FOX PETROLEUM INC. - FORM 10-Q - July 15, 2011

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EX-31.2 - CERTIFICATION OF CHIEF FINANCIAL OFFICER - FOX PETROLEUM INC.ex-31_2.htm
EX-31.1 - CERTIFICATION OF CHIEF EXECUTIVE OFFICER - FOX PETROLEUM INC.ex-31_1.htm
EX-32.1 - CERTIFICATION OF CHIEF EXECUTIVE OFFICER, CHIEF FINANCIAL OFFICER, PRINIPAL ACCOUNTING OFFICER, TREASURER - FOX PETROLEUM INC.ex-32_1.htm
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
 
 
Mark One  
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
   
 
For the quarterly period ended May 30, 2011
   
 
OR
   
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
   
  For the transition period from ______ to _______
Commission file number: 000-52721
 
FOX PETROLEUM INC.
(Name of small business issuer in its charter)
   
Nevada
(State or other jurisdiction of incorporation
or organization)
n/a
(I.R.S. Employer Identification No.)
      
      
545 EIGHTH AVENUE SUITE 401
NEW YORK, NY 10018
(Address of principal executive offices)
      
  
212-560-5195
(Issuer’s telephone number)
      
  
Securities registered pursuant to Section
12(b) of the Act:
Name of each exchange on which
registered:
None
  
      
  
 
Securities registered pursuant to Section 12(g) of the Act:
  
Common Stock, $0.001 par value
  
(Title of Class)
  
 
Indicate by checkmark whether the issuer: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes x   No o
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files.
 Yes o  No o
 
Indicate by check mark whether the registrant is a large accelerated filed, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  

Large accelerated filer
¨
  
Accelerated filer
¨
         
Non-accelerated filer
¨
  
Smaller reporting company
x
 
 Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)
Yes o  No x
 
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the most practicable date:
Class
 
 
Outstanding as of July 12,  2011
Common Stock, $0.001 par value
128,174,997
   
Transitional Small Business Disclosure Format (Check one):   
Yes  o No  x
 
 
 
 
 
Part I.   
FINANCIAL INFORMATION
  
     
Item 1.
Financial Statements
  
   
3
      
4
 
5
 
   Notes to Consolidated Financial Statements (Unaudited)
6
     
Item 2.   
13
      
    
Item 3.   
18
      
    
Item 4.
19
     
Part II.
  
      
    
Item 1.   
20
      
    
Item 1A.   
20
     
Item 2.  
20
     
Item 3.   
22
      
    
Item 4      
22
     
Item 5.  
22
      
    
Item 6.      
24
      
    


 
 
 
 
 
PART I.                      FINANCIAL INFORMATION

ITEM 1.                      FINANCIAL STATEMENTS
 
 
(unaudited)

ASSETS
  
   
May 31,
    
May 31,
  
   
2011
    
2011
  
   
(Unaudited)
        
CURRENT ASSETS
            
Cash and cash equivalents
  
$
-
    
$
4,870
  
VAT refund and other receivables
    
-
      
139,894
  
     
-
      
-
  
Total Current Assets
    
-
      
144,764
  
Oil and Gas Interests – Note 4
            
588,270
  
     
-
      
-
  
                 
TOTAL ASSETS
  
$
-
    
$
733,034
  
                 
CURRENT LIABILITIES
                
Accounts payable and accrued liabilities – Notes 4 and 5 and 8(c)
  
$
18,360,246
    
$
17,272,502
  
Due to related parties – Note 6
    
-
      
17,500
  
Notes payable – Note 5
    
5,312,333
      
4,885,333
  
     
23,672,579
      
22,175,335
  
Fees payable in stock and warrants – Notes 5(e), 8(b), (d) and (e)
    
44,461
      
75,672
  
                 
                 
TOTAL LIABILITIES
    
23,717,040
      
22,251,007
  
                 
STOCKHOLDERS' EQUITY
                
                 
Capital stock – Notes 4, 5, 6, 7, and 8 Authorized:
                
500,000,000 common shares, par value $0.001 per share
    
-
      
-
  
128,174,997 common shares (May 31, 2011: 69,818,245)
    
84,818
      
84,818
  
Additional paid-in capital
    
44,937,395
      
44,937,395
  
Subscriptions receivable
    
(26,000,000
)
    
(26,000,000
)
Deficit accumulated during the development stage
    
( 42,739,253
)
    
(40,540,186
)
             
-
  
                 
                 
Total Dolat Ventures, Inc. Stockholders' Equity
    
--
    
$
733,034
  
                 
 
Ability to Continue as a Going Concern – Note 2
Commitments – Notes 4, 5, 6, 7, and 8
                
   
 The accompanying notes are a integral part of these consolidated financial statements.
 
