FORCE MINERALS CORP - FORM 10-Q

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EXCEL - IDEA: XBRL DOCUMENT - FORCE MINERALS CORP	Financial_Report.xls
EX-32.1 - EXHIBIT 32.1 - FORCE MINERALS CORP	ex32_1.htm
EX-31.1 - EXHIBIT 31.1 - FORCE MINERALS CORP	ex31_1.htm
EX-31.2 - EXHIBIT 31.2 - FORCE MINERALS CORP	ex31_2.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

[X]	Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

	For the quarterly period ended February 28, 2013

[ ]	Transition Report pursuant to 13 or 15(d) of the Securities Exchange Act of 1934

	For the transition period from __________ to__________

	Commission File Number: 000-52494

Force Energy Corp.

(Exact name of registrant as specified in its charter)

Nevada	98-0462664
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

1400 16th Street, Suite 400, Denver, CO 80202

(Address of principal executive offices)

720-470-1414

(Registrant’s telephone number)

___________________________

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

Indicate by 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 such filing requirements for the past 90 days [X] Yes [ ] No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). [ ] Yes [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.

[ ] Large accelerated filer	[ ] Accelerated filer
[ ] Non-accelerated filer	[X] Smaller reporting company

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). [ ] Yes [X] No

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 128,301,602 common shares as of February 28, 2013.

Table of Contents

	TABLE OF CONTENTS
		Page

PART I – FINANCIAL INFORMATION

Item 1:	Financial Statements	3
Item 2:	Management’s Discussion and Analysis of Financial Condition and Results of Operations	4
Item 3:	Quantitative and Qualitative Disclosures About Market Risk	10
Item 4:	Controls and Procedures	10

PART II – OTHER INFORMATION

Item 1:	Legal Proceedings	12
Item 1A:	Risk Factors	12
Item 2:	Unregistered Sales of Equity Securities and Use of Proceeds	12
Item 3:	Defaults Upon Senior Securities	12
Item 4:	Mine Safety Disclosures	12
Item 5:	Other Information	12
Item 6:	Exhibits	12

Table of Contents

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

Our financial statements included in this Form 10-Q are as follows:

F-1	Consolidated Balance Sheets as of February 28, 2013 (unaudited) and November 30, 2011;
F-2	Consolidated Statements of Operations for the three months ended February 28, 2013 and February 29, 2012 and period from November 1, 2006 (Inception) to February 28, 2013 (unaudited);
F-3	Consolidated Statements of Cash Flows for the three months ended February 28, 2013 and February 29, 2012 and period from November 1, 2006 (Inception) to February 28, 2013 (unaudited);
F-4	Notes to Consolidated Financial Statements

These financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and the SEC instructions to Form 10-Q. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the interim period ended February 28, 2013 are not necessarily indicative of the results that can be expected for the full year.

Table of Contents

FORCE ENERGY CORP.

(A Development Stage Company)

CONSOLIDATED BALANCE SHEETS

	February 28,			November 30
	2013			2012
ASSETS		(unaudited)
Current
Cash	$	—		$	35,442

Total Current Assets		—			35,442

Mineral property option		340,099			340,099

Total Assets	$	340,099		$	375,541

LIABILITIES
Current
Bank overdraft	$	204		$	—
Accounts payable and accrued liabilities		128,230			43,713
Advances payable		20,000			20,000
Due to related parties		12,125			4,625
Convertible notes payable, net of discount		217,422			315,518
Derivative liabilities		183,700			58,200

Total Current Liabilities		561,681			442,056

Asset retirement obligation		16,889			16,845

Total Liabilities		578,570			458,901

Commitments

STOCKHOLDERS’ DEFICIT
Preferred stock, $0.001 par value 10,000,000 shares authorized, none outstanding
Common stock, $0.001 par value 750,000,000 shares authorized 128,301,602 shares issued (November 30, 2012, - 105,416,987 shares issued)		128,302			105,417
Additional paid in capital		3,889,851			3,812,334
Deferred stock compensation		(57,900	)		(95,400	)
Accumulated other comprehensive income		6,598			6,027
Deficit accumulated during the development stage		(4,205,322	)		(3,911,738	)

Total Stockholders’ Deficit		(238,471	)		(83,360	)

Total Liabilities and Stockholders’ Deficit	$	340,099		$	375,541

See accompanying notes to the Consolidated Financial Statements

F-1

Table of Contents

FORCE ENERGY CORP.

(A Development Stage Company)

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited)

							November 1,
							2006 (Date of
	Three Months Ended						Inception) to
	February 28						February 28,
	2013			2012			2013
				Restated			(cumulative)
					(Note 15)
Expenses
Accounting and audit fees	$	19,654		$	10,500		$	329,600
Accretion of ARO		615			524			7,772
Bank charges		23			832			5,466
Consulting fees		67,300			—			689,239
Depreciation		—			—			4,651
Investor relations		—			—			61,443
Legal fees		9,219			6,806			230,538
Management fees – Note 7		67,500			53,700			1,450,100
Mineral property exploration costs		—			—			64,250
Office expenses		178			2,336			44,371
Oil and gas exploration costs		—			—			15,000
Rent		784			771			47,598
Tax penalties and interest		—			—			42,910
Transfer and filing fees		507			490			81,909
Travel		—			—			12,476
Impairment of oil and gas costs		—			—			553,466

Loss before other items		(165,780	)		(75,959	)		(3,640,789	)

Other items:
Debt forgiveness		—			—			15,286
Loss on settlement of advance payable		—			—			(30,000	)
Change in fair value of derivative liability		(93,700	)		(19,200	)		(132,300	)
Interest expense		(34,104	)		(100,137	)		(417,677	)
Interest income		—			—			158

Net loss for the period		(293,584	)		(195,296	)		(4,205,322	)

Foreign exchange gain (loss)		571			(1,002	)		6,598

Comprehensive loss for the period	$	(293,013	)	$	(196,298	)	$	(4,198,724	)

Basic loss per share	$	(0.00	)	$	(0.01	)

Weighted average number of shares outstanding		113,105,733			52,937,627

See accompanying notes to the Consolidated Financial Statements

F-2

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FORCE ENERGY CORP.

(A Development Stage Company)

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

							Period from
							November 1,
							2006 (Date of
	Three Months Ended						Inception) to
	February 28						February 28
	2013			2012			2013
				Restated
					(Note 15)			(cumulative)
Operating Activities:
Net loss for the period	$	(293,584	)	$	(195,296	)	$	(4,205,322	)
Adjustments to reconcile net loss to net cash used in operating activities:
Non-cash interest expense		4,593			3,088			43,066
Interest expense - beneficial conversion feature of convertible note and advance payable		—			72,000			127,000
Accretion and elimination of discount on convertible notes		29,511			5,739			277,611
Loss from change in fair value of derivative liability		93,700			19,200			132,300
Consulting fees paid in stock		—			—			583,338
Share based compensation		37,500			31,200			767,100
Debt forgiveness		—			—			(15,286	)
Accretion of ARO		615			524			7,772
Depreciation		—			—			4,651
Impairment of oil and gas costs		—			—			553,466
Changes in operating assets and liabilities
Prepaid expenses		—			1,119			—
Advance payable		—			—			50,000
Accounts payable and accrued liabilities		84,519			(6,414	)		110,214

Net cash used in operating activities		(43,146	)		(68,840	)		(1,564,090	)

Investing Activities:
Acquisition of property and equipment		—			—			(4,651	)
Acquisition of mineral property option		—			—			(110,099	)
Acquisition and development costs of oil and gas properties		—			—			(387,517	)

Net cash used in investing activities		—			—			(502,267	)

Financing Activities:
Capital stock issued		—			—			1,419,000
Proceeds from convertible note payable		—			127,500			507,500
Due to related parties		7,500			(8,125	)		172,942
Repayment of convertible note payable		—			(38,345	)		(57,655	)
Proceeds from reverse acquisition		—			—			37,058

Net cash provided by financing activities		7,500			81,030			2,078,845

Effect of foreign currency translation		—			—			(12,692	)

Increase (decrease) in cash during the period		(35,646	)		12,190			(204	)

Cash, beginning of the period		35,442			16,393			—

Cash, end of the period	$	(204	)	$	28,583		$	(204	)

Supplemental Disclosure with Respect to Cash Flows – Note 12

See accompanying notes to the Consolidated Financial Statements

F-3

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FORCE ENERGY CORP.

