S-1

As filed with the Securities and Exchange Commission on September 17, 2013 Registration No. ______________

U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM S-1

Registration Statement under the Securities Act of 1933

XUN ENERGY, INC.

(Name of issuer in its charter)

Nevada	1311	26-1616719
(State or other jurisdiction of incorporation or organization)	(Primary Standard Industrial Classification Code)	(I.R.S. Employer Identification No.)

Xun Energy, Inc.

12759 NE Whitaker Way, #C453

Portland, Oregon, 97230

 (775) 200-0505

(Address and telephone number of principal executive offices)

Jerry Mikolajczyk, President, CEO and CFO

12759 NE Whitaker Way, #C453, Portland, OR 97230, (775) 200-0505

 (Name, address and phone number of agent for service)

Copies of communications to:

Matthew C. McMurdo, Esq., 28 West 44^th Street, 16^th Floor, New York, NY 10036, (917) 318-2865

Approximate date of commencement of proposed sale to the public: As soon as practicable after the registration statement becomes effective.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box x

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.o

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.o

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.o

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

Large Accelerated Filer	p		Accelerated Filer	p
Non-accelerated Filer	p	(Do not check if a smaller reporting company)	Smaller reporting company	x

Calculation of registration fee

Title of Each Class Of Securities To Be Registered	Amount To Be Registered(1)	Proposed Maximum Offering  Price Per Share (2)		Proposed Maximum Aggregate  Offering Price (2)		Amount of Registration Fee(2)
Common stock, $.0001 par value per share	79,081,633	$	.00067	$	52,314.69	$	7.14

1

(1)

The shares of common stock of Xun Energy, Inc. (“Xun” or the “Company”) to be registered includes 75,000,000 shares of our common stock (the “Put Shares”) that we will put to AGS Capital Group, LLC (“AGS”), pursuant to a reserve equity financing agreement by and between AGS and the Company, dated July 11, 2013 (the “Drawdown Agreement”) and (ii) 4,081,633 commitment shares of our common stock we paid to AGS as a fee for providing the facility.

In the event of stock splits, stock dividends, or similar transactions involving the common stock, the number of common shares registered shall, unless otherwise expressly provided, automatically be deemed to cover the additional securities to be offered or issued pursuant to Rule 416 promulgated under the Securities Act of 1933, as amended (the “Securities Act”). In the event that adjustment provisions of the Drawdown Agreement require the registrant to issue more shares than are being registered in this registration statement, for reasons other than those stated in Rule 416 of the Securities Act of 1933, as amended, the registrant will file a new registration statement to register those additional shares.

(2)

The proposed maximum offering price per share and the proposed maximum aggregate offering price have been estimated solely for the purpose of calculating the amount of the registration fee in accordance with Rules 457(c) under the Securities Act of 1933, as amended on the basis of the average of the high and low prices of the common stock on the OTC Markets on September 13, 2013, a date within five (5) trading days prior to the date of the filing of this registration statement. Fee was paid on May 29, 2013.

 The registrant hereby amends this Registration Statement on the date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on the date as the Commission, acting pursuant to said Section 8(a), may determine.

The information in this prospectus is not complete and may be changed. The Registrant may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell securities and we are not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

Our financial statements have been examined to the extent indicated in its reports by Weinberg & Baer LLC, Certified Public Accountants, and have been prepared in accordance with generally accepted accounting principles and pursuant to Regulation S-X as promulgated by the SEC and are included herein:

2

Selling Stockholder Preliminary Prospectus   

Subject to completion September 17, 2013

XUN ENERGY, INC.

79,081,633 Shares of Common Stock

This prospectus relates to the resale of up to 79,081,633 shares of common stock, $.0001 par value, of Xun Energy, Inc., a Nevada corporation, by the selling stockholder (the “Selling Stockholder”), including (i) up to 75,000,000 Put Shares that we may put to AGS, pursuant to the Drawdown Agreement and (ii) 4,081,633 commitment shares of our common stock we paid to AGS as a fee for providing the facility. The total amount of shares of common stock which may be sold pursuant to this prospectus would constitute approximately 12.5% of our issued and outstanding common stock as of September 16, 2013, if all of the shares had been sold by that date.

Pursuant to the Drawdown Agreement, which has a total drawdown amount of fifteen million dollars ($15,000,000) (the “Commitment Amount”), Xun has the right to sell to AGS, at its sole discretion, and AGS has the obligation to purchase through advances to the Company, the Company's common stock through draw-down notice requests (each, a “Notice”) issued by the Company. The number of shares of common stock that AGS shall purchase shall be determined by dividing the dollar amount raised, which may or may not equal the entire amount of the advance request, by the purchase price. No fractional shares will be issued.

The Selling Stockholder is selling all of the shares of common stock offered by this prospectus. It is anticipated that the Selling Stockholder will sell these shares of common stock from time to time in one or more transactions, in negotiated transactions or otherwise, at prevailing market prices or at prices otherwise negotiated. We will not receive any proceeds from the sale of shares by the Selling Stockholder. However, we will receive the sale price of any common stock that we sell to AGS under the Drawdown Agreement.  

AGS is an “underwriter” within the meaning of the Securities Act of 1933, as amended (the “Securities Act”) in connection with the resale of our common stock under the equity line of credit. AGS will pay us 90% of the average of the three (3) lowest closing bid prices during the ten (10) trading days immediately following our delivery of our Notice to AGS of our election to exercise our "put" right. The offering will terminate upon the earlier of (i) the first day of the month next following the 36-month anniversary of the date the registration statement, to which this prospectus is made a part, is declared effective by the SEC and (ii) the date on which AGS shall have made payment of advances in the aggregate amount of the Commitment Amount. There are no underwriting agreements.

We have agreed to pay all the costs and expenses of this registration.

Our common stock is quoted on the OTC Markets ("OTCBB") under the symbol "XNRG." The shares of our common stock registered hereunder are being offering for sale by the Selling Stockholder at prices established on the OTCBB during the term of this offering. On September 13, 2013, the closing bid price of our common stock was $0.0006 per share on the OTCBB. These prices will fluctuate based on the demand for our common stock.

Based on the market price of our common stock of $0.0007 on September 13, 2013, the Selling Stockholder would be able to sell 21.4 Billion shares of our common stock, assuming the Company increased its authorized share amount accordingly and the registration statement, of which this prospectus is part, was amended to increase the shares registered thereunder accordingly.

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

We may amend or supplement this prospectus from time to time by filing amendments or supplements as required. You should read the entire prospectus and any amendments or supplements carefully before you make your investment decision. The Company is not a blank check company because it has a specific business purpose and has no plans or intention to merge with an operating company.  None of the Company’s shareholders have plans to enter a change of control or change of management.  None of our current management has previously been involved with a development stage company that did not implement its business plan, that generated no or minimal revenues or was engaged in a change of control.

The shares being offered are highly speculative and they involve a high degree of risk and should be considered only by persons who can afford the loss of their entire investment. See "Risk Factors" beginning on page 14.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.

The date of this prospectus is subject to completion September 17, 2013

3

TABLE OF CONTENTS
PROSPECTUS SUMMARY	5
RISK FACTORS	14
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS	24
USE OF PROCEEDS	24
DETERMINATION OF OFFERING PRICE	24
DILUTION OF THE PRICE YOU PAY FOR YOUR SHARES	24
SELLING STOCKHOLDER	25
PLAN OF DISTRIBUTION	26
BUSINESS	28
MANAGEMENT'S DISCUSSION AND ANALYSIS AND RESULTS OF OPERATIONS	41
DESCRIPTION OF PROPERTY	45
LEGAL PROCEEDINGS	45
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS	46
EXECUTIVE COMPENSATION	49
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT	52
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS	52
DESCRIPTION OF SECURITIES	52
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS	53
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	58
DISCLOSURE OF COMMISSION POSITION OF INDEMNIFICATION FOR SECURITIES ACT LIABILITIES	58
EXPERTS	58
WHERE YOU CAN FIND MORE INFORMATION	58
FINANCIAL STATEMENTS	F1

You may only rely on the information contained in this prospectus or that we have referred you to. We have not authorized anyone to provide you with different information. This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any securities other than the common stock offered by this prospectus. This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any common stock in any circumstances in which such offer or solicitation is unlawful. Neither the delivery of this prospectus nor any sale made in connection with this prospectus shall, under any circumstances, create any implication that there has been no change in our affairs since the date of this prospectus or that the information contained by reference to this prospectus is correct as of any time after its date.

Until October 28, 2013, all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers' obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

4

 PROSPECTUS SUMMARY

The information presented is a brief overview of the key aspects of the offering.  The prospectus summary contains a summary of information contained elsewhere in this prospectus. You should carefully read all information in the prospectus, including the financial statements and the notes to the financial statements under the Financial Statements section beginning on page F-1 prior to making an investment decision.

Our Business

The Company is engaged primarily in the acquisition of producing or near producing oil and gas properties and the development of these oil and gas properties. The Company acquired oil and gas properties that allow it to drill and complete 30 oil and gas wells with an option to acquire an additional 15 oil and gas well locations for drilling and completion in Venango County, Pennsylvania. There is no assurance that we will be successful in raising the necessary funds to drill and complete one or more of the 30 oil and gas well locations; there are no assurances that if we are successful in raising the necessary funds to drill and complete one or more of the 30 oil and gas well locations that they will produce oil and gas. There are no assurances that should oil and gas will be produced from one or more of the 30 oil and gas well locations, that the Company will be profitable.

The Company plans to acquire additional producing or near producing oil and gas properties that will provide cash flow and an upside for future development. Such activities are concentrated in North America onshore, primarily in the United States.   We are currently scouting and evaluating properties in Texas, Oklahoma, Pennsylvania, Kansas and in Canada. There is no assurance that we will be successful in raising the necessary funds to acquire any of producing oil and gas properties.

We were incorporated on December 20, 2007 in the State of Nevada. We are a development stage company, and to date have earned limited revenue.

On August 31, 2012, the Company acquired 30 oil and gas well locations in Venango County, Pennsylvania with an option to acquire an additional 15 oil and gas locations.

