwin S. Nichols Exploration, Inc. ("Operator"), which provides in part, for the Company to acquire Sellers rights, title and interests  in and to the oil, gas and mineral leases covering the James T Padgitt Lease, (Texas RRC lease # 332) containing 596 acres of land, more or less; the Clara Couch H Lease, (Texas RRC lease # 326) containing 80 acres of land, more or less; the Clara Couch B Lease, (Texas RRC # 325) containing 542 acres of land, more or less; Jeff Owens Fee Lease, (Texas RRC # 331) containing 462.5 acres of land, more or less; the J. W. Owens D Lease, (Texas RRC lease # 330) containing 160 acres of land, more or less and the J. W. Owens Lease, (Texas RRC lease # 329) containing 480 acres of land, more or less, all lands being located in Crockett County, Texas, without limitation, interests in oil, gas and/or mineral leases covering any part of the lands, production payments, and net profits interests in any part of the lands or leases,and other leasehold interests in oil, gas and other minerals in any part of the lands.  The PSA required CEC to provide a none refundable deposit of $250,000 in addition to the $25,000 paid by CEC to the Seller as the initial deposit required by the Letter of Intent between CEC and Seller. CEC has fulfilled its obligation in providing the non-refundable deposit, which will be applied to the purchase price of $17 million, on closing scheduled for on or before April 30, 2012. Funding for the Closing is being arranged by the Company, through its wholly owned subsidiary, Xun Oil Corporation.



There can be no assurance that the proposed transaction will close.



NOTE 24: COMMERCIAL LOAN OFFER



On February 20, 2012, Xun Oil Corporation, a wholly owned subsidiary of the Company, entered into an agreement, Commercial Loan Offer, which provides in part, for the Company to receive from PRIVATE COLLATERAL LENDERS CORP. ("PCLC") $33,000,000 in financing for the acquisition of the West Crockett Oil and Gas Leases ("West Crockett") and the future development of West Crockett.



The commercial loan terms are:



16



|                                                                                                                                            
|--------------------------------------------------------------------------------------------------------------------------------------------
|·
Principal Amount: $33,000,000 .                                                                                                           
|·
$20,000,000 Senior Debt. + $13,000,000 Subordinate for future development.                                                                
|·
Interest Rate on Senior Debt: 6 %                                                                                                         
|·
Interest Rate on Subordinate: 6 %                                                                                                         
|·
Payment Amount: $1,200,000 (Interest Reserve).                                                                                            
|·
Payment Frequency: Prepaid for One Full Year                                                                                              
|·
Date of First Regular Payment: One Year from Closing.                                                                                     
|·
Final Interest Adjustment Date: April 30, 2012.                                                                                           
|·
Term  Last Payment Date: 12 Months from First Draw.                                                                                      
|·
Term in Months: 12 (automatically renewable - same interest)                                                                              
|·
Amortization in Months: 300                                                                                                               
|·
Origination Fee: 3 % of the Gross Financing payable at draw down. This amount shall be deducted from Gross Proceeds at Times of Disbursal.



Closing of the transaction is subject to the satisfaction of conditions precedent, including but not limited to: (i) property and public liability insurance including all risk insurance (with extended coverage endorsement) on the Companys real and personal property as required including lands, buildings, equipment and inventory in amounts and from an insurer acceptable to PCLC showing PCLC as low payee or mortgagee by way of standard mortgage endorsement, (ii) a refundable by guarantee Commercial Loan Underwriting Fee to PCLC of $360,000 CDN, (iii) confirmation that all Federal Revenue Agency accounts of the Company are current, (iv)  evidence that all business taxes are paid to date, and (v) documentation to include, but not limited, to the following:



|                                                                                                    
|----------------------------------------------------------------------------------------------------
|·
Professional evaluation showing full debt-service capacity of wells. (Security).                  
|·
Résumé of evaluator of Crockett (Texas) oilfields property.                                       
|·
Stock ownership documentation.                                                                    
|·
Assignment letter from the owner of said properties.                                              
|·
Development plan. (Business Plan)                                                                 
|·
Résumés of principals                                                                             
|·
Final approval by PCLCs lawyer and underwriter of all documents presented to PCLC by the Company.