(A Development Stage Company)

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

February 28, 2013

(Unaudited)

Note 1 Interim Reporting

The unaudited consolidated financial information furnished herein reflects all adjustments, which in the opinion of management are necessary to fairly state the Company’s financial position and the results of its operations for the periods presented. All adjustments are of a normal recurring nature. These interim consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements and notes thereto included in the Company’s audited consolidated financial statements for the fiscal year ended November 30, 2012. The Company assumes that the users of the interim consolidated financial information herein have read or have access to the audited financial statements for the preceding fiscal period and that the adequacy of additional disclosure needed for a fair presentation may be determined in that context. Accordingly, footnote disclosure, which would substantially duplicate the disclosure contained in the Company’s audited consolidated financial statements for the fiscal year ended November 30, 2012, has been omitted. The results of operations for the three-month period ended February 28, 2013 are not necessarily indicative of results for the entire year ending November 30, 2013.

Note 2 Nature of Operations and Going Concern

The Company was incorporated in the state of Nevada, United States of America on November 1, 2006. The Company was formed for the purpose of acquiring exploration and development stage natural resource properties.

Effective December 28, 2006, the Board of Directors authorized a 3 for 1 forward stock split of the common shares. The authorized number of common shares increased from 90,000,000 to 270,000,000 common shares with a par value of $0.001. All references in the accompanying financial statements to the number of common shares have been restated to reflect the forward stock split.

On February 12, 2008, the Company acquired 100% of the common shares of Force Energy Corp. an inactive company incorporated in Nevada on July 19, 2005, for $100, to effect a name change of the Company. On February 12, 2008, the Company and Force Energy Corp filed articles of merger with the Secretary of State of Nevada to effectuate a merger between the two companies. The surviving entity of the merger was the Company. Immediately thereafter the Company changed its name to Force Energy Corp.

These consolidated financial statements have been prepared in accordance with generally accepted accounting principles applicable to a going concern, which assumes that the Company will be able to meet its obligations and continue its operations for its next twelve months. Realization values may be substantially different from carrying values as shown and these consolidated financial statements do not give effect to adjustments that would be necessary to the carrying values and classification of assets and liabilities should the Company be unable to continue as a going concern. At February 28, 2013, the Company has a working capital deficit of $561,681. The Company has yet to achieve profitable operations, has accumulated losses of $4,205,322 since its inception and expects to incur further losses in the development of its business, all of which casts substantial doubt about the Company’s ability to continue as a going concern. The Company’s ability to continue as a going concern is dependent upon its ability to generate future profitable operations and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. Management has no formal plan in place to address this concern but considers that the Company will be able to obtain additional funds by equity financing and/or related party advances, however there is no assurance of additional funding being available or on acceptable terms, if at all.

F-4

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Note 3 Recent Issued Accounting Pronouncements

Adopted

Effective January 2012, the Company adopted ASU No. 2011-04, “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and International Financial Reporting Standards (“IFRS”) of Fair Value Measurement – Topic 820 (ASU 2-11-04).” ASU 2011-04 represents the converged guidance of the Financial Accounting Standards Board (“FASB”) and the International Accounting Standards Board (“IASB”) on fair value measurement. A variety of measures are included in the update intended to either clarify existing fair value measurement requirements, change particular principles requirements for measuring fair value or for disclosing information about fair value measurements. For many of the requirements, the FASB does not intend to change the application of existing requirements under Accounting Standards Codification (“ASC”) Topic 820, Fair Value Measurements. ASU 2011-04 was effective for interim and annual periods beginning after December 15, 2011. The adoption of this update did not have a material impact on the consolidated financial statements and related disclosures.

Effective January 2012, the Company adopted ASU No. 2011-05, “Presentation of Comprehensive Income (ASU 2011-05)”. ASU 2011-05 is intended to increase the prominence of items reported in other comprehensive income and to facilitate convergence of accounting guidance in this area with that of the IASB. The amendments require that all non-owner changes in shareholders’ equity be presented in a single continuous statement of comprehensive income or in two separate but consecutive statements. In December 2011, the FASB issued ASU No. 2011-12, “Comprehensive Income (Topic 220): Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05 (ASU 2011-12).” ASU 2011-12 defers the provisions of ASU 2011-05 that require the presentation of reclassification adjustments on the face of both the statement of income and statement of other comprehensive income. Amendments under ASU 2011-05 that were not deferred under ASU 2011-12 will be applied retrospectively for fiscal years, and interim periods within those years, beginning after December 15, 2011. The adoption of this update did not have a material impact on the consolidated financial statements and related disclosures.

Not Yet Adopted

In December 2011, the FASB issued ASU No. 2011-11: Balance Sheet (topic 210): Disclosures about Offsetting Assets and Liabilities, which requires new disclosure requirements mandating that entities disclose both gross and net information about instruments and transactions eligible for offset in the statement of financial position as well as instruments and transactions subject to an agreement similar to a master netting arrangement. In addition, the standard requires disclosure of collateral received and posted in connection with master netting agreements or similar arrangements. This ASU is effective for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. Entities should provide the disclosures required retrospectively for all comparative periods presented. We are currently evaluating the impact of adopting ASU 2011-11 on the consolidated financial statements and related disclosures.

In February 2013, the FASB issued ASU No. 2013-02, “Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive (ASU 2013-02)”. This guidance is the culmination of the FASB’s deliberation on reporting reclassification adjustments from accumulated other comprehensive income (“AOCI”). The amendments in ASU 2013-02 do not change the current requirements for reporting net income or other comprehensive income. However, the amendments require disclosure of amounts reclassified out of AOCI in its entirety, by component, on the face of the statement of operations or in the notes thereto. Amounts that are not required to be reclassified in their entirety to net income must be cross-referenced to other disclosures that provide additional detail. This standard is effective prospectively for annual and interim reporting periods beginning after December 15, 2012. The Company is evaluating the effect, if any, the adoption of ASU 2013-02 will have on its consolidated financial statements and related disclosures.

Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the American Institute of Certified Public Accountants, and the United States Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company’s present or future financial statements.

F-5

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Note 4 Financial Instruments

Fair value is defined as the price that would be received upon sale of an asset or paid upon transfer of a liability in an orderly transaction between market participants at the measurement date and in the principal or most advantageous market for that asset or liability. The fair value should be calculated based on assumptions that market participants would use in pricing the asset or liability, not on assumptions specific to the entity. In addition, the fair value of liabilities should include consideration of non-performance risk including our own credit risk.

In addition to defining fair value, the standard expands the disclosure requirements around fair value and establishes a fair value hierarchy for valuation inputs is expanded. The hierarchy prioritizes the inputs into three levels based on the extent to which inputs used in measuring fair value are observable in the market. Each fair value measurement is reported in one of the three levels and which is determined by the lowest level input that is significant to the fair value measurement in its entirety.

These levels are:

Level 1 - inputs are based upon unadjusted quoted prices for identical instruments traded in active markets.

Level 2 – inputs are based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3- inputs are generally unobservable and typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability. The fair values are therefore determined using model-based techniques that include option pricing models, discounted cash flow models, and similar techniques.

Financial assets and liabilities measured at fair value on a recurring basis:

	FAIR VALUE		FEBRUARY 28, 2013				NOVEMBER 30, 2012
		INPUT		CARRYING		ESTIMATED		CARRYING		ESTIMATED
		LEVEL		AMOUNT		FAIR VALUE		AMOUNT		FAIR VALUE
Derivative Liability		3		187,300		187,300		58,200		58,200
Total Financial Liabilities			$	187,300	$	187,300	$	58,200	$	58,200

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Note 4 Financial Instruments – (cont’d)

In management’s opinion, the fair value of convertible notes payable and advances payable is approximate to carrying value as the interest rates and other features of these instruments approximate those obtainable for similar instruments in the current market. Unless otherwise noted, it is management’s opinion that the Company is not exposed to significant interest, exchange or credit risks arising from these financial instruments.