On August 26, 2013, the Company's operator, Vencedor Energy Partners (VEP), completed the drilling, casing and cementing of our first oil well of the 30 well drilling program. Rice oil well number 15 was drilled to the Target Depth of 1,050' on the Rice lease, in Venango County, PA. Samples were taken during the drilling program for analysis. Petroleum odors were emitted at the 720', 745', and 915' levels of the wellbore, indicating oil presence at these depths.  The review of the drill cuttings (samples) from the Rice #15 supported the need for a wire line log to be conducted on the well. VEP's geologist confirmed that the samples taken on August 26, 2013 revealed a well formed zone in the Venango 2 and also potential lenses in the Venango 1 and Red Valley sequence. Oil saturation is estimated at 30-35% for the Venango sequence with a strong show in the Red Valley sequence. The log will provide enough details to determine other key factors in determining whether or not the oil well should be put into production.

STRATEGY

We aspire to be an independent oil and gas company in North America and to provide our shareholders with returns over the long-term. To achieve this, we strive to optimize our capital investments to maximize growth in cash flows, earnings, production and establish reserves. We will do this by:

1.

Generating cash flow,

2.

Securing financing to acquire our planned acquisitions,

3.

Exercising capital discipline,

4.

Ensuring financial strength, and

5.

Investing in oil and gas properties with strong full-cycle margins.

OVERVIEW

The Company is engaged primarily in the acquisition of producing or near producing oil and gas properties and the development of these oil and gas properties. The Company acquired oil and gas properties that allow it to drill and complete 30 oil and gas wells with an option to acquire an additional 15 oil and gas well locations for drilling and completion in Venango County, Pennsylvania. There is no assurance that we will be successful in raising the necessary funds to drill and complete one or more of the 30 oil and gas well locations; there are no assurances that if we are successful in raising the necessary funds to drill and complete one or more of the 30 oil and gas well locations that they will produce oil and gas. There are no assurances that should oil and gas will be produced from one or more of the 30 oil and gas well locations, that the Company will be profitable.

The Company plans to acquire additional producing or near producing oil and gas properties that will provide cash flow and an upside for future development. Such activities are concentrated in North America onshore, primarily in the United States.   We are currently scouting and evaluating properties in Texas, Oklahoma, Pennsylvania, Kansas and in Canada. There is no assurance that we will be successful in raising the necessary funds to acquire any of producing oil and gas properties.

5

The implementation of our business plan will require significant capital. We do not have this capital and as a result, we will require additional financing to acquire and develop our leasehold obligations. We may use debt or equity to fund our ongoing operations. There can be no assurance that any financing will be available, and if available, will be on terms and conditions acceptable to the Company. If we rely on equity financing, our shareholders will experience significant dilution. If we rely on debt financing, we may not be able to satisfy our debt obligations.

Identification of leasehold interests

The Company plans to acquire producing or near producing leaseholds that will provide cash flow and an upside for future development. However, it is unlikely that we will be able to exploit these leaseholds without a significant capital infusion.         

The Company may acquire the leaseholds in consideration for cash or shares of the company or a combination of cash and shares of the Company and may include an Overriding Royalty. Typical Overriding Royalty’s range from 2.5% to as much as 25% depending upon the current production on the leaseholds and the potential for Oil and Gas production.

A typical leasehold grants the Company the exclusive right to explore the land (“Property”) covered by the Oil and Gas Lease by geophysical and other methods, and to operate same for and produce there from all naturally-occurring oil, gas, casing-head gas or gasoline, gas condensate and/or all other liquid or gaseous hydrocarbons and other marketable or non-marketable substances produced therewith ("Oil and Gas"); and the exclusive right to inject gas, water, brine and other fluids into subsurface strata; and rights of way and easements for laying pipelines, telephone, telegraph and power lines, and the right to erect or install power stations, compressor stations, roadways, storage tanks or other storage facilities, separators and any fixtures and other structures thereon for producing, treating, processing, maintaining, storing and caring for the oil and gas; and oil and gas from other properties and any and all other rights and privileges necessary, incident to, or convenient for the economical operation of the Property and other lands for the production of Oil and Gas, and the injecting of gas, water, brine and other fluids into subsurface strata.

The Company may, at any time and from time-to-time pool all or part of the Property with other properties to create one or more drilling units. The production of Oil or Gas from such a pooled unit is generally treated as though the production occurred from a well on the Property, except the Lessor shall be entitled to royalty only on its pro-rata share of such production.

It is intended that the leasehold also include all lands and interests of the Lessor, which are contiguous to or in the vicinity of the Property.

Usually the leasehold will remain in force for a term of one year from the date executed and for as long thereafter as Oil and/or Gas is produced from the Property, or as long as operations for drilling are continued or as long as operations are continued for injection of gas, water, brine and other fluids into subsurface strata.

When a well is worked over or offset well drilled, an access road is constructed to the well site or upgraded. This results in surface damages that the surface owner is compensated for the loss of property. Timber may also be cut down during construction, the Company may cut and stack the timber at a location convenient for the surface owner to sell or a value may be assessed on the timber and the surface owner compensated.

Depending upon jurisdiction of the leasehold, the state can force a "pooling" of the oil and gas interests of a landowner with the interests of other landowners where the size or condition of lands does not allow the neighbor to find a drill site while respecting distance limits from property lines. A mineral owner has five options in the context of forced pooling. They can: 

1.

Lease their mineral interest.

2.

Sell their mineral interest.

3.

Participate materially in the development of the gas field.

4.

Be a non-consenting owner.

5.

Protest forced pooling

A rework well or producing well requires maintenance by a company representative sometimes referred to as a “pumper” to insure the well(s) produce at their capacity and to monitor production. As per the terms of the lease, a gate may be installed by the well Operator to prohibit access to the Property by unauthorized personnel. The gate is typically locked and a key may be provided to the landowner. The well may require periodic maintenance by a service rig during the life of the well. Surface equipment includes a wellhead, gas meter, storage tank (for oil wells), separator, and pipeline. Lease is held-by-production during the life of the well(s).

United States Market

The United States relied on net imports (imports minus exports) for about 40% of the petroleum (crude oil and petroleum products) that the United States consumed in 2012. Just over half of these imports came from the Western Hemisphere. The United States dependence on foreign petroleum has declined since peaking in 2005.[1]

6

The United States consumed 18.6 million barrels per day (MMbd) of petroleum products during 2012, making the United States the world's largest petroleum consumer. The United States was third in crude oil production at 6.5 MMbd. Crude oil alone, however, does not constitute all U.S. petroleum supplies. Significant gains occur because crude oil expands in the refining process, liquid fuel is captured in the processing of natural gas, and the United States have other sources of liquid fuel, including biofuels. These additional supplies totaled 4.8 MMbd in 2012.[1]

The United States imported 11.0 MMbd of crude oil and refined petroleum products in 2012. The United States also exported 3.2 MMbd of crude oil and petroleum products, so the United States net imports (imports minus exports) equaled 7.4 MMbd.[1]

In 2012, the United States imported 2.1 MMbd of petroleum products such as gasoline, diesel fuel, heating oil, jet fuel, and other products while exporting 3.1 MMbd of products, making the United States a net exporter of petroleum products.[1]

Top sources of net crude oil and petroleum product imports[1]:

·

Canada (28%)[1]

·

Saudi Arabia (13%)[1]

·

Mexico (10%)[1]

·

Venezuela (9%)[1]

·

Russia (5%)[1]

[1] Source EIA, link (current August 24, 2013): http://www.eia.gov/energy_in_brief/article/foreign_oil_dependence.cfm

Crude oil imports from the top five foreign suppliers to the United States—which in 2012 were Canada, Saudi Arabia, Mexico, Venezuela, and Iraq, in that order—accounted for almost 72% of total U.S. net crude oil imports, the highest proportion since 1997. The import share of the top five suppliers increased by 8 percentage points over the past three years despite a decline in total U.S. import volumes as the United States reduced its total crude oil imports in response to higher domestic oil production.[2]

U.S. net crude oil imports from the five countries averaged almost 6.1 million barrels per day (bbl/d) in 2012, even as total U.S. crude oil imports fell to their lowest level since 1997. Crude oil from the five countries accounted for a bigger share of overall U.S. net crude oil imports in 2012 than in previous years, at almost 72%, according to EIA's Petroleum Supply Monthly report. That share is up from around 64% in 2009, when the economic recession resulted in declining U.S. crude oil demand, and the highest share since reaching almost 73% in 1997. During 2012, Iraq replaced Nigeria as the fifth-largest supplier of U.S. crude oil imports.[2]

Highlights from the major crude oil supplying countries to the United States in 2012 included:

·

Canada - Crude oil imports by the United States averaged a record 2.4 million bbl/d, up 8% from their 2011 level.[2]

·

Saudi Arabia - Crude oil imports averaged almost 1.4 million bbl/d, up 14% from their 2011 level, and were the highest since 2008.[2]

·

Mexico - Crude oil imports of 972,000 bbl/d were down almost 12%, and fell below 1 million bbl/day for the first time since 1994, reflecting the steady decline in Mexico's crude oil production.[2]

·

Venezuela - Crude oil imports rose 4% to 906,000 bbl/d, the first increase since 2007. Venezuela's state oil company sent more crude to U.S. refineries, which exported more gasoline and other petroleum products back to Venezuela.[2]

·

Iraq. Crude oil imports of 474,000 bbl/d were up slightly more than 3% from 2011, moving Iraq ahead of Nigeria as the fifth-largest oil supplier to the United States for the first time since 1999. Iraq's crude oil production in the second half of last year topped 3 million bbl/d for first time since the end of the Gulf War in 1990.[2]

·

Nigeria. Crude oil imports of 405,000 bbl/d were down 42% from the year before and the lowest since 1985. Growing domestic production of light sweet crude oil of similar quality to Nigerian crude and lower demand for light sweet crude from United States East Coast refineries contributed to the decline.[2]

7

[2 ]Source: link (current August 24, 2013): http://www.eia.gov/todayinenergy/detail.cfm?id=10911

U.S. production of liquid fuels (mostly oil) will increase for the next 29 years by 108.11% of 2011 production levels by 2040 peaking by year 2020 with an annual production of 7.47 million barrels per day, an increase of 131.7% compared to 2011 domestic crude oil production, according to the Energy Information Administration (EIA), refer to table below:  