The closing date is anticipated to be on or before April 30, 2012. There can be no assurance that the proposed transaction will close.



NOTE 25: SUBSEQUENT EVENTS



On March 5, 2012, the Company terminated the assignment of its Kentucky drilling permit for XUN002 whereby the Company assigned its Kentucky drilling permit, on January 20, 2012 for XUN002 on the forfeited Tillett Lease to Cook Oil Company, LLC. ("COCL") in consideration of an override royalty of 2.5% of the value of all oil produced and removed under the permit and the net proceeds received by COCL from the sale of all gas and casing head gasoline produced and sold under the Permit.



On March 13, 2012, CEC agreed to assign 100% of the Purchase and Sale Agreement ("PSA"), dated January 31, 2012, between CEC and Edwin S. Nichols, Thad Purcell, Barry L. Benton, Vesta, LP, a Texas limited partnership, Sean Sassin, Renee Sassin, James C. Gibson, and Susan G. Godwin to Xun Oil Corporation and Xun Oil Corporation agreed to assume all obligations of the PSA.



There can be no assurance that the proposed transaction will close.



On April 12, 2012, the  Company entered into a twenty-four month agreement with Charles Morgan Securities Inc. ("CMS") pursuant to which CMS will provide consulting services in connection with the Companys business affairs and assist the Company in raising capital. In consideration of the services to be provided by CMS, the Company will pay CMS an engagement fee of $25,000 plus eighteen million shares of the Company 14 days after execution of the agreement and will pay CMS a fee of $60,000 over twelve months.



There can be no assurance that CMS will be successful in completing a capital raise for the Company.



17









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



Managements Discussion and Analysis of Financial Condition and Results of Operations.



The following managements discussion and analysis (MD&A) is managements assessment of the historical financial and operating results of the Company during the period covered by the financial statements. This MD&A should be read in conjunction with the audited consolidated financial statements and the related notes and other information included elsewhere in this Quarterly Report on Form 10-Q.



CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION



This Quarterly Report on Form 10-Q for the quarterly period ended February 29, 2012 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 earned limited 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.



In February 2010 pursuant to several privately negotiated stock sales, there was a change in control and new officers and directors were appointed. Management determined that it would be in the best interests of the Company to change its business model and focus its further operations in the alternative energy field. In connection with this revised business plan, the Company changed its name to Xun Energy, Inc. Our Board of Directors believes that the name change was necessary to more accurately reflect the Companys new business operations. The name change would assist shareholders, prospective investors, and analysts in understanding our new business model by eliminating confusion with respect to our prior activities.



In March 2010, the Company entered into a Share Exchange Agreement with Global Power and Water Industries, Inc. ("GPWI"). Managements goal was to pursue emerging opportunities in the field of solar energy. The initial focus would be 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.



In order to better position the Company to pursue other business opportunities; in July 2010, we increased the number of authorized shares of our common stock from one hundred million to five billion. We also forward split our outstanding common stock on an 80:1 basis.



18



Even though the agreement with GPWI was terminated, management believes that with the name change, recapitalization, and forward split, the Company is well positioned to pursue other business opportunities.



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.



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 began production of oil on one of its leases.



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 and produced oil that was sold and generated its first revenue for the Company.



On February 6, 2012, the Company established a subsidiary in the State of Florida.



Subsequent Events:



On March 5, 2012, the Company terminated the assignment of its Kentucky drilling permit for XUN002. The Company assigned its Kentucky drilling permit on January 20, 2012 for XUN002 on the forfeited Tillett Lease to Cook Oil Company, LLC ("COCL") in consideration of an override royalty of 2.5% of the value of all oil produced and removed under the permit and the net proceeds received by COCL from the sale of all gas and casing head gasoline produced and sold under the permit.