The carrying value of cash balances, accounts payable and accrued liabilities and due to related party approximates the fair value due to their short-term maturities.

Note 5 Mineral Property

On July 6, 2010, the Company entered into a Property Option Agreement (amended May 11, 2011) to acquire an option to purchase a 100% interest in the property known as the Zoro 1 property, a mineral property comprising 52 hectares (approximately 128.50 acres) in the Snow Lake region of Manitoba Canada. In order to exercise the option, the Company must pay cash or issue stock to the Option or by the following dates:

i) $59,600 (Cdn$62,000) on signing the agreement (paid)

ii) $102,900 (Cdn$100,000) or issue 1,000,000 shares of common stock on or before June, 15, 2011. (1,000,000 shares issued with a fair value of $80,000)

iii) $50,500 cash (Cdn$50,000) and issue 7,500,000 common stock on or before June, 15, 2012. ($50,500 paid (Cdn$50,000) and 7,500,000 shares issued with a fair value of $150,000)

iv) $403,560 (Cdn$400,000) or issue a specified number of common shares still to be determined by the parties on or before June, 15, 2013.

During the three month period ended February 28, 2013 the Company incurred $nil (three month ended February 29, 2012, - $8,639) of exploration expenditures on the property.

Note 6 Advance Payable

On March 21, 2011, the Company received a cash advance of $20,000. The advance is unsecured, non-interest bearing and has no fixed repayment terms.

Note 7 Related Party Transactions

Amounts due from (to) related parties comprise:

	February 28		November 30
	2013		2012
Amounts due to Director
Management fees	$	12,125	$	4,625

All amounts due to related parties are unsecured, non-interest bearing and have no specific terms for repayment.

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Note 7 Related Party Transactions – (cont’d)

On July 23, 2010, the Company entered into an employment contract with the Company President which expires July 22, 2011. Pursuant to the contract, the President received 2,500,000 common shares having a fair value of $550,000. Should the contract be terminated prior to completion the President will return 100,000 shares to treasury for each unfulfilled month of the contract. The President will also receive $2,500 per month for months 1-3; $4,000 per month for months 4-6 and $5,000 per month for months 7-12 of the contract.

The fair value of 1,300,000 shares issued which were earned immediately and have been expensed as stock based compensation of $286,000. The fair value of the remaining 1,200,000 shares issued which are to be earned over the term of the contract will be charged to operations over the life of the employment contract. This portion of the stock award is accounted for as deferred compensation whereby the fair value of the award is recorded as a component of stockholders’ equity until earned.

Pursuant to this stock award the Company recorded management fees of $nil (year ended November 31, 2011 - $170,200; year ended November 30, 2010 - $93,800).

On July 18, 2011, the Company entered into a new employment contract with the Company President which expires July 18, 2013. Pursuant to the contract, the President received 2,500,000 common shares having a fair value of $125,000. The President will receive $7,500 per month for months 13-24 of the contract. Unless the contract is terminated by either party giving 45 days written notice the contact will automatically renew. Should the contract be renewed then the President will receive 2,500,000 shares of common stock and an annual increase of $2,500 per month upon each renewal. If the Company does not have sufficient cash resources to settle the cash element of the contract, then at the request of the President any accrued unpaid fees may be converted into common stock at $0.025 per share.

The fair value of the 2,500,000 shares issued which are to be earned over the term of the contract will be charged to operations over the life of the employment contract. This portion of the stock award is accounted for as deferred compensation whereby the fair value of the award is recorded as a component of stockholders’ equity until earned. Pursuant to this stock award during the three month period ended February 28, 2013 the Company recorded management fees of $nil (three month period ended February 29, 2012 - $31,200).

On July 16, 2012, the Company entered into an addemdum to the contract which expires July 15, 2014. Pursuant to the contract, the President received 7,500,000 common shares on July 2012, and will continue to receive 7,500,000 common shares upon each anniversary date of the addendum. The fair value of the shares received was $150,000. The President will receive $10,000 per month for months 25-36 of the contract and an annual monthly increase of $2,500 per month thereafter. Unless the contract is terminated by either party giving 45 days written notice the contact will automatically renew. If the Company does not have sufficient cash resources to settle the cash element of the contract, then at the request of the President any accrued unpaid fees may be converted into common stock at $0.01 per share.

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Note 7 Related Party Transactions – (cont’d)

The fair value of the 7,500,000 shares issued which are to be earned over the term of the contract will be charged to operations over the life of the employment contract. This portion of the stock award is accounted for as deferred compensation whereby the fair value of the award is recorded as a component of stockholders’ equity until earned. During the three month period ended February 28, 2013, the Company recorded management fees of $37,500 (three month period ended February 28, 2012 - $nil) pursuant to this stock award

During the three month periods ended February 28, 2013 and February 29, 2012 the Company charged or accrued the following amounts:

	Three Months Ended
	February 28
	2013		2012
Amounts charged by directors
Management fees	$	67,500	$	53,700

Note 8 Convertible Notes Payable

	February 28			November 30
	2013			2012

Promissory Note #1	$	—		$	—
Promissory Note #2		—			—
Promissory Note #3		—			—
Promissory Note #4		—			—
Promissory Note #5		—			—
Promissory Note #6		20,000			20,000
Promissory Note #7		20,000			20,000
Promissory Note #8		20,000			20,000
Promissory Note #9		—			—
Promissory Note #10		30,000			30,000
Promissory Note #11		30,500			42,500
Promissory Note #12		42,500			42,500
Promissory Note #13		75,000			75,000
Promissory Note #14		12,000			50,000

		250,000			300,000
Debt discount		(52,689	)		—
Accrued interest		20,111			15,518

	$	217,422		$	315,518

As at February 28, 2013 and November 30, 2012 convertible notes payable are recorded net of unamortized debt discount of $52,689 and $nil respectively.

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Note 8 Convertible Notes Payable - (cont’d )

Promissory Note #1 (Note 15 - Restatement)

On May 11, 2011, the Company received $100,000 cash and the Company issued a convertible promissory note in the amount of $100,000. The promissory note is unsecured, bears interest at 8% per annum, and matures on May 10, 2013.

During the three month period ended February 28, 2013 the Company accrued $nil (three month period ended February 29, 2012 - $1,973) in interest expense pursuant to the note.

The note may be converted at the option of the holder at any time into Common stock of the Company. The conversion price is defined as “50% discount to the average bid price for the shares as quoted on the OTCBB where the shares are traded for the three consecutive business days prior to the date of conversion”. The Company determined that the embedded conversion feature was a derivative liability based upon its variable conversion terms.

On October 24, 2012, the note was amended. The amended note is unsecured, bears interest at 10% and matures on May 11, 2013. The note may be converted into Common stock at the option of the holder at any time prior to maturity. The conversion price is defined as “50% multiplied by the market price, where market price is determined as the lowest 3 closing bid prices during the ten trading day period ending the day prior to conversion. The Company determined the embedded conversion feature was a derivative liability based upon its variable conversion terms.

Upon inception the Company recorded debt discount and a derivative liability of $131,000 being the fair value of the conversion feature which was determined using the Black-Scholes valuation model. The debt discount is accreted to the statement of operations using the effective interest rate method over the term on the note or to the date of conversion. The derivative liability is revalued at each reporting date to fair value. Any change in fair value is credited or charged to the statement of operations in the period.

During the three month period ended February 28, 2013, the Company recorded a loss of $80,300 (three month period ended February 28, 2012 – loss of $19,200) due to the change in value of the derivative liability during the period, and debt discount of $nil (three month period ended February 29, 2012 - $5,739) was accreted to the statement of operations.