 
 
 

 
Fox Petroleum, Inc.
(A Development Stage Company)
INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS for the three months ended May 31, 2011 and 2010 and
for the period May 4, 2004 (Date of Inception) to May 31, 2011
(Stated in US Dollars )
(unaudited)

               
Period from
  
               
04-Nov-04
  
   
Three Months Ended
    
(inception)
  
   
August 31,
    
to August 31,
  
   
2011
    
2010
    
2011
  
REVENUES
                  
Sales revenues
  
$
-
    
$
-
    
$
-
  
Cost of revenues
    
-
      
-
      
-
  
Gross Profit
    
-
      
-
      
-
  
                         
OPERATING EXPENSES
                        
Accounting and Audit Fees
    
16,000
      
29,967
      
338,381
  
Accretion of convertible note
    
-
      
-
      
2,575,492
  
Advertising and public relations
    
-
      
-
      
2,001,045
  
Bank charges
    
-
      
4,306
      
29,868
  
Consulting fees – Note 6
    
-
      
86,657
      
755,239
  
Filing and transfer agent
    
-
              
49,690
  
Finance fees – Notes 5 and 8(c)
    
-
      
4,870,617
      
9,712,804
  
Foreign exchange
    
-
      
243,989
      
415,308
  
Insurance
    
-
      
-
      
72,590
  
Impairment of oil & gas assets
    
-  
      
-
      
10,046,683
  
Legal fees
    
-
      
10,300
      
567,848
  
Loss on failure to perform obligations under oil and gas commitments – Note 8(c)
    
-
      
-
      
12,910,000
  
License fees
    
-
      
25,126
      
67,328
  
Management fees – Note 6
    
-
      
188,956
      
1,380,186
  
Mineral property acquisition and exploration costs
    
-
      
-
      
17,000
  
Office and miscellaneous – Note 6
    
-
      
16,133
      
426,556
  
Travel and Entertainment
    
-
      
-
      
260,758
  
Loss for the period before other items
    
-
      
(5,582,760
)
    
(42,952,833
)
                         
Other items:
                        
Gain on recovery of VAT receivable
                    
78,451
  
Interest and other income
    
-
      
-
      
9,986
  
Gain on recovery of payables
    
-
      
-
      
125,143
  
Net loss for the period
  
$
(16000
)
  
$
(5,582,760
)
    
(42,739,253
)
                         
Basic and diluted loss per share
    
-
      
(0.20
)
        
Weighted average number of shares outstanding
    
24,063,670
      
27,763,897
          
                         
 
 
The accompanying notes are a integral part of these consolidated financial statements.

 
 
 
 
 
Fox Petroleum, Inc.
(A Development Stage Company)
Consolidated Statements of Cash Flows for the three months ended May 31, 2011 and 2010 and
for the period May 4, 2004 (Date of Inception) to May 31, 2011
( Stated in US Dollars )
(unaudited)

               
Period from
  
   
Three Months Ended
    
May 4, 2006 (inception)
  
   
May 30,
    
to August 31,
  
   
2011
    
2010
    
2011
  
CASH FLOWS FROM OPERATING ACTIVITIES
                  
Net income (loss)
  
$
-
    
$
(5,582,760
)
  
$
(42,739,253
)
Donated services and rent
    
-
              
21,000
  
Amortization of deferred financing costs
    
-
                  
Accretion of convertible debt discount
    
-
      
-
      
2,575,492
  
Fees payable in stock and warrants
    
-
      
2,090
      
37,087
  
Finance fee paid in stock and warrants
    
-
      
4,870,671
      
8,270,294
  
Gain on settlement of amounts payable
    
-
              
(125,143
)
Impairment of oil and gas assets
    
-
              
10,046,683
  
Gain of VAT receivable written off
    
-
              
(78,451
)
Change in non-cash working capital balances related to operations:
                        
VAT refund and other receivables
    
-
      
17,824
      
78,451
  
Prepaid expenses
    
-
                  
Accounts payable and accrued liabilities
    
-
      
687,394
      
19,019,627
  
Net cash used in operating activities
    
-
      
(4,835
)
    
(2,894,213
)
Investing Activities
                        
Proceeds (investment) in oil and gas interests
    
-
      
20,000
      
(7,702,687
)
Decrease (increase) in restricted cash
    
-
      
5,468
          
Net Cash Used in Investing Activities
    
-
      
25,468
      
(7,702,687
)
                         
                         
CASH FLOWS FROM FINANCING ACTIVITIES
                        
Proceeds from issuance of common stock
    
-
      
-
      
6,196,900
  
Proceeds from related party advances
    
-
      
(16,500
)
    
-
  
Proceeds from notes payable
                    
4,400,000
  
Net Cash Provided (Used) in Financing Activities
    
-
      
(16,500
)
    
10,598,900
  
                         
             
-
          
                         
NET INCREASE IN CASH
    
-
      
4133
      
-
  
CASH AT BEGINNING OF PERIOD
    
-
      
737
      
-
  
                         
CASH AT END OF PERIOD
  
$
-
    
$
4870
    
$
    
                         
 Non-cash transactions – Note 9
                        
   
The accompanying notes are a integral part of these consolidated financial statements.  
 
 

 
 
 

PART I.                      FINANCIAL INFORMATION

ITEM 2.                      MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A)

Forward looking statements

Statements made in this Form 10-Q that are not historical or current facts are "forward-looking statements" made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933 (the "Act") and Section 21E of the Securities Exchange Act of 1934. These statements often can be identified by the use of terms such as "may," "will," "expect," "believe," "anticipate," "estimate," "approximate," or "continue," or the negative thereof. We intend that such forward-looking statements be subject to the safe harbors for such statements. We wish to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. Any forward-looking statements represent management's best judgment as to what may occur in the future. However, forward-looking statements are subject to risks, uncertainties and important factors beyond our control that could cause actual results and events to differ materially from historical results of operations and events and those presently anticipated or projected. We disclaim any obligation subsequently to revise any forward-looking statements to reflect events or circumstances after the date of such statement or to reflect the occurrence of anticipated or unanticipated events.