On March 13, 2012, Crocket Energy Corporation ("CEC") assigned 100% of the Purchase and Sale Agreement ("PSA"), dated January 31, 2012, between CEC and Edwin S. Nichols, Thad Purcell, Barry L. Benton, Vesta LP, a Texas limited partnership, Sean Sassin, Renee Sassin, James C. Gibson, and Susan G. Godwin  to Xun Oil Corporation and Xun Oil Corporation agreed to assume all obligations under the PSA.



On April 12, 2012, the Company entered into a twenty-four month agreement with Charles Morgan Securities Inc. ("CMS") pursuant to which CMS will provide consulting services in connection with the Companys business affairs and assist the Company in raising capital. In consideration of the services to be provided by CMS, the Company will pay CMS an engagement fee of $25,000 plus eighteen million shares of the Company 14 days after execution of the agreement and will pay CMS a fee of $60,000 over twelve months.



There can be no assurance that CMS will be successful in completing a capital raise for the Company.



Introduction



We are an independent oil and natural gas development and production company. Our basic business model is to increase shareholder value by finding and developing oil and gas production through the development activities, which include re-entering oil and gas well, that have historical oil and gas production or are currently producing oil and gas, and selling the production from these, worked over wells at a profit in the State of Kentucky. To be successful, we must, over time, complete our goal of raising sufficient funds for a 10 well workover program scaling up to a 100 well workover program on our oil and gas leases in Kentucky over the next year and then sell the resulting production at a price that is sufficient to cover our operating expenses, administrative costs and interest expense, plus offer us a return on our capital investment.



We have a limited operating history of oil and gas production and no proven reserves, small amount of production and negative cash flow. To date, we have had limited revenues and have not been able to generate sustainable positive earnings on a Company-wide basis. Our management cannot provide any assurances that the Company will ever operate profitably. As a result of our limited operating history, we are more susceptible to the numerous business, investment, and industry risks that have been described in Item 1A. Risk Factors of  our Annual Report on Form 10-K, filed with the SEC on September 28, 2011.



Our longer-term success depends on, among many other factors, the production of grade oil and gas properties and on the prevailing sales prices for oil and natural gas along with associated operating expenses. The volatile nature of the energy markets makes it difficult to estimate future prices of oil and natural gas; however, any prolonged period of depressed prices would have a material adverse effect on our results of operations and financial condition.



19



Our operations are focused on identifying and evaluating prospective oil and gas properties and funding projects that we believe have the potential to produce oil or gas in commercial quantities subject to the Company obtaining the necessary funding for these workover programs.



During the past two fiscal years, we have been involved in searching for a business combination or acquisition that would provide us with revenue and positive cash flow. After two unsuccessful attempts, we decided to start a small scale oil and gas operation with minimum risk by re-entering existing oil and gas wells that previously produced oil and gas or are producing oil and gas at a fractional output compared to when the oil and gas wells first came into production and perform a workover program on wells on our oil and gas leases in the State of Kentucky. Workover activities include one or more of a variety of remedial operations on a producing well or inactive well to try to increase production. A workover program varies from well to well and can cost from a few thousand dollars to as much as fifty thousand dollars. Our first workover well, XUN001, was successful for producing oil. However, upon examining the well bore, we observed that the well bore was damaged and that we would not have sustained production from the oil well. XUN001 produced 122 barrels of oil before we shut it down. Our operations team has elected to drill an offset well next to XUN001 instead of repairing it. The cost of drilling the offset well will be less than the cost and the associated risks of trying to repair the well bore damage. After XUN001, we began the workover on XUN002 and had to stop our operations in Kentucky as we did not have the funds to complete the workover program.



Included in the net operating loss is the forfeiture of the Gross and Neely Leases, in the amount of $19,701, whereby the Company failed to commence work on the oil and gas leases on or before June 30, 2011 and September 2, 2011, respectively.



Comparison Of Results Of Operations For The Nine Months Ended February 29, 2012 and February 28, 2011 and from Inception (December 20, 2007) to February 29, 2012.