During the year ended November 30, 2012, the Company issued 14,344,432 common shares upon the conversion of the principal balance of the note into common stock, and $160,400 of the derivative liability was re-classified as additional paid in capital upon conversion, and the balance of the debt discount of $68,602 was charged to the statement of operations.

As of February 28, 2013, accrued interest of $11,141 (November 30, 2012 - $11,141), debt discount of $nil (November 30, 2012 - $nil) and a derivative liability of $93,300 (November 30, 2012 - $13,000) was recorded.

During the year ended November 30, 2011, the Company failed to recognize the embedded derivative which arose upon inception of the note due to the note being convertible at the option of the holder immediately. The Company has restated its accounting for this note as more fully described in Note 15.

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Note 8 Convertible Notes Payable – (cont’d)

Promissory Note #2 (Note 15 - Restatement)

On August 18, 2011, the Company received $37,500 cash and the Company issued a convertible promissory note in the amount of $37,500. The promissory note is unsecured, bears interest at 8% per annum, and matures on May 22, 2012. During the three month period ended February 28, 2013 the Company accrued $nil (three month period ended February 29, 2012 - $625) in interest expense.

After 180 days the note may be converted at the option of the holder into Common stock of the Company. The conversion price is 55% of the market price, where market price is defined as “the average of the lowest three of the last ten closing trading prices on the OTCBB immediately prior to conversion date”. The Company determined that the embedded conversion feature would be a derivative liability based upon its variable conversion terms once the holders conversion rights were triggered.

On February 15, 2012, the Company exercised its right of prepayment settlement, and the note was settled for cash consideration of $57,655. During the year ended November 30, 2012, the Company recorded $18,685 of interest pursuant to the terms of the note as a result of an early settlement penalty.

Promissory Note #3 (Note 15 - Restatement)

On September 28, 2011, the Company received $32,500 cash and the Company issued a convertible promissory note in the amount of $32,500. The promissory note is unsecured, bears interest at 8% per annum, and matures on July 3, 2012. During the three month period ended February 28, 2013 the Company accrued $nil (three month period ended February 29, 2012 - $646) in interest expense.

In March 2012, upon the holders option to convert becoming active the company recorded debt discount to the extent of the face value of the note of $32,500, expensed the excess amount of $700 as debt discount immediately and recorded a derivative liability of $33,200, being the fair value of the conversion feature which was determined using the Black-Scholes valuation model. The debt discount is accreted to the statement of operations using the effective interest rate method over the term on the note or to the date of conversion, and the derivative liability is revalued at each reporting date to fair value. Any change in fair value is credited or charged to the statement of operations in the period.

During the year ended November 30, 2012 the Company recorded a gain of $1,700 (2011 - $nil) due to the change in value of the derivative liability during the year.

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Note 8 Convertible Notes Payable – (cont’d)

Promissory Note #3 – (cont’d)

During the year ended November 30, 2012, the Company issued an aggregate of 2,486,549 common shares upon the conversion of the principal and interest balance of the note into common stock. At that time the balance of debt discount of $32,500 was charged to the statement of operations and the remaining balance of the derivative liability amounting to $31,500 was re-classified to additional paid in capital.

As at February 28, 2013, accrued interest of $nil (November 30, 2012 - $nil), debt discount of $nil (November 30, 2012 - $nil) and a derivative liability of $nil (November 30, 2012 - $nil) was recorded.

Promissory Note #4 (Note 15 - Restatement)

On January 4, 2012, the Company received $37,500 cash and the Company issued a convertible promissory note in the amount of $37,500. The promissory note is unsecured, bears interest at 8% per annum, and matures on October 6, 2012. During the three month period ended February 28, 2013 the Company accrued $nil (three month period ended February 29, 2012 – $469) in interest expense.

After 180 days the note may be converted at the option of the holder into Common stock of the Company. The conversion price is defined as “55% discount to the average bid price for the shares as quoted on the OTCBB where the shares are traded for the three consecutive business days prior to the date of conversion”. The Company determined that the embedded conversion feature would be a derivative liability based upon its variable conversion terms once the holders conversion rights were triggered.

In July 2012, upon the holders option to convert becoming active the Company recorded a debt discount and a derivative liability of $35,700 being the fair value of the conversion feature which was determined using the black-scholes valuation model. The debt discount is accreted to the statement of operations using the effective interest rate method over the term on the note or to the date of conversion, and the derivative liability is revalued at each reporting date to fair value. Any change in fair value is credited or charged to the statement of operations in the period.

During the year ended November 30, 2012, the Company issued an aggregate of 6,956,813 common shares upon the conversion of the principal and interest balance of the note into common stock. At that time the balance of debt discount of $35,700 was charged to the statement of operations and the remaining balance of the derivative liability amounting to $36,600 was re-classified to additional paid in capital.

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Note 8 Convertible Notes Payable - (cont’d)

Promissory Note #5

On February 15, 2012, the Company received $30,000 cash and the Company issued a convertible promissory note in the amount of $30,000. The promissory note is unsecured, interest free and repayable upon demand.

The note may be converted at the option of the holder into Common stock of the Company. The fixed conversion price is $0.01 per share. Accordingly the note may be converted into 3,000,000 common shares of the Company.

On October 24, 2012, this note was amalgamated with Note 9 and a new amended Convertible promissory note for $50,000 was created. (See Promissory Note #14).

Promissory Note #6

On February 15, 2012, the Company received $20,000 cash and the Company issued a convertible promissory note in the amount of $20,000. The promissory note is unsecured, interest free and repayable upon demand.

The note may be converted at the option of the holder into Common stock of the Company. The fixed conversion price is $0.01 per share. Accordingly the note may be converted into 2,000,000 common shares of the Company.

Promissory Note #7

Promissory Note #8

Promissory Note #9

On March 20, 2012, the Company received $20,000 cash and the Company issued a convertible promissory note in the amount of $20,000. The promissory note is unsecured, interest free and repayable upon demand.

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Note 8 Convertible Notes Payable - (cont’d)

Promissory Note #9 – (cont’d)

On October 24, 2012, this note was amalgamated with Note 5 and a new amended Convertible promissory note for $50,000 was created. (See Promissory Note #14)

Promissory Note #10

On March 20, 2012, the Company received $30,000 cash and the Company issued a convertible promissory note in the amount of $30,000. The promissory note is unsecured, interest free and repayable upon demand.

Promissory Note #11

On June 12, 2012, the Company received $42,500 cash and the Company issued a convertible promissory note in the amount of $42,500. The promissory note is unsecured, bears interest at 8% per annum, and matures on March 14, 2013. During the three month period ended February 28, 2013 the Company accrued $704 (three month period ended February 29, 2012 - $nil) in interest expense.

After 180 days the note may be converted at the option of the holder into Common stock of the Company. The conversion price is defined as “55% multiplied by market price where market price is determined as the average bid price for the shares as quoted on the OTCBB where the shares are traded for the three consecutive business days prior to the date of conversion”. The Company determined that the embedded conversion feature would be a derivative liability based upon its variable conversion terms once the holders conversion rights were triggered.

In December 2012, upon the holders option to convert becoming active, the Company recorded debt discount and a derivative liability of $38,600 being the fair value of the conversion feature which was determined using the Black-Scholes valuation model. The debt discount is accreted to the statement of operations using the effective interest rate method over the term on the note or to the date of conversion. The derivative liability is revalued at each reporting date to fair value. Any change in fair value is credited or charged to the statement of operations in the period.

During the three month period ended February 28, 2013, the Company recorded a loss of $6,400 (three month period ended February 28, 2012 – $nil) due to the change in value of the derivative liability during the period, and debt discount of $21,772 (three month period ended February 29, 2012 - $nil) was accreted to the statement of operations.

During the three month period ended February 28, 2013, the Company issued 5,000,000 common shares upon the conversion of $12,000 of the principal balance of the note into common stock, and $12,200 of the derivative liability was re-classified as additional paid in capital upon conversion, and $6,696 of the debt discount was charged to the statement of operations.