All references in this Annual Report on Form 10-K to the terms “we,” “our,” “us,” “FXPT.OB,” and the “Company” refer to Fox Petroleum Inc. and/or its wholly owned subsidiaries, Fox Petroleum (Alaska) Inc., Fox Petroleum, Inc. (a Kansas corporation) and Fox Energy Exploration Limited, as the case may be.
 
AVAILABLE INFORMATION
 
Fox Petroleum Inc. files annual, quarterly, current reports, proxy statements, and other information with the Securities and Exchange Commission (the "Commission"). You may read and copy documents referred to in this Annual Report on Form 10-K that have been filed with the Commission at the Commission's Public Reference Room, 450 Fifth Street, N.W., Washington, D.C. You may obtain information on the operation of the Public Reference Room by calling the Commission at 1-800-SEC-0330. You can also obtain copies of our Commission filings by going to the Commission's website at http://www.sec.gov.
 

GENERAL

Fox Petroleum Inc. was incorporated under the laws of the State of Nevada on May 4, 2004 under the name of “Nova Resources Inc.” Subsequently, our Board of Directors decided to change our name to “Fox Petroleum Inc” to better reflect the new direction of our business of exploration and development activities to the oil and gas sectors. Therefore, on February 5, 2007, we changed our name to “Fox Petroleum Inc.”. The name change was accomplished through a merger with our wholly owned subsidiary, Fox Petroleum Inc., which was incorporated for the sole purpose of changing our name with our company carrying on as the surviving corporation under the new name of “Fox Petroleum Inc.” As of the date of this Annual Report, we are a development stage company engaged in the identification, acquisition, exploration and, if warranted, development of prospective oil and gas properties. We have oil and gas interests in a United Kingdom onshore license and joint venture interests in Texas.

Subsidiaries
 
Fox Petroleum (Alaska) Inc.

On April 17, 2007, we incorporated a wholly owned subsidiary, Fox Petroleum (Alaska) Inc. (“Fox Petroleum Alaska”) under the laws of the State of Alaska in order to carry out our Alaska operations after completing a lease purchase and sale agreement with Fox Petroleum LLC. In order to hold Alaska oil and gas leases, we either had to be registered in Alaska or operate through an Alaska subsidiary.
 
 
 
 

 
Fox Energy Exploration Limited.

On May 17, 2007, we incorporated a wholly owned subsidiary, Fox Energy Exploration Limited (“Fox Energy Exploration Limited”), in England and Wales to hold assets in the United Kingdom under a farm-in agreement with Granby Enterprises Limited and Atlantic Petroleum UK Limited.

SHARE EXCHANGE AGREEMENTS

Ontario Share Exchange Agreement

Effective July 15, 2011, our Board of Directors authorized the execution of that certain share exchange agreement dated July 15, 2011 (the “Ontario Share Exchange Agreement”) among us, 1536692 Ontario Inc., a private corporation duly registered under the laws of the Province of Ontario, Canada (“Ontario”) and the shareholders of Ontario (the “Ontario Shareholders”). In accordance with the terms and provisions of the Ontario Share Exchange Agreement: (i) the Ontario Shareholders tendered all of their shares held of record, which constituted one hunred percent (100%) of the total issued and outstanding shares of Ontario, to us; (ii) we issued to the Ontario Shareholders 1,750,000 shares of our restricted common stock; and (iii) we assumed a debt due and owing by Ontario to Davfam Investments (1998) Ltd.  in the amount of $225,000, which debt was incurred by Ontario during fiscal years 1994 through 1995 . Ontario is the owner of a scrap plastic processing plant with certain equipment, fixtures and improvements and assets located in Hamilton, Ontario, Canada. Ontario is our wholly-owned subsidiary as a result of the Ontario Share Exchange Agreement.

Resource Share Exchange Agreement

Effective July 15, 2011, our Board of Directors further authorized the execution of that certain share exchange agreement dated July 15, 2011 (the “Resource Share Exchange Agreement”) among us, Resource Polymers Inc., a private corporation duly registered under the laws of the Province of Ontario, Canada (“Resource”) and the shareholders of Resource (the “Resource Shareholders”). In accordance with the terms and provisions of the Resource Share Exchange Agreement: (i) the Resource Shareholders tendered all of their shares held of record, which constituted one hunred percent (100%) of the total issued and outstanding shares of Resource, to us; (ii) we issued to the Resource Shareholders 1,750,000 shares of our restricted common stock; and (iii) ) we assumed a debt due and owing by Resource to Consolidated Recyclers Inc. in the amount of $350,000, which debt was incurred by Resource during fiscal years 1994 through 1997. Resource is also the owner of a scrap plastic processing plant with certain equipment, fixtures and improvements and assets located in Hamilton, Ontario, Canada. Resource is our wholly-owned subsidiary as a result of the Ontario Share Exchange Agreement.

CURRENT BUSINESS OPERATIONS

As of the date of this Quarterly Report, we are a development stage company engaged in acquiring, developing and operating plastic recycling operations throughout North America. With a focus on plastic waste compounds and the aggregating of plastic scrap products for manufactures. Fox Petroleum's goal is to become an important partner for leading recycling companies who need proficient services.