Liquid Fuels Supply and Disposition, Reference Case[3]
Million Barrels Per Day	2011	2015	2020	2025	2030	2035	2040	Growth Rate (2011-2040)
Crude Oil
Domestic Crude Production	5.67	7.29	7.47	6.79	6.30	6.26	6.13	0.30%
Gross Imports	8.94	7.33	6.82	7.05	7.36	7.37	7.57	-0.60%
Other Crude Supply	0.26	0.00	0.00	0.00	0.00	0.00	0.00	- -
Total Crude Supply	14.81	14.62	14.29	13.84	13.66	13.63	13.70	-0.30%
Other Petroleum Supply	3.02	3.54	4.04	4.12	3.82	3.57	3.29	0.30%
Other Non-petroleum Supply	1.09	1.30	1.51	1.55	1.58	1.68	1.97	2.10%
Total Primary Supply	18.92	19.46	19.84	19.50	19.06	18.88	18.96	0.00%
Percentages	2011	2015	2020	2025	2030	2035	2040	Growth Rate (2011-2040)
Crude Oil
Domestic Crude Production	30%	37%	38%	35%	33%	33%	32%	0.30%
Gross Imports	47%	38%	34%	36%	39%	39%	40%	-0.60%
Other Crude Supply	1%	0%	0%	0%	0%	0%	0%	- -
Total Crude Supply	78%	75%	72%	71%	72%	72%	72%	-0.30%
Other Petroleum Supply	16%	18%	20%	21%	20%	19%	17%	0.30%
Other Non-petroleum Supply	6%	7%	8%	8%	8%	9%	10%	2.10%
Total Primary Supply	100%	100%	100%	100%	100%	100%	100%	0.00%
[3] Source: EIA, AEO2013 link (current 08/24/2013): http://www.eia.gov/forecasts/aeo/source_oil.cfm

Projected crude oil production in the United States ranges from 6 to 8 million barrels per day (bbl/d) over the next 30 years in the Annual Energy Outlook 2013 (AEO2013) Reference case projection. However, under greater supply assumptions, crude oil production is sustained at a higher level of about 10 million bbl/d between 2020 and 2040 (see chart below).[4]

In this higher resource scenario, total U.S. liquid fuels production (which includes crude oil, natural gas liquids (NGL), refinery gains, biofuels, and other liquid fuels) increases to more than 18 million bbl/d in 2040, compared to 12 million bbl/d in the Reference case. That level of domestic production reduces net imports to 7% or less of total demand compared to 40% in 2012. Production projections inevitably reflect many uncertainties regarding the actual level of crude oil resources available, the difficulty or ease in extracting them, and the evolution of the technologies (and associated costs) used to recover them.[4]

8

The EIA developed a High Oil and Gas Resource case as part of the AEO2013 to examine the effects of higher domestic production on energy demand, imports, and prices. This alternative case presents a scenario in which U.S. crude oil production continues to expand after 2020, driven primarily by tight oil production. This increased production results from assumed greater technically recoverable tight oil resources, as well as undiscovered resources in Alaska and the offshore Lower 48 states. In addition, the maximum penetration rate for gas-to-liquids (GTL) is increased and kerogen (oil shale) is assumed to begin development. In the High Oil and Gas Resource case, NGL production increases from 2.2 million bbl/d in 2011 to 5.0 million bbl/d in 2040, compared to just under 3 million bb/d in 2040 in the Reference case. GTL output reaches about 0.6 million bbl/d, compared to about 0.2 million bbl/d in the Reference case (see chart below).[4]

Estimates of technically recoverable resources from the rapidly developing tight oil formations are particularly uncertain and change over time as new information is gained through drilling, production, and technology experimentation. Projections embody many assumptions that might not prove to be valid over the long term and over all tight and shale formations. In the High Oil and Gas Resource case, the tight oil resources are increased by changing the estimated ultimate recovery (EUR) per well and assuming closer well spacing.[4]

[4] Source: link (current August 24, 2013): http://www.eia.gov/todayinenergy/detail.cfm?id=11691

Facts and Figures About the U.S. Oil and Natural Gas Industry

9.8 million	Number of people directly and indirectly employed by the U.S. oil and natural gas industry in 2011.[5]
5.6% GDP	America’s oil and natural gas industry supports 5.6 percent of our nation’s GDP.[5]
$86 Million/day	Daily amount companies pay to the federal government in royalty payments, rents and bonus fees in 2010.[5]
$100 billion	Amount the U.S. oil and natural gas industry has paid to the federal government in rents, royalties and lease payments for production from  2000 to 2010.[5]
$176.7 billion	Amount the industry invested in new U.S. capital projects in 2011.[5]
$203.6 billion	Amount of wages paid to U.S. employees in 2011, plus benefits and payments to oil and natural gas leaseholders.[5]
$32 billion	Amount of dividends distributed to American shareholders in 2011.[5]

[5] Source: link (current August 24, 2013): http://energytomorrow.org

US Oil And Gas Industry Employment Growing Much Faster Than Total Private Sector Employment

From the start of 2007 through the end of 2012, total U.S. private sector employment increased by more than one million jobs, about 1%. Over the same period, the oil and natural gas industry increased by more than 162,000 jobs, a 40% increase.[6]

9

The Labor Department's Bureau of Labor Statistics (BLS) accounts for oil and natural gas industry employment in three categories: drilling, extraction, and support.[6]

·

Drilling involves any employment related to the spudding and drilling of wells, as well as reworking of wells, and accounted for more than 90,000 jobs by the end of 2012, an increase of 6,600 jobs since 2007.[6]

·

Extraction includes establishments primarily engaged in operating, developing, and producing oil and natural gas fields, including exploration and all production work up to the point of shipment from the producing property. Employment in the extraction category numbered more than 193,000 jobs by the end of 2012, 53,000 more jobs than in 2007.[6]

·

Support involves performing supporting activities for oil and natural gas operations, including exploration, excavation, well surveying, casing work, and well construction. Support is the largest oil and gas industry category, and employed more than 286,000 people by the end of 2012, up more than 102,000 jobs from 2007. (BLS considers support to be for the above activities, and does not include jobs created in other industries such as manufacturing, housing, retail, education, and food services.)[6]

About half of the workers employed in crude oil and natural gas production are in the support category of oil and natural gas industry employment, and employment in this category accounted for the bulk of the increases seen in oil and gas industry employment. Combined, the three industry categories equal just one-half of one percent of total U.S. private sector employment.[6]

Both the support and drilling industries were heavily affected by the recession, but these industries have recovered quickly, suffering only minor effects from the temporary moratorium on offshore drilling as a result of the Deepwater Horizon spill in 2010. Between January 2007 and December 2012, monthly crude oil production increased by 39%, and monthly natural gas production increased by 25% (see chart below). Employment in the oil and gas drilling, extraction, and support industries continues to contribute to overall private sector employment as the U.S. economy recovers from the 2007-09 recession. [6]

Beyond within-sector employment, oil and gas industry activity also directly supports output and employment in other domestic sectors, such as suppliers of pipe, drilling equipment, and other drilling materials. In addition, as with other forms of economic activity, there are indirect employment effects stemming from purchases made by industry and employees spending of their incomes. Because employee expenditures are closely tied to their incomes, higher paying jobs, such as those in the oil and gas sector, tend to have larger indirect effects on output and employment than lower paying ones. A recent TIE article reviews the experience of North Dakota, which has seen significant gains in real gross domestic product per capita, coinciding with the development of the Bakken shale play.[6]

[6] Source: link( current August 24, 2013): http://www.eia.gov/todayinenergy/detail.cfm?id=12451

10

MISSION STATEMENT

·

To become a leader in providing energy, through acquisition and diversification.

·

To acquire working interest positions and mineral rights leases for the purposes of oil and gas development and production using new technologies, advanced drilling and completion methods and invest in known, producing properties and surrounding areas.

·

To be aggressive in gaining interest positions in leases and existing producing properties that will produce desirable returns, utilize leading technologies, utilize methods to maximize exploration and production results while providing Return On Investment.

11

The Terms of the Offering

Securities Being Offered   

79,081,633 shares of common stock being registered on behalf of the Selling Stockholder (maximum offering).

Offering Period:

Until all shares are sold by the Selling Stockholder or until 36 months from the date that the registration statement becomes effective, whichever comes first.

Risk of Factors:

The Securities offered hereby involve a high degree of risk and should not be purchased by investors who cannot afford the loss of their entire investment.    See “Risk Factors”.

Common Stock Issued And

Outstanding Before Offering:

554,723,874 shares of our common stock are issued and outstanding as of the date of this Prospectus.

Common Stock Issued And

Outstanding After Offering:

633,805,507 shares of common stock.

Use of Proceeds:

We will not receive any proceeds from the sale of the common stock by the Selling Stockholder. However, we will receive proceeds from the sale of our common stock under the Drawdown Agreement. The proceeds will be used for working capital, asset acquisition, and general corporate purposes. See “Use of Proceeds.”

This offering relates to the resale of up to 79,081,633 shares of our common stock by the Selling Stockholder, including (i) up to 75,000,000 Put Shares that we may put to AGS, pursuant to the Drawdown Agreement and (ii) 4,081,633 commitment shares of our common stock we paid to AGS as a fee for providing the facility.

There are substantial risks to investors as a result of the issuance of shares of our common stock under the Drawdown Agreement. These risks include dilution of stockholders, significant decline in our stock price and our inability to draw sufficient funds when needed.

In order to fund a notice for funding pursuant to the Drawdown Agreement (a “Drawdown Notice”), AGS will periodically purchase our common stock under the Drawdown Agreement and will, in turn, sell such shares to investors in the market at the market price on a best efforts basis, subject to certain conditions. This may cause our stock price to decline, which will require us to issue increasing numbers of common shares to AGS to raise the same amount of funds, as our stock price declines.

12

Financial Summary

This financial summary does not contain all the financial information that may be important to you. Therefore, you should carefully read all the information in this prospectus, including the financial statements and their explanatory notes before making an investment decision.

We derived the summary financial information from our financial statements appearing in the section in this prospectus entitled "Financial Statements." You should read this summary financial information in conjunction with the section entitled "Management's Discussion and Analysis," our financial statements and related notes to the financial statements.

Statement of Operations Information:

As of May 31 2013

(Audited)

		December 20, 2007 (Inception) To May 31, 2013
Revenue
Revenue - Operations	$	4,637
Total Revenue	$	4,637
Cost of Goods Sold	$	1,653
Gross Profit	$	2,984
Expenses
General and Administrative	$	2,893,073
Loss before income taxes	$	(2,893,073)
Other income (expense)	$	(4563,810)
Provision for Income Taxes	$	-
Net (Loss)	$	(3,453,899)

Balance Sheet Information:

 As of May 31, 2013

(Audited) 

Total Assets	$	2,482,970
Total Liabilities	$	3,021,901
Working Capital	$	(2,017,501)
Common Stock and paid in capital	$	2,876,422
Total Stockholder's Equity	$	(538,932)

13

RISK FACTORS

An investment in our securities is highly speculative and subject to numerous and substantial risks. These risks are set forth below. You should not invest in the Company unless you can afford to lose your entire investment. Readers are encouraged to review these risks carefully before making any investment decision.