As at February 28, 2013, accrued interest of $2,297 (November 30, 2012 - $1,593), debt discount of $10,132 (November 30, 2012 - $nil) and a derivative liability of $32,800 (November 30, 2012 - $nil) was recorded.

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Note 8 Convertible Notes Payable - (cont’d)

Promissory Note #12

On August 17, 2012, the Company received $42,500 cash and the Company issued a convertible promissory note in the amount of $42,500. The promissory note is unsecured, bears interest at 8% per annum, and matures on May 21, 2013. During the three month period ended February 28, 2013 the Company accrued $839 (three month period ended February 29, 2012 - $nil) in interest expense.

After 180 days the note may be converted at the option of the holder into Common stock of the Company. The conversion price is defined as “48% multiplied by market price where market price is determined as the average bid price for the shares as quoted on the OTCBB where the shares are traded for the three consecutive business days prior to the date of conversion”. The Company determined that the embedded conversion feature would be a derivative liability based upon its variable conversion terms once the holders conversion rights were triggered.

In February 2013, upon the holders option to convert becoming active, the Company recorded debt discount and a derivative liability of $43,600 being the fair value of the conversion feature which was determined using the Black-Scholes valuation model. The debt discount is accreted to the statement of operations using the effective interest rate method over the term on the note or to the date of conversion. The derivative liability is revalued at each reporting date to fair value. Any change in fair value is credited or charged to the statement of operations in the period.

During the three month period ended February 28, 2013, the Company recorded a loss of $700 (three month period ended February 28, 2012 – $nil) due to the change in value of the derivative liability during the period, and debt discount of $1,043 (three month period ended February 29, 2012 - $nil) was accreted to the statement of operations.

As at February 28, 2013, accrued interest of $1,817 (November 30, 2012 - $978), debt discount of $42,557 (November 30, 2012 - $nil) and a derivative liability of $44,300 (November 30, 2012 - $nil) was recorded.

Promissory Note #13

On September 12, 2012, the Company received $75,000 cash and the Company issued a convertible promissory note in the amount of $75,000. The promissory note is unsecured, bears interest at 8% per annum, and matures on June 14, 2013. During the three month period ended February 28, 2013 the Company accrued $1,479 (three month period ended February 29, 2012 - $nil) in interest expense.

After 180 days the note may be converted at the option of the holder into Common stock of the Company. The conversion price is defined as “50% multiplied by market price where market price is determined as the average of the lowest three bid prices during the ten trading days prior to the date of conversion”. The Company determined that the embedded conversion feature would be a derivative liability based upon its variable conversion terms once the holders conversion rights were triggered.

As at February 28, 2013, accrued interest of $2,778 (November 30, 2012 - $1,299) was recorded.

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Note 8 Convertible Notes Payable - (cont’d) - (Restatement – Note 15)

Promissory Note #14

On October 24, 2012, Notes 5 and 9 were amalgamated and a new amended note was created, in the amount of $50,000. The promissory note is unsecured, bears interest at 10% per annum, and is due upon demand. During the three month period ended February 28, 2013 the Company accrued $1,571 (three month period ended February 29, 2012 - $nil) in interest expense.

The note may be converted at the option of the holder at any time into Common stock of the Company. The conversion price is defined as “50% multiplied by the market price, where market price is determined as the lowest 3 closing bid prices during the ten trading day period ending the day prior to conversion. The Company determined that the embedded conversion feature would be a derivative liability based upon its variable conversion terms.

Upon inception the Company recorded a debt discount and a derivative liability of $48,200 being the fair value of the conversion feature which was determined using the Black-Scholes valuation model. The debt discount has been charged immediately to the statement of operations as the note is due upon demand. The derivative liability is revalued at each reporting date to fair value. Any change in fair value is credited or charged to the statement of operations in the period.

During the three month period ended February 28, 2013 the Company recorded a loss of $6,300 (three month period ended February 29, 2013 - $nil) due to the change in value of the derivative liability during the period.

During the three month period ended February 28, 2013, the Company issued 17,884,615 common shares upon the conversion of $38,000 of the principal balance of the note into common stock, and $38,200 of the derivative liability was re-classified as additional paid in capital upon conversion.

As at February 28, 2013, accrued interest of $2,297 (November 30, 2012 - $507), debt discount of $nil (November 30, 2012 - $nil) and a derivative liability of $13,300 (November 30, 2012 - $45,200) was recorded.

The Company determined that Promissory notes 5, 6, 7 ,8 9, and 10 should be accounted for in accordance with FASB ASC 470-20 which addresses “Accounting for Convertible Securities with Beneficial Conversion Features". The intrinsic value of the conversion feature is calculated as the difference between the conversion price $0.01 and the fair value of the common stock into which the debt is convertible at the commitment date (being $0.05 for notes 5, 6, 7 and 8 and $0.02 for notes 9 and 10), multiplied by the number of shares into which the debt is convertible. The valuation of the beneficial conversion feature is calculated as pro rata portion of the proceeds from issuance of the convertible debt, being equal to proceeds received multiplied by intrinsic value divided by the total value received (ie. the aggregate of proceeds and intrinsic value). This beneficial conversion feature is allocated to debt discount and additional paid in capital. Because the debt is convertible at the date of issuance, the valuation of the beneficial conversion feature is charged to interest expense at the date of issuance.

During the three month period ended February 28, 2013 interest expense relating to the beneficial conversion feature of convertible notes of $nil ( three month ended February 29, 2012 - $72,000) was recorded in the financial statements, with a corresponding increase to additional paid in capital.

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Note 9 Derivative Liabilities

The Company issued financial instruments in the form of convertible notes with embedded conversion features. Many of the convertible notes payable have conversion rates, which are indexed to the market value of the Company’s stock price.

During the three month period ended February 28, 2013, the Company recorded derivative liabilities for embedded conversion features related to convertible notes payable of face value $85,000. (year ended November 30, 2012 - $120,000). During the three month period ended February 28, 2013 $50,000 (year ended November 30, 2012, $172,800) of convertible notes payable plus accrued interest were converted into common stock of the Company. For the three month period ended February 28, 2013 the Company performed a final mark-to-market adjustment for the derivative liability related to the convertible notes and the carrying amount of the derivative liability related to the conversion feature of $50,400 (year ended November 30, 2012 - $228,500) was re-classed to additional paid in capital on the date of conversion in the statement of shareholders’ deficit. During the three month period ended February 28, 2013, the Company recognized a loss of $93,700 (three month period ended February 29, 2012 - loss of $19,200) based on the change in fair value (mark-to market adjustment) of the derivative liability associated with the embedded conversion features in the accompanying statement of operations.

These derivative liabilities have been measured in accordance with fair value measurements, as defined by GAAP ASC 815. The valuation assumptions are classified within Level 1 inputs and Level 2 inputs. The following table represents the Company’s derivative liability activity for the embedded conversion features discussed above:

	February 28			November 30
	2013			2012

Balance, beginning of period	$	58,200		$	129,000
Initial recognition of derivative liability		82,200			117,100
Conversion of derivative financial instruments to Common stock		(50,400	)		(228,500	)
Change in fair value of derivative liability		93,700			40,600

Balance, end of period	$	183,700		$	58,200

These instruments were not issued with the intent of effectively hedging any future cash flow, fair value of any asset, liability or any net investment in a foreign operation. The instruments do not qualify for hedge accounting, and as such, all future changes in the fair value will be recognized currently in earnings until such time as the instruments are exercised, converted or expire. The following assumptions were used to determine the fair value of the derivative liabilities using the Black-Scholes valuation model as at February 28, 2013 and November 30, 2012.