 
 
 
 
RESULTS OF OPERATIONS
 
The following selected financial information is qualified by reference to, and should be read in conjunction with our consolidated financial statements and the notes thereto, and “Management’s Discussion and Analysis of Financial Condition and Results of Operation” contained elsewhere herein. The selected consolidated income statement data for the three month period ended May 30, 2011 and May 30, 2010 and the selected consolidated balance sheet data as of May 30, 2011 and 2010 are derived from our audited consolidated financial statements which are included elsewhere herein.

We are a developmental stage company and have not generated any revenue to date. The following table sets forth selected financial information for the periods indicated. We have incurred recurring losses to date. Our financial statements have been prepared assuming that we will continue as a going concern and, accordingly, do not include adjustments relating to the recoverability and realization of assets and classification of liabilities that might be necessary should we be unable to continue in operation.
 
We expect we will require additional capital to meet our long term operating requirements. We expect to raise additional capital through, among other things, the sale of equity or debt securities.
 
Three Month Period Ended May 30, 2011 Compared to Three Month Period Ended August  31, 2011.
 
Our net loss for the three month period ended May 30, 2011 was ($7,781,827) compared to a net loss of ($32,209,932) during the three month perio ended May 31, 2010, a decrease of $24,428,105. During the three month periods ended August 30, 2011 and 2010, we did not generate any revenue from operations.
 
 
During the three month period ended May 30, 2011, we incurred operating expenses of $7,906,970 compared to $32,289,013 (offset by $73,073 fr foreign exchange) incurred during the three month period ended May 31, 2010, a decrease of $24,382,043. The decrease in operating expenses was primarily attributable to the following items: (i) impairment of oil and gas assets of $588,270 (2010: $9,458,413); (ii) accretion of convertible note of $-0- (2010: $2,575,492); and (iii) loss on failure to perform obligations under oil and gas commitments of $-0- (2010: $12,910,000). The decrease in accretion of convertible note for the three month period ended May 31, 2011 as compared to the three month period ended May 31, 2010 was primarily due to our default during the 2010 fiscal year end of repayments on notes resulting in an immediate accretion of the entire discount of the notes during the 2010 year end. During the three month period ended May 31, 2010, we incurred substantial costs under the Letter of Commitment with Senergy, which was entered into to fulfill our obligations under the Farm-In Agreement with Valiant and Petrofac and further penalties (which was also expensed and accrued during the year) for our failure to fulfill our commitment for the use of the rig.. General and administrative expenses generally include corporate overhead, financial and administrative contracted services, marketing, and consulting costs.  Other items incurred during the three mont period ended May 31, 2011 was gain on recovery of payables of $125,143 (2010: $-0-), gain on recovery of VAT receivable of $-0- (2010: $78,451) and interest and other income of $-0- (2010: $630).
 
 
During the three month period ended May 30, 2011, we incurred a loss for the period of ($7,781,827) or ($0.32) per share as compared to a loss for the period of ($32,209,932) or ($2.03) per share during the three month period ended May 31, 2010. The basic weighted average number of shares outstanding was 24,063,670 for the three month period ended May 31, 2011 compared to 15,886,053 for the three month period ended May 31, 2010.
 
 
 
 
 
LIQUIDITY AND CAPITAL RESOURCES
 
Three Month Period Ended May 30, 2011
 
As at May 30, 2011, our current assets were $-0- and our current liabilities were $23,717,040, which resulted in a working capital deficit of $23,717,040. As of February 28, 2011, current liabilities were comprised of: (i) $18,360,246 in accounts payable and accrued liabilities; and (ii) $5,312,333 in notes payable. See “ – Material Commitments.”
 
As of May 30, 2011, our total assets were $-0-. The decrease in total assets during the three month period ended May 31, 2011 from the three mont period ended May 31, 2010 was primarily due to our decrease in cash and the VAT refund and other receivable.
 
As at May, 2011, our total liabilities were $23,717,040 comprised entirely of current liabilities. The increase in liabilities during the three month period ended May 31, 2011 from the three month period ended May 31, 2010 was primarily due to the increase in accounts payable and accrued liabilities.
 
Stockholders’ deficit increased from ($20,585,213) for the three month period ended May 31, 2010 to ($23,717,040) for the three month period ended May 31, 2010.
 
Cash Flows from Operating Activities
 
NONE
 
Cash Flows from Investing Activities
 
None
 
Cash Flows from Financing Activities
 
None
 
PLAN OF OPERATION AND FUNDING
 
We have no access to capital to repay our debt or fund our current or ongoing operations. Unless we can secure additional capital and renegotiate the terms of our outstanding debts, we may be required to discontinue our operations at any time. We will need additional further advances and issuance of debt instruments to fund our operations over the next six months. In connection with our future business plan, management anticipates additional increases in operating expenses and capital expenditures relating to acquisition of further interests in gold mining concessions. We would finance these expenses with further issuances of securities and debt issuances. We expect we would need to raise additional capital and generate revenues to meet long-term operating requirements. Additional issuances of equity or convertible debt securities would result in dilution to our current shareholders. Further, such securities may have rights, preferences or privileges senior to our common stock. Additional financing may not be available upon acceptable terms, or at all. If we are not able to obtain additional financing on a timely basis, we will be unable to conduct our operations as planned, and we will not be able to meet our other obligations as they become due. In such event, we will be forced to scale down or perhaps even cease our operations.
 