Revenues



We generated no revenues for the nine months ending February 29, 2012 and the nine months ending February 28, 2011. Our operations to date have been financed by the sale of our common stock, third party loans and limited revenue. Operating expenses for the nine months ended February 29, 2012 and February 28, 2011 totalled $340,450 and $131,455. Our single largest expense to date has been professional fees totalling $297,037 and $104,048. Most of these expenses have been incurred in connection with maintaining our executive and operations staff while attempting to source funding for our workover program and our regulatory filings with the Securities and Exchange. General and Administrative expenses, including professional fees, totalled $320,232 and $128,874 respectively.



For the nine months ended February 29, 2012 and February 28, 2011 we had a net loss of ($340,450) and ($131,455).  Total losses since December 20, 2007 (Inception) were ($1,056,041).



Until we obtain additional funding to complete our oil and gas well workover program, we do not anticipate generating revenues, and any revenues that we generate may not be sufficient to cover our operating expenses.  In which case we may have to cease operations and you may lose your entire investment.



Liquidity and Capital Resources



Assets and Liabilities



Our primary financial resource is our base of our unproven oil and gas leases. Our ability to fund our capital expenditure program is dependent upon the availability of capital resource financing. In this fiscal year, we planned on spending approximately $5,000,000 in new capital investments for a 100 well workover program on our ability to raise $5,000,000 in funding, however our actual expenditures vary significantly from this estimate as our plans to obtain financing during the year have not materialized as of February 29, 2012. Factors such as changes in operating margins due to changes in the price of oil and gas and the availability of capital resources could increase or decrease our ultimate level of expenditures during the remaining fiscal year.



The changes in our capital resources at February 29, 2012 compared with February 28, 2011 are:



|                        |   |                   |   |                   |   |                     |                  
|----------------------- | - | ----------------- | - | ----------------- | - | ------------------- | -----------------
|                        |   | February 29, 2012 |   | February 28, 2011 |   | Increase (Decrease) | Percentage Change
|                        |   |                   |   |                   |   |                     |                  
|Cash                    | $ | 179               | $ | 1,954             | $ | (1,775)             | -90.85%          
|Current Assets          | $ | 179               | $ | 2,146             | $ | (1,967)             | -91.67%          
|Total Assets            | $ | 435,974           | $ | 6,748             | $ | 429,226             | 6360.79%         
|Current Liabilities     | $ | 1,315,052         | $ | 68,644            | $ | 1,246,408           | 1815.76%         
|Total Liabilities       | $ | 1,440,689         | $ | 68,644            | $ | 1,372,045           | 1998.78%         
|Working Capital Deficit | $ | 1,314,874         | $ | 66,690            | $ | 1,248,184           | 1871.62%         



20



Our working capital deficit increased by $1,248,184 from ($66,690) as of February 28, 2011 to ($1,314,874) as of February 29, 2012. This increase in the deficit was due to the amount of resources that was required to maintain our corporate and field staff and to complete all the necessary SEC filings.



Over the last nine months, we expended our resources on attempting to raise funds for our workover well program and completing our fiscal year end consolidated statements and SEC filings. Our business is capital intensive. Our ability to grow is dependent upon favorably obtaining outside debt and capital and generating cash flows from operating activities necessary to fund our investment activities. There is no assurance that we will be able to achieve profitability. Since our future operations will continue to be dependent on successful development activities and our ability to seek and secure capital from external sources, should we be unable to achieve sustainable profitability this could cause any equity investment in the Company to become worthless.



Major sources of funds in the past for us have included the debt or equity markets. We will have to rely on these capital markets to fund future operations and growth. Our business model is focused on the development (workover programs) on our properties. Our ability to generate future revenues and operating cash flow will depend on successful completion of our planned workover programs and the acquisition of oil and gas producing properties, which may very likely require us to continue to raise equity or debt capital from outside sources.



The Company has ongoing capital commitments to develop certain leases pursuant to their underlying terms. Failure to meet such ongoing commitments may result in the loss of the right to participate in future workovers on certain leases or the loss of the lease itself. These ongoing capital commitments require us to seek capital from sources outside of the Company. The current uncertainty in the credit and capital markets, and the economic downturn, may restrict our ability to obtain needed capital.