	February 28			November 30
	2013			2012

Risk free rate		0.10	%		0.13	%
Dividend yield		Nil			Nil
Weighted Average Expected term		0.13 Years			0.44 Years
Weighted Average volatility		169	%		98	%

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Note 10 Asset Retirement Obligation

During the period November 2007 to October 2009 the Company acquired in tranches a 50% working interest in the Hayter 10-8-40-1 W4M oil and gas well in Alberta Canada, known as the “Hayter Prospect”. During the year ended November 30, 2012, due to financial restrictions in the current capital markets management determined the focus of the Company in the future would predominantly be the exploration and development of the Zoro Mineral Property, and as the Company had no current plans to further develop the Hayter property the company recorded an impairment provision of $135,427 during the fiscal year ended November 30, 2012 resulting in the book value of the Hayter prospect being $nil at November 30, 2012.

Total future asset retirement obligations were estimated by management based on the Company’s net ownership interest, estimated costs to reclaim and abandon the wells and the estimated timing of the costs to be incurred in future periods. The Company has estimated the net present value of its total asset retirement obligations at February 28, 2013 to be $16,889 based on a total undiscounted liability of $17,057 (Cdn$17,500) in the Hayter Prospect, Alberta, Canada. These payments are expected to be made over the next seven years, with the majority of the cost incurred between 2016 and 2019.

The Company’s credit adjusted risk free rate of 15% and an inflation rate of 8% were used to calculate the present value of the asset retirement obligation.

	February 28			November 30
	2013			2012

Balance, beginning of year	$	16,845		$	13,524
Liabilities incurred		—			—
Accretion expense		615			2,238
Effect of foreign exchange		(571	)		1,083

	$	16,889		$	16,845

Note 11 Capital Stock

Authorized

10,000,000 Preferred shares, par value $0.001 – none issued

750,000,000 Common shares par value $0.001 – 128,301,602 issued

(November 30, 2012 - 105,416,987 shares issued)

On September 26, 2012, The Company increased its authorized capital stock to 750,000,000 common shares from 270,000,000 common shares.

Issued

Between December 12, 2012 and February 28, 2013, the Company issued an aggregate of 17,884,615 common shares with an aggregate fair value of $76,202, upon the conversion $38,000 of a convertible note which was due upon demand.

On January 12, 2013, the Company issued 5,000,000 common shares with an aggregate fair value of $24,200, upon the conversion $12,000 of a convertible note which falls due on March 14, 2013.

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Note 12 Supplemental Disclosure with Respect to Cash Flows

During the three month period ended February 28, 2013, the following non-cash investing and financing activities occurred:

i) An aggregate of 5,000,000 common shares were issued with a fair value of $24,200 upon the partial conversion into stock of $12,000 of the principal of a convertible note payable.

iv) An aggregate of 17,884,615 common shares were issued with a fair value of $76,202 upon the partial conversion into stock of $38,000 of the principal of a convertible note payable.

During the three month period ended February 29, 2012, no non cash investing and financing activities occurred

Note 13 Commitment

On May 5, 2012, the Company entered into a consultancy agreement with Primary Capital LLC. (“Primary”) whereby Primary would provide financial advisory and investment banking services to the Company for a period of two years commencing May 7, 2012. Pursuant to the agreement the Company paid Primary a non-refundable signing fee of $10,000 and issued Primary common stock equivalent to 4.9% (the “Applicable Percentage”) of the Common shares on a fully diluted basis after giving effect to the conversion of all outstanding derivative securities at the time of inception of the agreement,

Accordingly on May 5, 2012, 2,691,926 common shares were issued with a fair value of $53,838.

Pursuant to the agreement should the Company issue further potentially dilutive derivative instruments, or issue stock from treasury at any time, then within 5 days of the end of the fiscal quarter in which such instruments or stock was issued, the Company will issue to Primary additional common shares (the “Adjustment shares”) such that Primary continues to hold common stock equivalent to the Applicable Percentage.

Should the Board of Directors grant Options, Warrants or other securities pursuant to a restricted stock purchase plan or stock option plan approved by the stockholders and Board of Directors of the Company, to employees or Directors such grants shall be considered Excluded Securities for the purposes of determining the Applicable Percentage and the calculation of Adjustment shares in future periods.

Also if the Company completes any financing during the engagement period and also within 2 years of the termination of the agreement with any party introduced to the Company by Primary, Primary will be entitled to:

i) a cash fee of 8% of the gross proceeds of the financing,

ii) a 5 year warrant to purchase that number of shares equal to 8% of the number of shares issued in the financing on the same terms as the financing. Any such warrant issued will be in a form provided by Primary and may include terminology allowing for full ratchet anti-dilution provisions, standard and cashless exercise provisions and the same registration rights as received by the original investors.

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Note 13 Commitment (cont’d)

The agreement can be terminated by either party by providing written notice at any time after the first anniversary of the agreement if either party is in breach of the agreement and fails to cure such breach within 15 days after it receives notice of such breach.

As at February 28, 2013, the Company has accrued $92,400 being the fair value of stock issuable at February 28, 2013 pursuant to the contract.

Note 14 Subsequent Events

Subsequent to the period end the Company issued 5,000,000 pursuant to the partial conversion of $8,000 of the principal of a note payable which was due upon demand.

Note 15 Restatement

i) Convertible Notes Payable

The Company has determined that certain transactions relating to the convertible notes payable were not correctly accounted for in the three month period ended February 29, 2012 and accordingly the results of the three month period ended February 29, 2012 have been restated.

The Company did not recognize any embedded derivative liabilities arising upon the inception or during the term of certain convertible notes payable. As a result of this, at February 29, 2012 the value of the convertible notes on the balance sheet was overstated by $150,028 and derivative liabilities were understated by $148,200. In the statement of loss, for the three month period ended February 29, 2012 accretion of convertible debt and interest discount expense was overstated by $37,861, interest on convertible notes was overstated by $59,599 and the loss on change in fair value of derivative liability was understated by $93,700.

ii) Accumulated Other Comprehensive Income

The Company also determined the accounting for foreign exchange with respect to the translation adjustments arising on the translation of its Canadian subsidiary Company had been incorrectly recorded. Such gains or losses arising had been included in the operations of the year, rather than being treated as elements of other comprehensive income, which forms a separate part of equity.

As a result of the restatement, the Company has increased the balance of other comprehensive income at November 30, 2011 by $6,388 and also increased deficit by a corresponding amount. During the three month period ended February 29, 2012, foreign exchange charged to the income statement was reduced by $1,002 and a corresponding reduction to accumulated comprehensive income was recorded.

The effect of the above restatements is to reduce the carrying value of the convertible notes payable from $329,099 to $179,071 and to increase derivative liability from $nil to $148,200 at February 29, 2012. Also the previously reported loss for the three month period ended February 28, 2012 was reduced by $13,050 to $195,296 with a corresponding reduction to deficit at February 28, 2012.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

Certain statements, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives, and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements generally are identified by the words “believes,” “project,” “expects,” “anticipates,” “estimates,” “intends,” “strategy,” “plan,” “may,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. We intend such forward-looking statements to be covered by the safe-harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and are including this statement for purposes of complying with those safe-harbor provisions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse affect on our operations and future prospects on a consolidated basis include, but are not limited to: changes in economic conditions, legislative/regulatory changes, availability of capital, interest rates, competition, and generally accepted accounting principles. These risks and uncertainties should also be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise. Further information concerning our business, including additional factors that could materially affect our financial results, is included herein and in our other filings with the SEC.

Company Overview

We are currently engaged in the business of identifying, evaluating, and qualifying potential natural gas and oil wells; investing in interests in those wells with the goal of producing commercially marketable quantities of oil and natural gas. We have recently expanded our business model to include the exploration of mineral claims for rare earth minerals.

The Hayter Well

We presently hold a 50% working interest of the County Line Energy Corp. interest in the Hayter Well located in Alberta, Canada.

County Line Energy Corp. is the operator of the Hayter well. The Hayter well has been cased and cemented in anticipation of the completion of the drill program. County Line plans to enter the Hayter well, perforate the potential pay zones and conduct regular production testing of the zones. Should the testing confirm adequate oil reserves and potential economic flow rates, County Line is expected to install adequate pumping equipment and other surface facilities in anticipation of the projected flow rates. Currently, there are no known oil reserves on the Hayter well.