MATERIAL COMMITMENTS

As of the date of this Quarterly Report, we have the following material commitments as described below.
 
 
 
 
 
 
Financing from Trafalgar Capital Specialized Investment Fund, Luxembourg
 
On June 24, 2008, we entered into a securities purchase agreement (the “Securities Purchase Agreement”) with Trafalgar Capital Specialized Investment Fund, Luxembourg (“Trafalgar”) pursuant to which we sold to Trafalgar $2,500,000 of a senior secured convertible redeemable debenture. Pursuant to the terms of the Securities Purchase Agreement, we agreed to pay to Trafalgar a legal and documentation review fee of $17,500, a due diligence fee of $10,000, a warrant to purchase 500,000 shares of our common stock for five years at an exercise price of $2.9851 (issued), a commitment fee equal to 7% of the principal amount of the debenture, a facility fee equal to 2% of the principal amount of the debenture, and 200,000 restricted shares of our common stock (issued). In connection with the Securities Purchase Agreement, we executed a nonbinding term sheet to enter into a committed equity facility with Trafalgar, which would be entered into upon the debenture being repaid in full by us.
 
Effective October 31, 2008 we amended the Securities Purchase Agreement and related transaction documents dated June 24, 2008 (collectively, the “Original Transaction Documents”) between us and Trafalgar. The amendment and certain related transaction documents (collectively, the “Amended Transaction Documents”) are dated October 31, 2008 and were executed and delivered to us by Trafalgar on May 11, 2008.
 
Under the Amended Transaction Documents, we sold to Trafalgar $3,500,000 of secured convertible redeemable debentures consisting of: (i) the original debenture sold to Trafalgar under the Original Transaction Documents in the principal amount of $2,500,000, which was amended and extended such that the debenture was separated into two debentures, each of which are for a total principal amount of $1,250,000 (the “Amended Debentures”); and (ii) a new debenture in the total principal amount of $1,000,000 (the “New Debenture” and together with the Amended Debentures, the “Debentures”).
 
The Amended Debentures mature as to $1,250,000 on April 30, 2010 (later extended to October 31, 2010) and $1,250,000 on April 30, 2011 and bear an annual interest rate of 10% compounded monthly until the unpaid principal is paid. Trafalgar is entitled, at its option, to convert and sell the principal amount of the Amended Debenture plus accrued interest into shares of our common stock at the price per share equal to the lesser of: (i) 100% of the volume weighted average price as quoted by Bloomberg L.P. on October 31, 2008, or (ii) 80% of the lowest daily closing volume weighted average price as quoted by Bloomberg L.P. during the 5 trading days immediately preceding the date of conversion. In no event will Trafalgar be entitled to convert the Amended Debentures for a number of shares of our common stock in excess of that number of shares of our common stock, upon giving effect to such conversion, would cause the aggregate number of shares of our common stock beneficially owned by Trafalgar and its affiliates to exceed 9.99% of the outstanding shares of our common stock following such conversion without our approval. We may redeem the Amended Debentures provided that our common stock is trading below 100% of the volume weighted average price as quoted by Bloomberg L.P. on October 31, 2008 at the time we give Trafalgar the redemption notice, by paying the unpaid principal and interest accrued to such date and a prepayment premium of 15% redemption premium on the amount redeemed. We must redeem the entire principal amount outstanding on only one of the Amended Debentures on April 30, 2010 at a 15% redemption premium; there is no mandatory redemption requirement for the other Amended Debenture.
 
 
 
 
 
 
The New Debenture matures on October 31, 2011 and bears an annual interest rate of 10% compounded monthly until the unpaid principal is paid. An event of default occurs if: (i) we fail to pay amounts due under the New Debenture, (ii) our transfer agent fails to issue freely tradeable common stock to Trafalgar within three days of our receiving a notice of conversion or exercise after our registration statement is declared effective, (iii) we fail to comply with any of our other agreements in the New Debenture for five business days after receiving notice to comply, (iv) we enter into bankruptcy or become insolvent, or (v) we breach any of covenants under the securities purchase agreement and do not cure within five business days of receiving a written notice of the breach. Upon an event of default, Trafalgar may accelerate full repayment of the New Debenture outstanding and accrued interest thereon. Also, Trafalgar is entitled, at its option, to convert and sell the principal amount of the New Debenture plus accrued interest into shares of our common stock at the price per share equal to the lesser of (i) 100% of the volume weighted average price as quoted by Bloomberg L.P. on October 31, 2008, or (ii) 80% of the lowest daily closing volume weighted average price as quoted by Bloomberg L.P. during the five trading days immediately preceding the date of conversion. However, if we issue or sell shares of our common stock without consideration or for a consideration per share less than the bid price of our common stock determined immediately prior to its issuance, the conversion price will be reset to 85% of such sales price if the reset price is lower than the conversion price. In no event will Trafalgar be entitled to convert the New Debenture for a number of shares of our common stock in excess of that number of shares of our common stock, upon giving effect to such conversion, would cause the aggregate number of shares of our common stock beneficially owned by Trafalgar and its affiliates to exceed 9.99% of the outstanding shares of our common stock following such conversion without our approval. We may redeem the debentures provided that our common stock is trading below 100% of the volume weighted average price as quoted by Bloomberg L.P. on October 31, 2008 at the time we give Trafalgar the redemption notice, by paying the unpaid principal and interest accrued to such date and a prepayment premium of 15% redemption premium on the amount redeemed. We must begin redeeming the New Debenture monthly beginning on January 31, 2010 by making equal payments of principal over the term of the New Debenture plus any outstanding interest payments and at a 15% redemption premium on the principal redeemed each month. So long as any of the principal of or interest on the New Debenture remains unpaid, we may not, without the prior consent of Trafalgar: (i) issue or sell shares of our common stock without consideration or for a consideration per share less than the bid price of our common stock determined immediately prior to its issuance, (ii) issue or sell any warrant, option, right, contract, call, or other security instrument granting the holder thereof, the right to acquire our common stock without consideration or for a consideration less than our common stock’s bid price value determined immediately prior to its issuance, (iii) enter into any security instrument granting the holder a security interest in any of our or our subsidiary’s assets, (iv) permit any of our subsidiaries to enter into any security instrument granting the holder a security interest in any assets of such subsidiary, (v) file any registration statement on Form S-8, or (vi) incur any additional debt or permit any of our subsidiaries to incur any additional debt without Trafalgar’s prior written consent.
 