Cash Flows



Changes in the net funds provided by or (used in) each of our operating, investing and financing activities are set forth in the table below:

|                                                    |   |                   |   |                   |   |                     |                  
|--------------------------------------------------- | - | ----------------- | - | ----------------- | - | ------------------- | -----------------
|                                                    |   | February 29, 2012 |   | February 28, 2011 |   | Increase (Decrease) | Percentage Change
|Net cash provided by (used in) operating activities | $ | (6,315)           | $ | (90,129)          | $ | (83,815)            | -92.99%          
|Net cash provided by (used in) investing activities | $ | (430,170)         | $ | (4,603)           | $ | 425,567             | 9245.43%         
|Net cash provided by (used by) financing activities | $ | 411,595           | $ | 74,300            | $ | 337,295             | 453.96%          
|                                                    |   |                   |   |                   |   |                     |                  

Cash Flow Used in Operating activities:



Cash flow from operating activities is derived from changes in the balances of payables, or other non-oil property asset account balances. For the nine months ended February 29, 2012, we had a negative cash flow from operating activities of $6,315, in comparison to a negative cash flow of $90,129 for the nine months ended February 28, 2011. This change of $83,815 was the result of an increase in our payables balance. Variations in cash flow from operating activities may affect our level of development (workover) expenditures. Our expenditures consist primarily of our General and Administrative (G&A) expenses, which consist of consulting and professional services, employee compensation, legal, accounting, travel and other G&A expenses, which we have incurred in order to address necessary organizational activities.



Cash Flow Used in Investing activities:



Cash flow used by investing activities was $430,170 for the nine months ended February 29, 2012. This is in comparison to $4,603 used for investing activities for the nine months ended February 28, 2011. The funds were used to place non-refundable deposits, which will be deducted off the acquisition cost, and due diligence costs for producing oil and gas leases in Texas.



Cash Flow from Financing activities:



Cash flow from financing activities is derived from long-term liability account balances or in equity, account balances excluding retained earnings. Cash flow provided by financing activities was $411,595 for the nine months ended February 29, 2012. This is in comparison to $74,300 provided by financing activities for the nine months ended February 28, 2011. The funds were used to retire a short term debt and placing deposits on oil and gas leases in Texas. We anticipate it will be necessary to rely on additional funding from the debt financing and from capital markets in the current fiscal year to complete the acquisition of the oil and gas leases in Texas and to discharge our debts.



Our business is capital intensive. Our ability to grow is dependent upon favorably obtaining outside capital and generating cash flows from operating activities necessary to fund our investment activities. There is no assurance that we will be able to achieve profitability. Since our future operations will continue to be dependent on successful development activities and our ability to seek and secure capital from external sources, should we be unable to achieve profitability this could cause any equity investment in the Company to become worthless.



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We have no ongoing revenues to satisfy our ongoing liabilities. Our auditors have issued a going concern opinion. Unless we secure equity, debt financing or Joint Venture partners, of which there can be no assurance, or identify a profitable acquisition candidate, we will not be able to continue any operations.



Plan of Operation For Remaining Fiscal Year



We will attempt to source equity and or debt financing, or joint venture partners to complete the acquisition of the oil and gas leases in Texas. We have had discussions with several companies and individuals over and above PCLC and CMS for funding and/or joint ventures. Other than PCLC and CMS, we have not come to terms with any company or individual and there can be no assurance that we will enter into an agreement at any time in the near future or close on the financing agreements we have in place with PCLC and CMS. We will attempt to finance our operating expenses with additional debt or through equity financing.



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.



ITEM 4. CONTROLS AND PROCEDURES



Item 9A. Controls and Procedures.



Disclosure controls and procedures.



Under the supervision and with the participation of our management, including our principal executive and principal financial officer, we evaluated, as of February 29, 2012, the effectiveness of our disclosure controls and procedures. Based on that evaluation, our principal executive and principal financial officer concluded that the disclosure controls and procedures were effective as of the end of the period covered by this Quarterly Report on Form 10-Q.



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.