Risks of Purchasing Shares:

Possible loss of entire investment.

This Offering is intended for investors who can accept the applicable risks. Prospective investors should not subscribe unless they can readily bear the consequences of the loss of their entire investment.

Exchange fluctuations.

Shares will be priced in US dollars, and persons investing by converting foreign currency will bear the risk of such conversion. The value of such investments may be affected favorably or unfavorably by fluctuations in exchange currencies. In addition, prospective investors whose assets and liabilities are primarily denominated in currencies other than US Dollars should take into account the potential risk of loss arising from fluctuations in the rate of exchange between the currency of the investment and such other currency.

Additional dilution as additional shares are issued which may decrease the market price of our common stock.

Additional offerings will likely have to be made in the future to raise capital to meet operating cash flow needs. Such offerings may include warrants for issuance of additional common stock, further diluting the number of shares of common stock outstanding from time to time. An increase in the number of our shares of common stock from these events or others may result in a decrease of the market price for our common stock and will dilute the ownership interest of current shareholders.  

Shares eligible for future sale under Rule 144 may adversely affect the market for our securities.

From time to time, certain of our stockholders who hold restricted securities may be eligible to sell all or some of their shares of common stock by means of ordinary brokerage transactions in the open market pursuant to Rule 144, promulgated under the Securities Act of 1933, subject to certain limitations. Although current stockholders may have no current intention or ability to sell their shares, any substantial sales by holders of our common stock in the future pursuant to Rule 144 may have a material adverse effect on the market price of our securities.

The price of our common stock is subjected to volatility.

The market for Xun’s common stock is highly volatile. The trading price of Xun’s common stock is subject to wide fluctuations in response to, among other things, quarterly variations in operating and financial results, and general economic and market conditions. In addition, statements or changes in opinions, ratings, or earnings estimates made by brokerage firms or industry analysts relating to their markets or relating to Xun could result in an immediate and adverse effect on the market price of our common stock. The highly volatile nature of Xun’s stock prices may cause investment losses for their shareholders. If securities class action litigation is brought against Xun, such litigation could result in substantial costs while diverting management's attention and resources.

Disruptions in global financial markets and deteriorating global economic conditions could cause lower returns to investors.

Disruptions in global financial markets and deteriorating global economic conditions could adversely affect the value of Xun’s common stock. The current state of the economy and the implications of future potential weakening may negatively impact market fundamentals, resulting in lower revenues and values for Xun’s business opportunities and investments.

If securities or industry analysts do not publish research or reports about Xun’s business or if they issue an adverse or misleading opinion regarding Xun stock, its price and trading volume could decline.

The trading market for Xun’s common stock will be influenced by the research and reports that industry or securities analysts publish about Xun or its business, if any.

Our shares will be deemed to be "penny stocks" as defined in the Securities Exchange Act of 1934, as amended, and, as a result, will be subject to various eligibility and disclosure requirements on broker-dealers engaged in the resale of these shares.

The shares offered in this prospectus will be "penny stocks" as that term is defined in the Securities Exchange Act of 1934, as amended, (the ‘Exchange Act”) to mean, among other definitions, equity securities with a price of less than $5.00 per share. Under the penny stock regulations, a broker-dealer selling a penny stock to anyone other than an established customer or an accredited investor must make a special suitability determination regarding the purchaser and provide special disclosure

14

documents to the purchaser. The imposition of these suitability standards and special disclosures could reduce an investor's ability to resale the shares at a time or price desired. See the section "Market for Common Equity and Related Stockholder Matters."

If we fail to remain Current on our reporting requirements, we could be removed from quotation by the OTCBB, which would limit the ability of broker-dealers to sell our securities and the ability of shareholders to sell their securities in the secondary market.

Companies quoted on the OTCBB must be reporting issuers under Section 12 of the Exchange Act, and must be current in their reports under Section 13 of the Exchange Act, in order to maintain price quotation privileges on the OTCBB.  If we fail to remain current on our reporting requirements, we could be removed from the OTCBB.  As a result, the market liquidity for our securities could be adversely affected by limiting the ability of broker-dealers to sell our securities and the ability of shareholders to sell their securities in the secondary market.

Risks Related to the equity line of credit:

AGS will pay less than the then-prevailing market price of our common stock which could cause the price of our common stock to decline.

Our common stock to be issued under the Drawdown Agreement will be purchased at a ten percent (10%) discount or 90% of the average of the three (3) lowest closing bid prices during the ten (10) trading days immediately following our delivery of our Notice to AGS of our election to exercise our "put" right.

AGS has a financial incentive to sell our shares immediately upon receiving the shares to realize the profit between the discounted price and the market price.  If AGS sells our shares, the price of our common stock may decrease.  If our stock price decreases, AGS may have a further incentive to sell such shares. Accordingly, the discounted sales price in the Drawdown Agreement may cause the price of our common stock to decline.

We are registering an aggregate of 79,081,633 shares of common stock to be issued under the equity line of credit. The sale of such shares could depress the market price of our common stock.

We are registering an aggregate of 79,081,633 shares of common stock under the registration statement of which this prospectus forms a part for issuance pursuant to the equity line of credit. The sale of these shares into the public market by AGS could depress the market price of our common stock.

We may not have access to the full amount under the equity line of credit.

For the five consecutive trading days prior to September 16, 2013, the lowest closing trade price of our common stock was $0.0006  There is no assurance that the market price of our common stock will increase substantially in the near future. The entire commitment under the equity line of credit is $15,000,000.  The aggregate number of shares of common stock necessary to raise the entire $15,000,000 at $0.0006 per share is 25 Billion. The number of common shares that remains issuable is lower than the number of common shares we need to issue in order to have access to the full amount under the equity line of credit.  Therefore, we may not have access to the remaining commitment under the equity line of credit unless the market price of our common stock to increase substantially. The Company may have to restructure the common stock through a common stock reverse split to meet its minimum price of $0.50 per share of common stock.

Our common stock price may decline by our draw on our equity line of credit.

Effective July 11, 2013, we entered into the Drawdown Agreement with AGS. Pursuant to the Drawdown Agreement, when we deem it necessary, we may raise capital through the private sale of our common stock to AGS at a price equal to 90% of the average of the three (3) lowest closing bid prices of our common stock during the ten (10) consecutive trading days immediately following the date our Notice is delivered.  Because the put price is lower than the prevailing market price of our common stock, to the extent that the put right is exercised, your ownership interest may be diluted.

There may not be sufficient trading volume in our common stock or price of our common stock to permit us to acquire adequate funds which may adversely affect our liquidity.

The Drawdown Agreement provides that the dollar value that we will be permitted to request from AGS in each Notice may be up to $250,000, provided that the number of shares sold pursuant to each Notice shall not exceed 200% of the average daily trading volume for the previous 10 trading days. If the average daily trading volume in our common stock is too low, it is possible that we may not be permitted to draw the full amount of proceeds of the drawdown request, which may not provide adequate funding for our planned operations and may materially decrease our liquidity.

We may draw on our equity line of credit to the extent that a change of control occurs.

The Company may continue to make drawdown requests while the Selling Shareholder holds shares of common stock or sells

15

 shares to a specific party, thereby causing the Selling Shareholder or such purchasing party to gain control of the Company. This could jeopardize the execution of the Company’s business plan and may disrupt operations.  

Risks Related to Our Business:

We ceased generating revenue.

We have had limited revenues since inception. We will, in all likelihood, sustain operating expenses without corresponding revenues. This may result in our incurring a net operating loss that will increase unless we consummate an acquisition of an oil and gas producing properties that are profitable. We cannot assure you that we can identify any oil and gas properties that will be profitable at the time of its acquisition by the Company or ever.

Unless we secure additional working capital, the Company can only continue as a going concern for twelve months.

Unless we secure equity, debt financing or Joint Venture partners, of which there can be no assurance, or identify a profitable acquisition candidate, we will not be able to continue any operations for longer than twelve months. We based this estimate on that majority of our operating costs are for salaries of the officers and directors of the Company, which are being accrued.  Our negative cash flow is for our auditors, attorneys, transfer agent, EDGAR filer and travel expenses. We have sufficient cash to cover auditors, attorneys, transfer agent, EDGAR filer and limited travel expenses for the next twelve months.  After such time, the Company would be forced to cease operations.

Environmental and Occupational Regulations will impact our operations.

We are subject to various federal, state, provincial, and local international laws and regulations concerning occupational safety and health as well as the discharge of materials into, and the protection of, the environment. Environmental laws and regulations relate to, among other things:

i)

assessing the environmental impact of drilling, workover or construction activities;

ii)

the generation, storage, transportation and disposal of waste materials;

iii)

the emission of certain gases into the atmosphere;

iv)

the monitoring, abandonment, reclamation and remediation of well and other sites, including sites of former operations; and

v)

the development of emergency response and spill contingency plans.

The costs of environmental protection and safety and health compliance are significant. Compliance with environmental, safety and health initiatives can be costly. There is no assurance that we will be able to comply with these regulations. If we cannot comply with these regulations, we will be forced to cease all operations in which case you will lose your entire investment. We cannot predict with any reasonable degree of certainty our future exposure concerning such matters.

We are subject to exploration and production regulation.

Our oil and gas operations are subject to various federal, state, provincial, tribal, and local laws and regulations. These laws and regulations relate to matters that include, but are not limited to:

i)

acquisition of seismic data;

ii)

location of wells;

iii)

drilling and casing of wells;

iv)

hydraulic fracturing;

v)

well production;

vi)

spill prevention plans;

vii)

emissions and discharge permitting;

viii)

use, transportation, storage and disposal of fluids and materials incidental to oil and gas operations;

ix)

surface usage and the restoration of properties upon which wells have been drilled;

x)

calculation and disbursement of royalty payments and production taxes;

xi)

plugging and abandoning of wells; and

xii)

transportation of production.