Our use of the $1,000,000 received pursuant to the New Debenture will require the prior written approval of Trafalgar. Upon the disbursement of the $1,000,000 relating to the purchase of the New Debenture, we paid to Trafalgar one interest payment due on each of the three Debentures, which was paid directly from the proceeds of the closing for the Amended Transaction Documents.
 
We agreed to enter into a “lock box” agreement covering revenue generated by us which shall be executed prior to May 21, 2008. Failure by our company to execute such “lock box” agreement is deemed an event of default under Amended Transaction Documents including the Debentures and the Pledge and Escrow Agreement. We have negotiated the terms of this agreement with Trafalgar and we expect that the “lock box” agreement will be in place to receive first revenue.
 
The original warrant issued by us to Trafalgar was amended and replaced such that it is exercisable for a total of 2,000,000 shares of common stock at an exercise price of $0.001 per share. Also, we agreed to register the shares of common stock into which the warrant is exercisable within thirty days of October 31, 2008, subject to compliance with Rule 415 as promulgated under the Securities Act of 1933, as amended, or any Rule 415 comments or restrictions placed by the Securities and Exchange Commission on the registration statement for the shares underlying the warrant.
 
We agreed to issue to Trafalgar 2,500,000 shares of common stock (issued). Also, we agreed to register such shares of common stock within thirty days of October 31, 2008, subject to compliance with Rule 415 as promulgated under the Securities Act of 1933, as amended, or any Rule 415 comments or restrictions placed by the Securities and Exchange Commission on the registration statement for such shares.
 
 
 
 
 
We entered into a Pledge and Escrow Agreement with Trafalgar and James G. Dodrill II, P.A. as escrow agent, whereby we agreed to issue to Trafalgar an additional 15,000,000 shares of common stock (the “Pledged Shares”), which shall serve as additional pledged property under the Security Agreement, as amended, between us and Trafalgar. The Pledged Shares were to be held by the escrow agent until the full payment of all amounts due to Trafalgar under the Debentures or the termination or expiration of the Pledge and Escrow Agreement. Upon the occurrence of an event of default under the Debentures, the Securities Purchase Agreement, the Pledge and Escrow Agreement, the Security Agreement and all other contracts between us and Trafalgar, Trafalgar will be entitled to receive physical delivery of the Pledged Shares, vote the Pledged Shares, to receive dividends and other distributions thereon, to sell the Pledged Shares, and to enjoy all other rights and privileges incident to the ownership of the Pledged Shares. Upon full payment of all amounts due to Trafalgar under the Debentures, the Pledge Agreement and Trafalgar’s security interest and rights in and to the Pledged Shares will terminate.
 
Also in connection with the Amended Transaction Documents: (i) we gave Trafalgar the first right of refusal to provide additional funding to us; (ii) we agreed to enter into an exclusive investment banking agreement with Trafalgar Capital Advisors, an affiliate of Trafalgar, within ten business days of October 31, 2008, and as of the date of this quarterly report, we are currently negotiating the terms of this agreement with Trafalgar Capital Advisors; (iii) we agreed to pay a legal and documentation review fee to James G. Dodrill II, P.A. of $7,500, which was paid directly from the proceeds of the closing for the Amended Transaction Documents; (iv) we entered into a side letter agreement whereby we agreed to redeem all of the Debentures if we successfully complete an equity financing for gross amounts of a minimum of $5 million; and (v) we entered into irrevocable transfer agent instructions with our transfer agent.
 
We failed to make most payments due to Trafalgar Capital Specialized Investment Fund, Luxembourg under the various loan arrangements (approximately $196,000 in scheduled principal, premium and interest repayments at February 28, 2010). We later were not in a position to repay the $1,250,000 principal due at the end of April 2010 under a loan agreement with Trafalgar (which would have left $2,250,000 principal outstanding). We have also incurred trade creditor and direct salary related debt of over $1,000,000 to date for our operations in Kansas. Several of these key trade creditors have issued mechanical liens against our facilities in Kansas.
 