We have not incurred any development costs on the Hayter Well for the year ended November 30, 2012 or the three months ended February 28, 2013. We do not anticipate immediate attention to this project, as our time and effort currently is focused on our Zoro 1 Mineral Claim.

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Zoro 1 Mineral Claim

On July 6, 2010, we entered into an option agreement with Dalton Dupasquier, pursuant to which Mr. Dupasquier has granted to us the sole and exclusive right and option, exercisable in the manner described below, to acquire a 100% net undivided interest in the property known as the Zoro 1 mineral claim, located near the East Shore of Wekusko Lake in west-central Manitoba, Canada.

Amount of Payment		Date Payment is Due	Additional Notes
$	59,600	July 6, 2010	This amount was paid.
$	80,000	June 15, 2011	This amount was paid in 1,000,000 shares of common stock.
$	200,500	June 15, 2012	This amount was agreed to be paid in $50,500 and 7,500,000 shares of common stock. We have paid $50,500 and issued 7,500,000 shares of common stock.
$	403,560	June 15, 2013

During the year ended November 30 2012, we incurred $8,639 oon exploration expenditures on the property. During the three months ended February 28, 2013, we incurred $0 on exploration expenditures on the property.

We have no rights to the Zoro 1 mineral claim unless and until we exercise the option.

We acquired the option to explore the potential for deposits of lithium on the Zoro 1 mineral claim. According to the United States Geological Survey (USGS), global end-use markets for lithium include ceramics and glass, batteries, lubricating greases, air treatment, continuous casting and primary aluminum production. Batteries, especially rechargeable batteries, are the market for lithium compounds with the largest growth potential as major automobile companies pursue the development of lithium batteries to power hybrid electric cars.

In September 2009, we received a Technical Report on the Zoro 1 mineral claim. The report was authored by Mr. Mark Fedikow, PhD., P.Eng. of Mount Morgan Resources Ltd. The objectives of the report were to summarize the geology, review the historic ore reserves, and economic potential of the spodumene-bearing dykes delineated on the property and their surrounding geological environment.

An historic reserve estimate for Lithium oxide (Li2O) has been calculated on limited drilling on a single dyke on the Zoro 1 mineral claim. Drill indicated spodumene reserves coupled with data from trenching have been calculated with a total undiluted tonnage given as 1,727,550 at 0.945% Li2O. However, the historic data upon which the resource of 1,727,550 tons grading 0.945% Li2O was based is not dispositive. When the historic work was done, there was no “Qualified Person” in place, assay labs were not ISO Certified and insufficient drilling was undertaken to define the resource. It therefore became necessary to conduct more exploration activities to support the limited historic data available.

There are seven zoned pegmatite dykes on the Zoro 1 mineral claim. An exploration team explored the main dyke, located the additional seven trenches that had historically been noted on the Zoro 1 claim and produced a geologic map of each trench. Once areas of interest were located, the crew cleaned out the trenches and used a pick and shovel method to look at rocks to find pegmatite. They then took channel samples using a rock saw on historic trenches hosting pegmatite.

While exploring the main and additional seven dykes on the project area the crew identified several additional trenches that had not been noted in previous exploration programs. These findings suggest a potential for a greater amount of resource to be spread across the property, and give further encouragement for more detailed exploration.

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Altogether 170 channel samples were sent for assay at Activation Laboratories in Ancaster, Ontario. The samples were analyzed to confirm historical lithium assays, and to assess the pegmatite for rare earth elements, including gold, rubidium, niobium, tantalum, tin, tungsten, and beryllium, all of which add to the prospectivity and economic viability of the Zoro 1 property.

Analysis of the channel samples collected from historic trenches in the pegmatite target has confirmed that a significant zone of lithium mineralization is present on the Zoro 1 claim. Analytical results are summarized in Table 1, which is attached to our annual report as Exhibit 99.2 that we filed with the Securities and Exchange Commission on February 23, 2012.

With the current and future importance of lithium and the mineralized zone at Zoro 1, we are now preparing for the next phase of our exploration program. This phase, which will require a drill program, will assess the third dimension of the deposit and its historic resource, and determine the economic viability of mining the resource.

We plan to continue to explore the Zoro 1 mineral claim using the Exploration Recommendations outlined by Dr. Fedikow in the NI 43-101 Technical Report, which are set forth below along with a table of recommended expenditures.

Initially, the Zoro 1 pegmatites should be the focus of the following exploration approaches. These are as follows:

Trench rehabilitation including overburden stripping and washing.

Geologic mapping of individual trenches at a scale of 1:20.

Detailed geological mapping at a scale appropriate to document relevant features on the property. This will include the seven pegmatite dykes, trench locations, historic drill collars and geological attributes of the dykes. It is likely this mapping will be undertaken at a scale of 1:1000.

Trench and channel sampling should be undertaken to confirm historic assay results.

Re-log historic drill core as possible.

A grid should be re-established on the property and an attempt made to tie-in the collar locations of all previous drilling. This information would help to structure new diamond drill programs. Initially, an attempt should be made to re-construct the historic grid although it is unlikely this will be possible given the length of time that has elapsed since the grid was first cut.

The geochemistry of the spodumene with particular relevance to iron content should be evaluated. Albite-rich portions of the pegmatite should be assayed for tantalum, tin, and niobium values. Altered and mineralized wallrocks should be assayed for gold particularly where the mineral assemblage of pyrrhotite, chalcopyrite and arsenopyrite are observed. Any subsequent drill program should be accompanied by a multi-element geochemical approach to assaying core including assays for gold. This will be followed up with assays for specific metals that may be present in the pegmatite dykes. The new assay program should be accompanied by a quality assurance and quality control program.

Diamond drilling should initially target Dyke No. 1 with the aim of ascertaining the physical size and extent of this dyke. Additional drilling will be necessary in the vicinity of the six remaining known dykes as well as any additional lithium-bearing pegmatite uncovered during exploration on the remainder of the property.

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Trench Rehabilitation, Geologic Mapping and Assays (Four Weeks)
1. Trench stripping, excavation and washing:	$	15,000.00
2. Field technician: $250.00/day:	$	7,000.00
3. General Laborers (n=2): $150.00/day:	$	8,400.00
4. Geologist: $400.00/day:	$	11,200.00
5. Assays (n=100 @ $50.00/sample):	$	5,000.00
Drill Program
6. Mobilization/Demobilization of equipment and crews:	$	10,000.00
7. Two Thousand metres of NQ coring:	$	250,000.00
8. Moves between holes:	$	25,000.00
9. Core trays and survey tool:	$	8,000.00
10. Room and board @ $150.00/day for 60 days:	$	18,000.00
11. Communications and freight:	$	10,000.00
12. Helicopter:	$	40,000.00
13. Helicopter fuel:	$	7,500.00
14. Geologist @ $400.00/day for 60 days:	$	24,000.00
15. Geologist Room and Board @ $150.00/day:	$	9,000.00
16. Geologist Transportation/Mobilization/Demobilization/Site access:	$	5,000.00
17. Assays @$50.00/sample for 300 samples:	$	15,000.00
18. Report preparation:	$	7,500.00
Sub-total:	$	475,600.00
Contingency @ 10%:	$	47,560
Total:	$	523,160.00

Anticipated Cash Requirements

We estimate that our general operating expenses for the next twelve month period to be as follows:

Estimated Funding Required During the Next Twelve Months
Expenses		Amount
Management fees	$	150,000
Exploration expenses	$	523,160
Zoro 1 mineral property payment	$	94,958
Professional fees	$	120,000
General administrative expenses	$	80,000
Total	$	968,118

To date, we have had negative cash flows from operations and we have been dependent on sales of our equity securities and debt financing to meet our cash requirements. We expect this situation to continue for the foreseeable future. We anticipate that we will have negative cash flows during the next twelve month period.