16

Our operations also are subject to conservation regulations, including the regulation of the size of drilling and spacing units or proration units; the number of wells that may be drilled on the Oil and Gas Lease and the unitization or pooling of oil and gas properties. In the United States, some states allow the forced pooling or integration of tracts to facilitate exploration, while other states rely on voluntary pooling of lands and leases, which may make it more difficult to develop oil and gas properties. In addition, state conservation laws generally limit the venting or flaring of natural gas and impose certain requirements regarding the ratable purchase of production. The effect of these regulations is to limit the amounts of oil and gas we can produce from our wells and to limit the number of wells or the locations at which we can drill.

Public policy, which includes laws, rules and regulations, can change.

Our operations are generally subject to federal laws, rules and regulations. In addition, we are also subject to the laws and regulations of various states and local governments. Pursuant to public policy changes, numerous government departments and agencies have issued extensive rules and regulations binding on the oil and gas industry and its individual members, some of which carry substantial penalties for failure to comply. Changes in such public policy have affected, and at times in the future could affect, our operations. Political developments can restrict production levels, enact price controls, and change environmental protection requirements, and increase taxes, royalties and other amounts payable to governments or governmental agencies. Existing laws and regulations can also require us to incur substantial costs to maintain regulatory compliance. Our operating and other compliance costs could increase further if existing laws and regulations are revised or reinterpreted or if new laws and regulations become applicable to our operations. Although we are unable to predict changes to existing laws and regulations, such changes could significantly affect our profitability, financial condition, and liquidity, particularly changes related to hydraulic fracturing, income taxes and climate change as discussed below.

Hydraulic Fracturing  — The U.S. Congress is currently considering legislation to amend the federal Safe Drinking Water Act to require the disclosure of chemicals used by the oil and natural-gas industry in the hydraulic-fracturing process. Currently, regulation of hydraulic fracturing is primarily conducted at the state level through permitting and other compliance requirements. This legislation, if adopted, could establish an additional level of regulation and permitting at the federal level.

Environmental matters and costs can be significant.

As an operator of oil and gas properties, we are subject to various federal, state, and local laws and regulations relating to discharge of materials into, and protection of, the environment. These laws and regulations may, among other things, impose liability on us for the cost of pollution clean-up resulting from our operations in affected areas. Any future environmental costs of fulfilling our commitments to the environment are uncertain and will be governed by several factors, including future changes to regulatory requirements. There is no assurance that changes in or additions to public policy regarding the protection of the environment will not have a significant impact on our operations and profitability.

Insurance does not cover all risks.

Exploration, development, production, and processing of oil and gas can be hazardous and involve unforeseen occurrence including, but not limited to blowouts, cratering, fires, and loss of well control. These occurrences can result in damage to or destruction of wells or production facilities, injury to persons, loss of life, or damage to property or the environment. We do not maintain insurance at this time against losses or liabilities in accordance with customary industry practices. However, insurance against all operational risks is not available to us.

We have generated limited revenues from operations. We have a history of losses and losses are likely to continue in the future.

We have generated limited revenues from operations. Cumulative losses as of February 28, 2013 totaled ($2,897,586). We have incurred significant losses in the past and we will likely continue to incur losses in the future unless our development program proves successful. Even if our development program produces oil and gas, there can be no assurance that we will be able to commercially exploit these resources, or generate sufficient revenues to operate profitably.

We will require additional financing to continue our development operations.

We will require significant working capital to continue our current development program. There can be no assurance that we will be able to secure additional funding to meet our objectives or if we are able to identify funding sources, that the funding will be available on terms acceptable to the Company. Should this occur, we will have to significantly reduce our development programs, which will limit our ability to secure additional equity participation in acquisitions of oil and gas leases or in various joint ventures.

There are no confirmed proven reserves of oil and gas reservoirs on any properties from which we may derive any financial benefit.

Neither the Company nor any independent petroleum geologist has confirmed that our leasehold interests can be commercially developed. In order to carry out additional development and/or exploration programs of any potential oil or gas deposits, we will require substantial additional funding.

17

We have no history as a company engaged in oil and gas development or exploration.   

We have no history of earnings or cash flow from oil and gas operations. If we are able to proceed to production, commercial viability will be affected by factors that are beyond our control such as the particular attributes of the deposit, the fluctuation in the prices of oil and gas,  the cost of construction and operating an oil or gas  well, prices, and refining facilities, the availability of economic sources for energy, government regulations including regulations relating to prices, royalties, restrictions on production, quotas on exploration,  as the costs of protection of the environment.

If our exploration costs are higher than anticipated, then our profitability will be adversely affected.

We are currently proceeding with development and/or exploration of our leasehold interests on the basis of estimated development/exploration costs. If our development/exploration costs are greater than anticipated we may be forced to terminate our operations until such time as we generate additional revenues to fund our operations. Factors that could cause development/exploration costs to increase are adverse weather conditions, difficult terrain, unknown or unexpected results when we re-enter a well, increased government regulation and shortages of qualified personnel.

We face many operating hazards.

The development and operation of an oil or gas well involves many risks, which even a combination of experience, knowledge and careful evaluation may not be able to overcome. These risks include, among other things, ground fall, flooding, environmental hazards, and the discharge of toxic chemicals, explosions and other accidents. Such occurrences may result in work stoppages, delays in production, increased production costs, damage to or destruction of mines and other producing facilities, injury or loss of life, damage to property, environmental damage, and possible legal liability for such damages.

We do not maintain liability insurance.

We do not maintain liability insurance. As such, if we are found liable for any action, whether intentional or unintentional, we will be required to satisfy the liability with our own funds. Currently we have nominal assets and any monetary award would likely result in the close of our operations. Even assuming a significant increase in our assets and we secure liability insurance, the amount of the coverage may be insufficient to cover to insure against any award. Since the Company may not be able, or may elect not to insure, this may result in a material adverse change in the Company’s financial position. The nature of these risks is such that liabilities may exceed policy limits, in which event the Company would incur substantial uninsured losses.

During our operations we may experience certain unanticipated conditions or unexpected or unusual events may occur, including fires, floods, or earthquakes. It is not always possible to fully insure against such risks and we may decide not to take out insurance against such risks as a result of high premiums or for other reasons. Should such liabilities arise, they may reduce or eliminate any future profitability and may result in a decline in the value of the securities of the Company.

There may be insufficient oil and gas reserves to develop any of our properties and our estimates may be inaccurate.

There is no certainty that any expenditures made in the development/exploration of any properties will result in discoveries of commercially recoverable quantities of oil or gas. Most development/exploration projects do not result in the discovery of commercially extractable deposits of oil or gas and no assurance can be given that any particular level of recovery will in fact be realized or that any identified leasehold interest will ever qualify as a commercially developed. Estimates of reserves, deposits, and production costs can also be affected by such factors as environmental regulations and requirements, weather, unexpected or unknown results when we re-enter a well, environmental factors, unforeseen technical difficulties, unusual or unexpected geological formations, and work interruptions.

Short term factors relating to reserves, such as the need for orderly development of the wells may also have an adverse effect on our development/exploration, drilling and on the results of operations. There can be no assurance the production of insignificant amounts of oil can be duplicated in a larger exploration program. Material changes in estimated reserves, development/drilling costs may affect the economic viability of any project.

 We have no proven reserves.

All of our leasehold interests are without known bodies (reserves) of commercial oil or gas. Development of these properties will follow only upon obtaining satisfactory development/exploration results. The long-term profitability of the Company’s operations will be in part directly related to the cost and success of its development/exploration and development programs. Oil and gas development/exploration and development are highly speculative businesses, involving a high degree of risk. Few properties, which are explored, are ultimately developed into producing oil and gas fields. There is no assurance that our development/exploration and development activities will result in any discoveries of commercial quantities of oil and gas. There is also no assurance that, even if commercial quantities of oil or gas are discovered, a well can be brought into commercial production. Production/discovery of oil and gas is dependent upon a number of factors, not the least of which is the technical skill

18

 of the development/exploration personnel involved. The commercial viability of a well is also dependent upon a number of factors, many of which are beyond the Company’s control, such as worldwide economy, the price of oil and gas, government regulations, including regulations relating to royalties, allowable production, and environmental protection.

We face fluctuating oil and prices.   

The price of oil and gas has experienced significant price movements over short periods of time and is affected by numerous factors beyond our control, including international economic and political trends, expectations of inflation, currency exchange fluctuations (including, the U.S. dollar relative to other currencies) interest rates, global or regional consumption patterns, speculative activities and increases in production due to improved exploration and d production methods. The supply of and demand for oil and gas are affected by various factors, including political events, economic conditions and production costs in major producing regions.

Drilling operations are hazardous, raise environmental concerns and raise insurance risks.

Drilling operations are by their nature subject to a variety of risks, such as, flooding, environmental hazards, the discharge of toxic chemicals and other hazards. Such occurrences may delay development or production, increase production costs, or result in a liability. We may not be able to insure fully or at all against such risks, due to political or other reasons, or we may decide not to take out insurance against such risks as a result of high premiums or other reasons. We intend to conduct our business in a way that safeguards public health and the environment and in compliance with applicable laws and regulations. Environmental hazards may exist on properties in which we hold an interest which are unknown to us and may have been caused by prior owners. Changes to drilling laws and regulations could require additional capital expenditures and increase operating and/or reclamation costs. Although we are unable to predict what additional legislation, if any, might be proposed or enacted, additional regulatory requirements could render certain operations uneconomic.

Our estimates of resources are subject to uncertainty. The cost of employing this technology maybe cost prohibitive or the cost may exceed the benefit.

Under current SEC standards, proved reserves are those quantities of oil and natural gas, which, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be economically producible from a given date forward, from known reservoirs, and under existing economic conditions, operating methods, and government regulations. The term “reasonable certainty” implies a high degree of confidence that the quantities of oil and/or natural gas actually recovered will equal or exceed the estimate. Reasonable certainty can be established using techniques that have been proved effective by actual production from projects in the same reservoir or an analogous reservoir or by other evidence using reliable technology that establishes reasonable certainty. Reliable technology is a grouping of one or more technologies (including computational methods) that have been field-tested and have demonstrated to provide reasonably certain results with consistency and repeatability in the formation being evaluated or in an analogous formation.