PART II. OTHER INFORMATION



ITEM 1.   LEGAL PROCEEDINGS.





On May 10, 2011, the Company accepted an Offer to Purchase from Lea Kennedy d/b/a LuxemBarings (Purchaser) to purchase $10 million of the Companys common stock based on the average of five consecutive trading days close prior to date of closing (the "Offer to Purchase"). The Offer to Purchase was scheduled to close on or before June 24, 2011. The Purchaser failed to complete the transaction, after mutually agreed extensions of the closing date. The Company has retained legal counsel to take legal action against the Purchaser for failing to complete the purchase transaction and for damages to the Company as a result of the failure to complete the transaction. The Company has recognized losses, at cost, in the financial statements for the period ended February 29, 2012.



ITEM 1A.   RISK FACTORS



There have been no material changes in our risk factors from those disclosed in our Form 10-K filed September 28, 2011.



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



The Company authorized and approved an aggregate of 112,500 common stock shares for the fiscal year ending May 31, 2011 with an average price of $0.1263 per share to the management and the 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. During the fiscal year ending May 31, 2011, the Company issued 75,000 of the 112,500 shares to the management and the Board with the remaining 37,500 shares issued on June 6, 2011.



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The Company authorized and approved an aggregate of 105,000 common stock shares for the nine months ended February 29, 2012 with an average price of $0.0231 per share to the Board pursuant to Board Member Compensation Agreements with Mr. Peter Matousek, Mr. Donald Lynch, Mr. Jerry G. Mikolajczyk and Mr. Kevin M. Grapes. The Company issued 30,000 of the 105,000 shares to the Board as of February 29, 2012.



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



ITEM 3.   DEFAULTS UPON SENIOR SECURITIES.



None



ITEM 4.  MINE SAFETY DISCLOSURES.



Not Applicable



ITEM 5.  OTHER INFORMATION



None.



|                                        |                                                                                                        |      |         |             |                         
|--------------------------------------- | ------------------------------------------------------------------------------------------------------ | ---- | ------- | ----------- | ------------------------
|ITEM 6.   EXHIBITS                      | INCORPORATED BY REFERENCE                                                                             
|Exhibit Number                          | Exhibit Description                                                                                    | Form | Exhibit | Filing Date | File/
Furnished Herewith
|Material Contracts                     
|10.1                                    | Commercial Loan Offer                                                                                  | 8-K  | 10.1    | 02/21/12    |                         
|10.1                                    | Bill of Sale - ALRT                                                                                    | 8-K  | 10.1    | 02/15/12    |                         
|10.2                                    | Bill of Sale - Jerry G. Mikolajczyk                                                                    | 8-K  | 10.2    | 02/15/12    |                         
|10.1                                    | Assignment Of Oil And Gas Permit                                                                       | 8-K  | 10.1    | 01/24/12    |                         
|10.1                                    | Investment Banking and Advisory Agreement                                                              | 8-K  | 10.1    | 04/18/12    |                         
|Rule 13a14(a)/15d-14(a) Certifications
|31.1                                    | Certificate of the Chief Executive Officer pursuant Section 302 of the Sarbanes-Oxley Act of 2002      |      |         |             | X                       
|31.2                                    | Certificate of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002       |      |         |             | X                       
|32.1                                    | Certificate of the Chief Executive Officer  pursuant to Section 906 of the Sarbanes-Oxley Act of 2002  |      |         |             | X                       
|32.2                                    | Certificate of the Chief Financial  Officer  pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |      |         |             | X                       











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 20, 2012  | By:              | /s/ Jerry G. Mikolajczyk                                                              
|                      |                  | Jerry G. Mikolajczyk                                                                  
|                      |                  | Chief Executive Officer
(principal executive officer)                                 
|                      |                  |                                                                                       
|Date:  April 20, 2012 | By:              | /s/ Jerry G. Mikolajczyk                                                              
|                      |                  | Jerry G. Mikolajczyk                                                                  
|                      |                  | Chief Financial Officer
(principal financial officer and principal accounting officer)



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# Endnotes