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Results of operations for the three months ended February 28, 2013 and February 29, 2012, and for the period from Inception (November 1, 2006) to February 28, 2013

Our operating results for the three months ended February 28, 2013 and February 29, 2012 are summarized as follows:

	Three Months Ended		Three Months Ended
	February 28, 2013		February 29, 2012
Revenue	$	0	$	0
Operating Expenses	$	165,780	$	75,959
Other Expenses	$	127,806	$	119,337
Net Loss	$	293,584	$	195,296

Revenues

We have not earned any revenues to date, and do not anticipate earning revenues until such time as we encounter commercially productive minerals to exploit. All of our prospects are undeveloped. We anticipate that we will have to address the cash shortfall through additional equity financings in the future. We can offer no assurance, however, that such financings will be available on terms acceptable to our company.

Expenses

Our expenses for the three months ended February 28, 2013 and February 29, 2012 are outlined in the table below:

	Three Months Ended		Three Months Ended
	February 28, 2013		February 29, 2012
Accounting and audit fees	$	19,654	$	10,500
Accretion of ARO	$	615	$	524
Bank charges and interest	$	23	$	832
Consulting fees	$	67,300		—
Legal fees	$	9,219	$	6,806
Management fees	$	67,500	$	53,700
Office expenses	$	178	$	2,336
Rent	$	784	$	771
Transfer and filing fees	$	507	$	490
Total	$	165,780	$	75,959

Our operating expenses increased by $89,821 for the three months ended February 28, 2013 as compared with the three months ended February 29, 2012. Our increase was largely a result of consulting fees.

Other Expenses

We recorded $127,804 in other expenses as a result of $93,700 for the loss on settlement of advances payable and $34,104 for interest expenses for the three months ended February 28, 2013, as compared with other expenses of $119,337 as a result of $19,200 for the loss on settlement of advances payable and $100,137 for interest expenses for the three months ended February 29, 2012.

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Net Loss

We recorded a net loss of $293,584 for the three months ended February 28, 2013, as compared with $195,296 for the same period ended February 29, 2012.

Liquidity And Capital Resources

Working Capital

	February 28, 2013			November 30, 2012
Current Assets	$	0		$	35,442
Current Liabilities	$	561,681		$	442,056
Working Capital (Deficit)	$	(561,681	)	$	(406,614	)

Cash Flows

	Three Months Ended February 28, 2013			Three Months Ended February 29, 2012
Cash used in Operating Activities	$	(43,146	)	$	(68,840	)
Cash used in Investing Activities		—			—
Cash provided by Financing Activities	$	7,500		$	81,030
Increase (Decrease) in Cash	$	35,646		$	12,190

Cash Used In Operating Activities

Our net losses for the three months ended February 28, 2013 and February 29, 2012 were the main contributed reason for our negative operating cash flow for both periods. Cash used in operating activities was funded by cash on hand and cash from financing activities.

Cash from Financing Activities

We generated $7,500 in cash from related party advances during the three months ended February 28, 2013 compared to $81,030 from $127,500 from the issuance of convertible notes payable, offset by $81,25 in payment of related party advances and $38,345 in settlement of convertible notes payable during the three months ended February 29, 2012.

We will depend almost exclusively on outside capital to pay for the continued exploration and development of our properties. Such outside capital may include the sale of additional stock and/or commercial borrowing. Capital may not continue to be available if necessary to meet these continuing development costs or, if the capital is available, that it will be on terms acceptable to us. The issuance of additional equity securities by us would result in a significant dilution in the equity interests of our current stockholders. Obtaining commercial loans, assuming those loans would be available, will increase our liabilities and future cash commitments.

If we are unable to obtain financing in the amounts and on terms deemed acceptable to us, we may be unable to continue our business and as a result may be required to scale back or cease operations for our business, the result of which would be that our stockholders would lose some or all of their investment.

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Off Balance Sheet Arrangements

As of February 28, 2013, there were no off balance sheet arrangements.

Going Concern

The accompanying financial statements in this quarterly report on Form 10-Q have been prepared in accordance with generally accepted accounting principles applicable to a going concern, which assumes that we will be able to meet our obligations and continue our operations for the next twelve months. Realization values may be substantially different from carrying values as shown and these financial statements do not give effect to adjustments that would be necessary to the carrying values and classification of assets and liabilities should we be unable to continue as a going concern. At February 28, 2013, we had a working capital deficit of $561,681. We have yet to achieve profitable operations, have accumulated losses of $4,205,322 since our inception and expect to incur further losses in the development of our business, all of which casts substantial doubt about our ability to continue as a going concern. Our ability to continue as a going concern is dependent upon our ability to generate future profitable operations and/or to obtain the necessary financing to meet our obligations and repay our liabilities arising from normal business operations when they come due. Management has no formal plan in place to address this concern but considers that we will be able to obtain additional funds by equity financing and/or related party advances, however there is no assurance of additional funding being available or on acceptable terms, if at all.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

A smaller reporting company is not required to provide the information required by this Item.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

As required by Rule 13a-15 of the Securities Exchange Act of 1934, our principal executive officer and principal financial officer evaluated our company's disclosure controls and procedures (as defined in Rules 13a-15(e) of the Securities Exchange Act of 1934) as of the end of the period covered by this report. Based on this evaluation, our principal executive officer and principal financial officer concluded that as of the end of the period covered by this report, these disclosure controls and procedures were not effective to ensure that the information required to be disclosed by our company in reports it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities Exchange Commission and to ensure that such information is accumulated and communicated to our company's management, including our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure. The conclusion that our disclosure controls and procedures were not effective was due to the presence of the following material weaknesses in internal control over financial reporting which are indicative of many small companies with small staff: (i) inadequate segregation of duties and effective risk assessment; and (ii) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of both United States generally accepted accounting principles and Securities and Exchange Commission guidelines. Management anticipates that such disclosure controls and procedures will not be effective until the material weaknesses are remediated.

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We plan to take steps to enhance and improve the design of our internal controls over financial reporting. During the period covered by this quarterly report on Form 10-Q, we have not been able to remediate the material weaknesses identified above. To remediate such weaknesses, we plan to implement the following changes during our fiscal year ending November 30, 2013, subject to obtaining additional financing: (i) appoint additional qualified personnel to address inadequate segregation of duties and ineffective risk management; and (ii) adopt sufficient written policies and procedures for accounting and financial reporting. The remediation efforts set out above are largely dependent upon our securing additional financing to cover the costs of implementing the changes required. If we are unsuccessful in securing such funds, remediation efforts may be adversely affected in a material manner.

Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues, if any, within our 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 simple error or mistake.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended February 28, 2013 that have materially affected or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II – OTHER INFORMATION

Item 1. Legal Proceedings

We are not a party to any pending legal proceeding. We are not aware of any pending legal proceeding to which any of our officers, directors, or any beneficial holders of 5% or more of our voting securities are adverse to us or have a material interest adverse to us.

Item 1A: Risk Factors

A smaller reporting company is not required to provide the information required by this Item.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

During the three month period ended February 28, 2013, we incurred the following stock transactions:

Between December 12, 2012 and February 28, 2013, we issued an aggregate of 17,884,615 common shares with an aggregate fair value of $76,202, upon the conversion $38,000 of a convertible note which was due upon demand.

On January 12, 2013, we issued 5,000,000 common shares with an aggregate fair value of $24,200, upon the conversion $12,000 of a convertible note which falls due on March 14, 2013.

These securities were issued pursuant to Section 4(2) of the Securities Act and/or Rule 506 promulgated thereunder. The holders represented their intention to acquire the securities for investment only and not with a view towards distribution. The investors were given adequate information about us to make an informed investment decision. We did not engage in any general solicitation or advertising. We directed our transfer agent to issue the stock certificates with the appropriate restrictive legend affixed to the restricted stock.

Item 3. Defaults upon Senior Securities

None

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None

Item 6. Exhibits

Exhibit Number	Description of Exhibit
31.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101**	The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended February 28, 2013 formatted in Extensible Business Reporting Language (XBRL).

**Provided herewith

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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.

	FORCE ENERGY CORP.

Date:	April 11, 2013 By: /s/ Tim DeHerrera Tim DeHerrera Title: Chief Executive Officer and Director

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