As a result, in April 30, 2010, we and Trafalgar entered into amendment to the securities purchase agreement, secured debenture, registration rights agreement and security agreement, whereby Trafalgar agreed to extend the maturity date of a secured debenture in the principal amount of $1,250,000 until October 31, 2010 from April 30, 2010. In consideration for Trafalgar’s agreeing to extend the maturity date of that secured debenture, we released 15,000,000 shares of our common stock from escrow to Trafalgar as payment of an extension fee. These shares were originally intended to serve as additional pledged property under the security agreement that we entered into with Trafalgar in connection with the sale of the debentures to Trafalgar and in fact were described by Trafalgar as being made available for a CEF type arrangement to repay creditors. This was later reneged on by Trafalgar.
 
In addition, pursuant to the bill of sale and assignment in lieu of foreclosure and the certificate of seller, we sold and assigned to TCF Oil and Gas Corp., a Florida corporation owned by Trafalgar, all of our properties located in Ellsworth County, Kansas, including three oil and gas leases located in Ellsworth County, Kansas in consideration of the payment of $100 from TCF Oil and Gas to us and of the simultaneous execution by Trafalgar of a covenant not to sue us for an in personam judgment under the obligations evidenced or secured by the various loan documents between Trafalgar and us. TCF Oil and Gas did not assume our obligations and liabilities under the loan documents between Trafalgar and us and such obligations and liabilities remain our responsibility. In addition, this bill of sale and assignment does not restrict the right of Trafalgar as holder of such loan documents to enforce the same or to institute or proceed with foreclosure or any other remedial proceedings under the same. We also released Trafalgar from any claims arising out of the loans from Trafalgar
 
 
 
 
 
In consideration of the simultaneous execution by our company of the bill of sale and assignment in lieu of foreclosure and the certificate of seller, Trafalgar, FIS entered into the covenant not to sue. Pursuant to this covenant, Trafalgar agreed not to sue for an in personam judgment against our company under the various loan documents between our company and Trafalgar. Nevertheless, in connection with the enforcement of its rights under such loan documents, Trafalgar reserved the right to sue our company in rem.
 
In addition, Trafalgar expressly reserved all rights of action, claims, and demands against any and all persons or entities, including without limitation any guarantor of any of the loans, indebtedness or obligations evidenced or secured by such loan documents other than our company, and expressly reserved all rights of action, claims and demands against and all persons or entities including our company under or arising out of or related to any mechanics’ liens and/or mechanics’ lien claims filed on, asserted against or related to any of the mortgaged properties (mostly three oil and gas leases in Ellsworth County, Kansas and related properties) from our company to Trafalgar. This instrument was not a release and does not operate to discharge any of the loans, indebtedness or obligations evidenced or secured by the loan documents.
 
On September 20,2011 the company issued an 8% convertible note to Asher Enterprises Inc.in the aggregate principal amount of $45,000.

PURCHASE OF SIGNIFICANT EQUIPMENT

We do not intend to purchase any significant equipment during the next twelve months.

OFF-BALANCE SHEET ARRANGEMENTS
 
As of the date of this Quarterly Report, we do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.
 

 
Our activities expose us to a variety of financial risks: market risk (including currency risk and cash flow); credit risk and liquidity risk. Our overall risk management program focuses on the unpredictability of the financial market and seeks to minimize potential adverse effects on our financial performance. We do not use derivative financial instruments to hedge these risks. Our subsidiaries are exposed to financial risks that arise from fluctuations in foreign exchange rates and the degree of volatility of these rates.

Interest rate
 
Interest rates in the United States are generally controlled. Any potential future loans will relate mainly to acquisition of properties and will be mainly short-term. However our debt may be likely to rise in connection with expansion and if interest rates were to rise at the same time, this could have a significant impact on our operating and financing activities. We have not entered into derivative contracts to hedge existing risks for speculative purposes. We are exposed to fluctuation in our future cash flows arising from changes in interest rates through its variable rate financial assets and liabilities. Other liabilities negotiated at a fixed rate expose us to fair value interest rate risk.
 
 
 
 
 
ITEM 4.                      CONTROLS AND PROCEDURES

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
 
\We maintain “disclosure controls and procedures,” as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”), that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.  We conducted an evaluation (the “Evaluation”), under the supervision and with the participation of our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), of the effectiveness of the design and operation of our disclosure controls and procedures (“Disclosure Controls”) as of the end of the period covered by this report pursuant to Rule 13a-15 of the Exchange Act.  Based on this Evaluation, our CEO and CFO concluded that our Disclosure Controls were effective as of the end of the period covered by this report.
 
Changes in Internal Controls

We have also evaluated our internal controls for financial reporting, and there have been no significant changes in our internal controls or in other factors that could significantly affect those controls subsequent to the date of their last evaluation.

Limitations on the Effectiveness of Controls

Our management, including our CEO and CFO, does not expect that our Disclosure Controls and internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management or board override of the control.
 
The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

 
 
 
 
 
CEO and CFO Certifications

Appearing immediately following the Signatures section of this report there are Certifications of the CEO and the CFO. The Certifications are required in accordance with Section 302 of the Sarbanes-Oxley Act of 2002 (the Section 302 Certifications). This Item of this report, which you are currently reading is the information concerning the Evaluation referred to in the Section 302 Certifications and this information should be read in conjunction with the Section 302 Certifications for a more complete understanding of the topics presented.