In order to establish reasonable certainty with respect to our leases, we would have to employ technologies that have been demonstrated to yield results with consistency and repeatability. The technical data used in the estimation of proved reserves include, but are not limited to, electrical logs, radioactivity logs, core analyses, geologic maps and available downhole and production data, seismic data and well test data. Generally, oil and gas reserves are estimated using, as appropriate, one or more of these available methods: production decline curve analysis, analogy to similar reservoirs or volumetric calculations. Reserves attributable to producing wells with sufficient production history are estimated using appropriate decline curves or other performance relationships. Reserves attributable to producing wells with limited production history and for undeveloped locations are estimated using performance from analogous wells in the surrounding area and technical data to assess the reservoir continuity. In some instances, particularly in connection with exploratory discoveries, analogous performance data is not available, requiring us to rely primarily on volumetric calculations to determine reserve quantities. Volumetric calculations are primarily based on data derived from geologic-based seismic interpretation, open-hole logs, and completion flow data. When using production decline curve analysis or analogy to estimate proved reserves, they would be limited to estimates to the quantities of oil and gas derived through volumetric calculations.

The accuracy of any reserve estimate is a function of the quality of available geological, geophysical, engineering, and economic data, the precision of the engineering and geological interpretation and judgment. The estimates of reserves and future cash flows are based on various assumptions and are inherently imprecise. Even though these estimates may be reasonable and logical, actual future production, cash flows, taxes, development expenditures, operating expenses and quantities of recoverable oil and natural gas reserves may vary substantially from these estimates. Also, the use of a discount factor for reporting purposes may not necessarily represent the most appropriate discount factor, given actual interest rates and risks to which the oil and natural gas industry in general are subject.

If we are unable to obtain all of our required governmental permits, our operations could be negatively impacted.

Our future operations, including exploration and development activities, required permits from various governmental authorities. Such operations are and will be governed by laws and regulations governing prospecting, development,   production, exports, taxes, labor standards, occupational health, waste disposal, toxic substances, land use, environmental protection, mine safety and

19

 other matters. There can be no assurance that we will be able to acquire all required licenses or permits or to maintain continued operations at our properties.

We are subject to numerous environmental and other regulatory requirements.

All phases of drilling and development/exploration operations are subject to governmental regulation including environmental regulation. Environmental legislation is becoming stricter, with increased fines and penalties for non-compliance, more stringent environmental assessments of proposed projects and heightened responsibility for companies and their officers, directors and employees. There can be no assurance that possible future changes in environmental regulation will not adversely affect our operations. As well, environmental hazards may exist on a property in which we hold an interest that was caused by previous or existing owners or operators of the properties and of which the Company is not aware at present.

Government approvals and permits are required to be maintained in connection with our drilling and development/exploration activities. We will require permits for our operations and there re is no assurance that delays will not occur in connection with obtaining all necessary renewals of such permits for the existing operations or additional permits for any possible future changes to the Company’s operations, including any proposed capital improvement programs. Failure to comply with applicable laws, regulations and permitting requirements may result in enforcement actions there under, including orders issued by regulatory or judicial authorities causing operations to cease or be curtailed, and may include corrective measures requiring capital expenditures, installation of additional equipment, or remedial actions. Parties engaged in drilling operations may be required to compensate those suffering loss or damage by reason of our activities and may be liable for civil or criminal fines or penalties imposed for violations of applicable laws or regulations. Amendments to current laws, regulations and permitting requirements, or more stringent application of existing laws, may have a material adverse impact on the Company resulting in increased capital expenditures or production costs, reduced levels of production at producing properties or abandonment or delays in development of properties.

There is no assurance that there will not be title or boundary disputes.

Although we have investigated the right to explore and exploit our properties and obtained records from government offices, this should not be construed as a guarantee of title. Other parties may dispute the title to any of our properties or that any property may be subject to prior unregistered agreements and transfers. The title may be affected by undetected encumbrances or defects or governmental actions.

Local infrastructure may impact our development/exploration activities and results of operations.

Our activities depend, to one degree or another, on adequate infrastructure. Reliable roads, bridges and power and water supplies are important determinants that affect capital and operating costs. Unusual or infrequent weather phenomena sabotage or government or other interference in the maintenance or provision of such infrastructure could adversely affect the activities and profitability of the Company.

There may be challenges to our title in our properties.

While we intend to conduct our own due diligence prior to committing significant funds to any project,  oil and gas properties may be subject to prior unregistered agreements, transfers or claims and title may be affected by undetected defects. Should this occur, we face significant delays, costs and the possible loss of any investments or commitment of capital.

Because of the speculative nature of completing development programs and drilling for oil and gas, there are significant risks that our business will fail.

Oil and gas development/exploration is extremely risky. We cannot provide any assurances that our activities will result in commercially exploitable reserves of oil and gas. Development/exploration for oil and gas is a speculative venture necessarily involving substantial risk. Any expenditure that we make may not result in the discovery of commercially exploitable reserves.

The market for oil and gas is volatile. This will have a direct impact on the Company’s revenues (if any) and profits (if any) and will probably have an adverse effect on our ongoing operations.

The price of both oil and gas has fluctuated significantly over the past few years. This has contributed to the renewed interest in oil and gas exploration. However, in the event that the price of either oil or gas falls, the interest in exploratory ventures may decline and the value of the Company’s business could be adversely affected.

Government regulation or changes in such regulation may adversely affect the Company’s business.

The Company intends to engage experts to assist it with respect to its operations. The Company deals with various regulatory and governmental agencies and the rules and regulations of such agencies. No assurances can be given that it will be successful in its efforts or dealings with these agencies. Further, in order for the Company to operate and grow its business, it needs to continually conform to the laws, rules, and regulations of such jurisdiction. It is possible that the legal and regulatory environment pertaining

20

to the development/exploration and development of oil and gas properties will change. Uncertainty and new regulations and rules could increase the Company’s cost of doing business or prevent it from conducting its business.

 We are in competition with companies that are larger, more established and better capitalized than we are.

Many of our potential competitors have:

·

greater financial and technical resources;

·

longer operating histories and greater experience in oil and gas

We may not be able to generate revenue sufficient to maintain operations.

To date, we have generated limited revenue. We have incurred significant losses since inception and there can be no assurance that we will be able to reverse this trend. Even if we are able to successfully identify commercially exploitable oil and gas reserves, there is no assurance that we will have sufficient financing to exploit these reserves, generate revenues, or find a willing buyer for the properties.

We have no proven reserves, extremely limited operations and no operating revenues.   

We currently have no revenues from operations and no proven reserves. Reserves, by definition, contain mineral deposits in a quantity and in a form from which oil and gas may be economically and legally extracted or produced. We have not established that either oil or gas exists in any quantity in the property, which is the focus of our exploration efforts, and unless or until we do so, we will have nominal revenues.   

Development/Exploration for economic deposits of oil and gas is speculative.

Our business is very speculative since there is generally no way to recover any of the funds expended on development/exploration unless the existence of commercially exploitable reserves are established and the Company can exploit those reserves by either commencing drilling operations, selling or leasing its interest in the property, or entering into a joint venture with a larger e company that can further develop the property. Unless we can establish and exploit reserves before our funds are exhausted, we will have to discontinue operations, which could make our stock valueless.

Our operations are subject to environmental risks.

Our operations are subject to strict environmental rules and regulations. There can be no assurance that we will be able to comply with these rules. Environmental legislation is evolving in some jurisdictions in a manner, which will require stricter standards and enforcement, increased fines and penalties for non-compliance, more stringent environmental assessments of proposed projects, and a heightened degree of responsibility for companies and their officers, directors and employees. There is no assurance that future changes in environmental regulation, if any, will not adversely affect our projects

The oil and gas industry is highly competitive and the success and future growth of our business depend upon our ability to remain competitive in identifying and developing properties with sufficient reserves for economic exploitation.

The oil and gas industry is highly competitive and fragmented with limited barriers to entry, especially at the exploratory stages. We compete in national, regional, and local markets with large multi-national corporations and against start-up operators hoping to identify an oil or gas property. Some of our competitors have significantly greater financial resources than we do. This puts us at a competitive disadvantage if we choose to further exploit development opportunities.   

The loss of key members of our senior management team could adversely affect the execution of our business strategy and our financial results.

We believe that the successful execution of our business strategy and our ability to move beyond the exploratory stages depends on the continued employment of key members of our senior management team. If any members of our senior management team become unable or unwilling to continue in their present positions, our financial results and our business could be materially adversely affected.

We operate in a regulated industry and changes in regulations or violations of regulations may result in increased costs or sanctions that could reduce our revenues.

Our organization is subject to extensive and complex, federal and state laws and regulations. If we fail to comply with the laws and regulations that are directly applicable to our business, we could suffer civil and/or criminal penalties or be subject to injunctions or cease and desist orders.

21

We will hire third party companies to undertake our development programs.   

We will have to hire employees or retain independent companies to oversee or perform our development operations. We currently do not have sufficient funds for either. As such, even with exploitable deposits of oil or gas, we may not be able to develop our leasehold interests.

Risks Related to Our Stockholders and Shares of Common Stock

We have a large number of authorized but unissued shares of our common stock.

We have a large number of authorized but unissued shares of common stock, which our management may issue without further stockholder approval, thereby causing dilution of your holdings of our common stock. Our management will continue to have broad discretion to issue shares of our common stock in a range of transactions, including capital-raising transactions, mergers, acquisitions and in other transactions, without obtaining stockholder approval, unless stockholder approval is required. If our management determines to issue shares of our common stock from the large pool of authorized but unissued shares for any purpose in the future, your ownership position would be diluted without your further ability to vote on that transaction.

Shares of our common stock may continue to be subject to price volatility and illiquidity because our shares may continue to be thinly traded and may never become eligible for trading on a national securities exchange.

While we may at some point be able to meet the requirements necessary for our common stock to be listed on a national securities exchange, we cannot assure you that we will ever achieve a listing of our common stock on a national securities exchange. Our shares are currently only eligible for quotation on the Over-The-Counter Bulletin Board, which is not an exchange. Initial listing on a national securities exchange is subject to a variety of requirements, including minimum trading price and minimum public “float” requirements, and could also be affected by the general skepticism of such markets concerning companies that are the result of mergers with inactive publicly-held companies. There are also continuing eligibility requirements for companies listed on public trading markets. If we are unable to satisfy the initial or continuing eligibility requirements of any such market, then our stock may not be listed or could be delisted. This could result in a lower trading price for our common stock and may limit your ability to sell your shares, any of which could result in you losing some or all of your investments.

The market valuation of our business may fluctuate due to factors beyond our control and the value of your investment may fluctuate correspondingly.

The market valuation of emerging growth companies, such as us, frequently fluctuate due to factors unrelated to the past or present operating performance of such companies. Our market valuation may fluctuate significantly in response to a number of factors, many of which are beyond our control, including:

i.

changes in securities analysts’ estimates of our financial performance, although there are currently no analysts covering our stock;

ii.

fluctuations in stock market prices and volumes, particularly among securities of emerging growth companies;

iii.

changes in market valuations of similar companies;

iv.

announcements by us or our competitors of significant contracts, new technologies, acquisitions, commercial relationships, joint ventures or capital commitments;

v.

variations in our quarterly operating results;

vi.

fluctuations in related commodities prices; and

vii.

additions or departures of key personnel.

As a result, the value of your investment in us may fluctuate.

Investors should not look to dividends as a source of income.

In the interest of reinvesting initial profits back into our business, we do not intend to pay cash dividends in the foreseeable future. Consequently, any economic return will initially be derived, if at all, from appreciation in the fair market value of our stock, and not as a result of dividend payments.

Our common stock may be subject to penny stock regulations, which may make it difficult for investors to sell their stock.

The Securities and Exchange Commission has adopted rules that regulate broker-dealer practices in connection with transactions in “penny stocks”. Penny stocks generally are equity securities with a price of less than $5.00 (other than securities registered on certain national securities exchanges or quoted on the NASDAQ system, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system). The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from those rules; deliver a standardized risk disclosure document prepared by the Commission, which specifies information about penny stocks and the nature and significance of risks of the penny

22

stock market. The broker-dealer also must provide the customer with bid and offer quotations for the penny stock, the compensation of the broker-dealer and salesperson in the transaction, and monthly account statements indicating the market value of each penny stock held in the customer's account. In addition, the penny stock rules require that, prior to a transaction in a penny stock not otherwise exempt from those rules; the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written agreement to the transaction. These disclosure requirements may have the effect of reducing the trading activity in the secondary market for a stock that becomes subject to the penny stock rules. If our common stock becomes subject to the penny stock rules, holders of our shares may have difficulty selling those shares.

We have never paid dividends on our common stock.

We have never paid cash dividends on our common stock and do not presently intend to pay any dividends in the foreseeable future. We anticipate that any funds available for payment of cash dividends will be re-invested into the Company to further our business strategy.

We expect to issue more shares in an equity financing, which will result in substantial dilution..

Our Articles of Incorporation authorize the Company to issue 5,000,000,000 shares of common stock. Any equity financing effected by the Company may result in the issuance of additional securities without stockholder approval and may result in substantial dilution in the percentage of our common stock held by our then existing stockholders. Moreover, our common stock issued in any equity financing transaction may be valued on an arbitrary or non-arm’s-length basis by our management, resulting in an additional reduction in the percentage of common stock held by our then existing stockholders. Our board of directors has the power to issue any or all of such authorized but unissued shares without stockholder approval. To the extent that additional shares of common stock or preferred stock are issued in connection with a business combination or otherwise, dilution to the interests of our stockholders will occur and the rights of the holders of common stock might be materially adversely affected.

23

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus includes forward-looking statements. All statements other than statements of historical facts contained in this prospectus, including statements regarding our future financial position, business strategy and plans and objectives of management for future operations, are forward-looking statements.  The words "believe," "may," "estimate," "continue," "anticipate," "intend," "should," "plan," "expect" and similar expressions, as they relate to us, are intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. These forward-looking statements are subject to a number of risks, uncertainties and assumptions described in "Risk Factors" and elsewhere in this prospectus.

Other sections of this prospectus may include additional factors which could adversely affect our business and financial performance. Moreover, we operate in a highly regulated, very competitive and rapidly changing environment. New risk factors emerge from time to time and it is not possible for our management to predict all risk factors, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

We undertake no obligation to update publicly or revise any forward-looking statements. You should not rely upon forward-looking statements as predictions of future events or performance. We cannot assure you that the events and circumstances reflected in the forward-looking statements will be achieved or will occur. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. We have an ongoing obligation to continually disclose material future changes in the Company and its operations.

USE OF PROCEEDS

We will not receive any of the proceeds from the sale of the common stock by Selling Stockholder. However, the Company anticipates receiving up to $15,000,000 gross proceeds pursuant to the equity line of credit with AGS. The maximum amount we can receive is dependent on the liquidity and price of our common stock, and could be less than $15,000,000. The likelihood of receiving the full amount, based on the market price of our common stock over the last quarter, is very low to nil. The liquidity of the common stock needs to be higher as well as the price of the common stock. The Company may have to restructure the common stock through a common stock reverse split to meet its minimum price of $0.50 per share of common stock. We choose an equity line of $15,000,000 as we require large sums of financing for our staged growth which will be obtained either through debt financing or equity financing. After a restructure, the likelihood of accessing full amount of $15,000,000 over the next three years would be greatly improved. If the Company receives $15,000,000, we expect to disburse the proceeds from this offering in the amounts set forth below:

Offering Proceeds:	$15,000,000	$10,000,000	$5,000,000
Selling Costs - 5%	$750,000	$500,000	$250,000
Acquisitions:	$12,500,000	$8,500,000	$4,250,000
Working Capital - 10%:	$1,250,000	$850,000	$425,000
General Corporate Purposes:	$500,000	$150,000	$75,000
Totals	$15,000,000	$10,000,000	$5,000,000

DETERMINATION OF OFFERING PRICE

The Selling Stockholder may sell their shares in the over-the-counter market or otherwise, at market prices prevailing at the time of sale, at prices related to the prevailing market price, or at negotiated prices. We will not receive any proceeds from the sale of shares by the Selling Stockholder.

DILUTION OF THE PRICE YOU PAY FOR YOUR SHARES

"Dilution" represents the difference between the offering price of the shares of common stock and the net book value per share of common stock immediately after completion of the offering. "Net Book Value" is the amount that results from subtracting total liabilities from total assets.  In this offering, the level of dilution is increased as a result of the relatively low book value of Xun’s issued and outstanding stock.

24

As of May 31, 2013, we had 385,460,240 shares of common stock outstanding. Our net tangible book value as of May 31, 2013 was ($538,932).  Based upon those figures, our net tangible book value per share was ($0.0139815) and after giving effect to the purchase by AGS of all 75,000,000 shares being offered, and in effect Xun receives the maximum estimated proceeds, our net book value per share would be $0.19141609 which represents an immediate dilution to an investor of $0.00858391per share.

The following table illustrates the dilution of the net book value of common stock purchased by AGS in this offering of 75,000,000 shares compared with those existing shareholders who purchased shares of Xun previously.

Percent of Offering Sold	100%	75%	50%	25%
Net Tangible Book Value Per Share Prior to Sale	($0.00139815)	($0.00139815)	($0.00139815)	($0.00139815)
Pro Forma Net Tangible Book Value Per Share After Sale	$0.19141609	$0.19141609	$0.19141609	$0.19141609
Increase in Net Book Value Per Share Due to Sale	$0.19281424	$0.19281424	$0.19281424	$0.19281424
Net Dilution (Purchase Price of $0.20 Less Pro Forma Net Tangible Book Value Per Share)	$0.00858391	$0.00858391	$0.00858391	$0.00858391

SELLING STOCKHOLDER

Reserve Equity Financing Agreement.

On July 11, 2013, we entered into the Drawdown Agreement and a registration rights agreement (collectively, the “Agreements”) with AGS. In accordance with the Agreements, AGS has committed, subject to certain conditions, to purchase up to fifteen million dollars ($15,000,000) of the Company's common stock over a term of up to three years. AGS and any participating broker-dealers are “underwriters” within the meaning of the Securities Act. Although the Company is not mandated to sell shares under the Agreements, the Agreements give the Company the option to sell to AGS shares of common stock at a per share purchase price equal to 90% of the average of the three lowest closing bid prices during the ten consecutive trading days immediately following the Company's delivery of a Notice. At its option, the Company may set a safety net price under which AGS will not purchase the shares which were the subject of the Notice.  

AGS is not required to purchase the shares, unless the shares which are subject to the Notice have been registered for resale and are freely tradable in accordance with the federal securities laws, including the Securities Act. The Company is obligated to file with the SEC a registration statement on Form S-1, of which this prospectus forms a part, and to use all commercially reasonable efforts to have such registration statement declared effective by the SEC.

During the ten consecutive trading days following a Notice, we will calculate the amount of shares we will sell to AGS and the purchase price per share. The amount may not equal the full amount of the Notice due to market conditions and/or the floor provisions in the Drawdown Agreement. The purchase price per share of common stock will be based on the average of the three lowest closing bid prices of our common stock during the ten consecutive trading days immediately following the drawdown date, less a discount of 10%. AGS' obligations under the Drawdown Agreement are not transferrable.

The value of stock issued in each advance must exceed $3,000 if the stock is not DWAC eligible and cannot be sent electronically in order for the Advance to be accepted by the Investor. The maximum amount we can request at any one time is the larger of:

·

$250,000; or

·

200% of the average daily volume based on the trailing ten days preceding the date of delivery of a Notice.

Allen Silberstein is a natural person and the Chief Executive Officer of AGS who exercises the voting and dispositive powers with respect to the shares to be offered by the Company. Allen Silberstein has had no other material relationship with the Company and has owned no securities of the Company prior to the offering.

Please note that the parties have agreed to $15,000,000 as the amount of the equity line of credit. Although the parties believe it is unlikely that the full amount of the proceeds available under equity line of credit will be used at the current stock price, the parties believe that with the proper use of the funds, the price of the stock will increase and we will be able to use the whole equity line of credit.

All expenses incurred with respect to the registration of the common stock will be borne by us, but we will not be obligated to pay any underwriting fees, discounts, commission or other expenses incurred by the Selling Stockholder in connection with the sale of such shares. 

Except as indicated below, neither the Selling Stockholder nor any of its associates or affiliates has held any position, office, or

25

other material relationship with us in the past three years.

The following table sets forth the name of the Selling Stockholder, the number of shares of common stock beneficially owned by the Selling Stockholder as of the date hereof and the number of shares of common stock being offered by the Selling Stockholder. The shares being offered hereby are being registered to permit public secondary trading, and the Selling Stockholder may offer all or part of the shares for resale from time to time. However, the Selling Stockholder is under no obligation to sell all or any portion of such shares. All information with respect to share ownership has been furnished by the Selling Stockholder. The “Number of Shares Beneficially Owned After the Offering” column assumes the sale of all shares offered herein.