Audit Committee report
 
Our Board of Directors has not established an audit committee. The respective role of an audit committee has been conducted by our Board of Directors. We intend to establish an audit committee during fiscal year 2011. When established, the audit committee's primary function will be to provide advice with respect to our financial matters and to assist our Board of Directors in fulfilling its oversight responsibilities regarding finance, accounting, and legal compliance. The audit committee's primary duties and responsibilities will be to: (i) serve as an independent and objective party to monitor our financial reporting process and internal control system; (ii) review and appraise the audit efforts of our independent accountants; (iii) evaluate our quarterly financial performance as well as its compliance with laws and regulations; (iv) oversee management's establishment and enforcement of financial policies and business practices; and (v) provide an open avenue of communication among the independent accountants, management and our Board of Directors.


PART II.                    OTHER INFORMATION

ITEM 1.                      LEGAL PROCEEDINGS
Except for claims, if any, arising out of our letter of commitment with Senergy Limited (as disclosed elsewhere in this Quarterly Report) and trade creditor related debt for our operations in Kansas (as disclosed elsewhere in this Quarterly Report), we know of no material, existing or pending legal proceedings to which we are a party or of which any of our property is the subject.
 
Management is not aware of any other legal proceedings contemplated by any governmental authority or any other party involving us or our properties. As of the date of this Quarterly Report, no director, officer or affiliate is (i) a party adverse to us in any legal proceeding, or (ii) has an adverse interest to us in any legal proceedings. Management is not aware of any other legal proceedings pending or that have been threatened against us or our properties.

ITEM 1A.                      RISKS FACTORS

No report required.

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

Share Exchange Agreements

Effective July 15, 2011, we entered into the Ontario Share Exchange Agreement and the Resource Share Exchange Agreement. In accordance with the terms and provisions of the Ontario Share Exchange Agreement, we acquired one hundred percent (100%) of the total issued and outstanding shares of common stock of Ontario helld of record by the Ontario Shareholders in exchange for issuance of an aggregate 1,750,000 shares of our restricted common stock to the Ontario Shareholders. The shares of common stock were issued to the Ontario Shareholders under Regulation S of the Securities Act. In accordance with the terms and provisions of the Resource Share Exchange Agreement, we acquired one hundred percent (100%) of the total issued and outstanding shares of common stock of Resource helld of record by the Resource Shareholders in exchange for issuance of an aggregate 1,750,000 shares of our restricted common stock to Resource Shareholders. The shares of common stock were issued to the Resource Shareholders under Regulation S of the Securities Act.

 
 
 

Effective July 15, 2011, the Board of Directors of Fox Petroleum, Inc., a corporation organized under the laws of the State of Nevada (the “Company”) authorized the execution of that certain share exchange agreement dated July 15, 2011 (the “Ontario Share Exchange Agreement”) among the Company, 1536692 Ontario Inc., a private corporation duly registered under the laws of the Province of Ontario, Canada (“Ontario”) and the shareholders of Ontario (the “Ontario Shareholders”). In accordance with the terms and provisions of the Ontario Share Exchange Agreement: (i) the Ontario Shareholders tendered all of their shares held of record, which constituted one hunred percent (100%) of the total issued and outstanding shares of Ontario, to the Company; (ii) the Company issued to the Ontario Shareholders 1,750,000 shares of its restricted common stock; and (iii) the Company assumed a debt due and owing by Ontario to Davfam Investments (1998) Ltd.  in the amount of $225,000, which debt was incurred by Ontario during fiscal years 2002 through 2005 . Ontario is the owner of a scrap plastic processing plant with certain equipment, fixtures and improvements and assets located in Hamilton, Ontario, Canada. Ontario is a wholly-owned subsidiary of the Company as a result of the Ontario Share Exchange Agreement.

Amendment to Articles of Incorporation
 
Effective August 31, 2011, Fox Petroleum, Inc., a corporation organized under the laws of the State of Nevada (the “Company”) filed an amendment to its Articles of Incorporation (the “Amendment”) to increase the Company’s authorized capital structure to 500,000,000 shares consisting of 450,000,000 shares of common stock, par value $0.001, and 50,000,000 shares of preferred stock, par value $0.001.
The Amendment was approved by the Board of Directors by unanimous written consent resolutions dated August 31, 2011 signed by all the members of the Board of Directors. The Amendment was subsequently approved by certain shareholders of the Company holding a majority of the total issued and outstanding shares of common stock of the Company by written consent resolutions dated August 31, 2011

ITEM 3.                      DEFAULTS UPON SENOIR SECURITIES

No report required.

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

No report required.

ITEM 5.                      OTHER INFORMATION

No report required.

ITEM 6.      EXHIBITS
 
Exhibits:
 
SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
 
FOX PETROLEUM INC.
  
       
Dated: July 12, 2011 
By:
/s/  William Lieberman
  
   
William Lieberman, President and
  
   
Chief Executive Officer
  
 

Dated: July 12, 2011 
By:
/s/  William Lieberman
  
   
William Lieberman, Chief Financial Officer
  


 

FOX PETROLEUM INC. Reports

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