Name	Shares Beneficially Owned Prior To Offering	Shares to be Offered	Amount Beneficially Owned After Offering(1)	Percent Beneficially Owned After Offering
AGS Capital Group, LLC (2)	4,081,633 (4)	75,000,000 (3)	0	0%

(1)

The number assumes the Selling Stockholder sells all of the common shares being offering pursuant to this prospectus.

(2)

AGS Capital Group, LLC is a limited liability company organized and exiting under the laws of the State of Nevada. Allen Silberstein is the Chief Executive Officer of AGS Capital Group, LLC and, acting alone, has voting and dispositive power over the shares beneficially owned by AGS Capital Group, LLC.

(3)

The number assumes that AGS purchases the maximum amount of registrable Put Shares in this registration statement.

(4)

Assumes that AGS commitment fee deposit of 4,081,633 shares is refunded to the Company.

Disclosure showing shares issuable if market stock price drops 25%, 50% and 75%
Drawdown Amount	$15,000,000
Percentage to Minimum Price $0.50	100%	75%	50%	25%
Gross Market Price, Average of 3 lowest closing bid prices	$0.5556	$0.4167	$0.2778	$0.1389
Stock Purchase Price, net of 10% Discount	$0.5000	$0.3750	$0.2500	$0.1250
Shares to be issued	30,000,000	40,000,000	60,000,000	120,000,000

PLAN OF DISTRIBUTION

This prospectus relates to the resale of up to 79,081,633 shares of our common stock by the Selling Stockholder, including (i) up to 75,000,000 Put Shares that we may put to AGS, pursuant to the Drawdown Agreement, and (ii) 4,081,633 commitment shares of our common stock we paid to AGS as a fee for providing the facility.

The Selling Stockholder and any of its pledgees, donees, assignees and other successors-in-interest may, from time to time sell any or all of their shares of common stock on any stock exchange, market or trading facility on which the shares are traded or in private transactions. These sales may be at fixed or negotiated prices. The Selling Stockholder may use any one or more of the following methods when selling shares:

·

ordinary brokerage transactions and transactions in which the broker-dealer solicits the purchaser;

·

block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block as principal;

·

facilitate the transaction;

·

purchases by a broker-dealer as principal and resale by the broker-dealer for its account;

·

an exchange distribution in accordance with the rules of the applicable exchange;

·

privately negotiated transactions;

·

broker-dealers may agree with the Selling Stockholder to sell a specified number of such shares at a stipulated price per share;

·

through the writing of options on the shares

·

a combination of any such methods of sale; and

·

any other method permitted pursuant to applicable law.

26

The Selling Stockholder shall have the sole and absolute discretion not to accept any purchase offer or make any sale of shares if it deems the purchase price to be unsatisfactory at any particular time.

The Selling Stockholder may also sell the shares directly to market makers acting as principals and/or broker-dealers acting as agents for themselves or their customers. Such broker-dealers may receive compensation in the form of discounts, concessions or commissions from the Selling Stockholder and/or the purchasers of shares for whom such broker-dealers may act as agents or to whom they sell as principal or both, which compensation as to a particular broker-dealer might be in excess of customary commissions. Market makers and block purchasers purchasing the shares will do so for their own account and at their own risk. It is possible that the Selling Stockholder will attempt to sell shares of common stock in block transactions to market makers or other purchasers at a price per share which may be below the then existing market price. We cannot assure that all or any of the shares offered in this prospectus will be issued to, or sold by, the Selling Stockholder. The Selling Stockholder and any broker-dealers or agents, upon completing the sale of any of the shares offered in this prospectus, may be deemed to be "underwriters" as that term is defined under the Securities Act, the Exchange Act and the rules and regulations of such acts. In such event, any commissions received by such broker-dealers or agents and any profit on the resale of the shares purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act.

We are required to pay all fees and expenses incident to the registration of the shares. The Selling Stockholder, alternatively, may sell all or any part of the shares offered in this prospectus through an underwriter. The Selling Stockholder has not entered into any agreement with a prospective underwriter and there is no assurance that any such agreement will be entered into.

The Selling Stockholder may pledge its shares to its brokers under the margin provisions of customer agreements. If the Selling Stockholder defaults on a margin loan, the broker may, from time to time, offer and sell the pledged shares. The Selling Stockholder and any other persons participating in the sale or distribution of the shares will be subject to applicable provisions of the Exchange Act, and the rules and regulations under such act, including, without limitation, Regulation M. These provisions may restrict certain activities of, and limit the timing of purchases and sales of any of the shares by, the Selling Stockholder or any other such person. The Selling Stockholder is not permitted to engage in short sales of common stock. Furthermore, under Regulation M, persons engaged in a distribution of securities are prohibited from simultaneously engaging in market making and certain other activities with respect to such securities for a specified period of time prior to the commencement of such distributions, subject to specified exceptions or exemptions. All of these limitations may affect the marketability of the shares.

AGS, the underwriter herein, may offer for sale up to 79,081,633 shares of our common stock which it will originally acquire pursuant to the terms of the Drawdown Agreement. AGS will be offering such shares for its own account. We do not know for certain how or when AGS will choose to sell its shares of common stock. However, it can sell such shares at any time or through any manner set forth in this plan of distribution, at such time as we have "put" the shares to them. We may request AGS to purchase shares by delivering a Notice to AGS. A Notice may not be sent until the drawdown on the prior Notice is completed.

To permit AGS to resell the shares of common stock issued to it and the 4,081,633 Commitment Shares, we agreed to file a registration statement, of which this prospectus is a part, and all necessary amendments and supplements with the SEC for the purpose of registering and maintaining the registration of the shares and the 4,081,633 Commitment Shares. We will bear all costs relating to the registration of the common stock offered by this prospectus. We will keep the registration statement effective until the earlier of (i) the date after which all of the shares of common stock held by AGS that are covered by the registration statement have been sold by AGS pursuant to such registration statement and (ii) the first day of the month next following the 36-month anniversary of the date the registration statement, to which this prospectus is made a part, is declared effective by the SEC.

27

BUSINESS

Definitions

There are numerous abbreviations of general use in the Oil and Gas Industry, as well as those used by the Company. Following is a glossary of abbreviations used throughout this report.   

Abbreviations:

Abbreviation	Definition
“BBL”	Barrel, 42 US gallons
“BOPD”	Barrels of Oil Production per Day
“BOPM”	Barrels of Oil Per Month
“D&A”	Dry and Abandoned
“DG”	Domestic Gas
“GAS”	Gas Producer or natural gas
“HKO”	Highest known oil
“LKH”	Lowest known hydrocarbons
“LOC”	Location (new permit issued or insufficient data)
“MCF”	One Thousand Cubic Feet
“MCFGPD”	Thousand Cubic Feet Of Gas Per Day
“MCFPD”	One Thousand Cubic Feet of Gas Per Day
"MMbd"	One million Barrels Per Day
“MMBtu”	One million (1,000,000) British thermal units
“MMCFD”	One Million Cubic Feet of Gas Per Day
“NRI”	Net Revenue Interest or Net Royalty Interest
“NUX”	Nux Holdings of Kentucky, Inc.
“OIL”	Oil Producer or crude oil
“ORRI”	Overriding Royalty Interest
"PSA"	Purchase and Sales Agreement
"REF"	Reserve Equity Financing
"REFA"	Reserve Equity Financing Agreement
“SEC”	The United States Securities and Exchange Commission.
“TCF”	Trillion cubic feet
“TRM”	Terminated (permit expired or cancelled)
“WI”	Working Interest
“XNRG”	Xun Energy, Inc.
“XUN OIL-KY”	Xun Oil of Kentucky, Inc., part of  Oil and Gas Division of Xun Energy, Inc.
“XUN OIL-FL”	Xun Oil Corporation, part of Oil and Gas Division of Xun Energy, Inc

Oil and Gas Glossary of Terms and Definitions

We are providing you with the following glossary of terms to assist you in your understanding of the oil and gas industry.    

Term	Definition
ASSIGNMENT	In oil and gas usage, assignment is a transfer of a property or an interest in an oil or gas property; most commonly, the transfer of an oil or gas lease. The assignor does the transferring and the assignee receives the interest of property.
CRUDE OIL PRODUCTION	Pressure from the reservoir forces the hydrocarbons (crude oil) from the pores in the formation, and moves them to the wellbore. A downhole pump connected by sucker rod to a pump jack artificially lifts the crude oil from the bottom of the wellbore to the top of the wellhead and into a collection tank.
DEVELOPMENT - OFFSET DRILLING	Offset drilling program consists of drilling new wells within a proven and producing property. Well locations are selected by geologists based on known and historical data from producing oil and gas wells within the property or adjoining properties.
DOWN HOLE PUMP OR BOTTOM HOLE PUMP	Any of the rod pumps, high-pressure liquid pumps, or centrifugal pumps located at or near the bottom of the well and used to lift the well fluids.
DRILLING RIG	28 A drilling rig is a machine, which creates holes (usually called boreholes) and/or shafts in the ground. Drilling rigs can be massive structures housing equipment used to drill oil wells, or natural gas extraction wells.
FARMIN AGREEMENT	An agreement between operators whereby the owner (farmer) not wanting to drill a property agrees to assign all or part to the operator (farmee) desiring to drill; farmee assumes the obligation to drill one or more wells on the property to earn the assignment.
FRACTURING	The pumping of crude oil, diesel, water, or chemical into a reservoir with such force that the reservoir rock is broken and results in greater flow of oil or gas from the reservoir.
GAS WELL	A well that produces natural gas, which is not associated with crude oil.
LANDMAN	The individual who negotiates oil and gas leases with mineral owners, cures title defects, and negotiates with other companies on agreements concerning the lease.
LANDOWNER	The person who generally owns all or part of the minerals under his lands and is entitled to lease the same.
LEASE	(1) A legal instrument executed by a mineral owner granting exclusive right to another to explore, drill, and produce oil and gas from a piece of land; (2) Used in conjunction with the actual location of a well(s) or unit.
LEASEHOLD	An Oil and Gas property that is leased from the land owner for a royalty based on production of oil and gas from the property as developed by the leasee.
LESSEE	The person who receives the lease, sometimes called the tenant.
LESSOR	The person giving the lease, sometimes called grantor or landlord.
NET REVENUE INTEREST	The share of revenue, expressed in fractions or decimals, accruing to the working interest after deducting all lease burdens (royalty, overriding royalty, or similar burden).
OFFSET WELL	(1) A well drilled on the next location to the original well. The distance from the first well to the offset well depends upon spacing regulations and whether the original well produces oil or gas. (2) A well drilled on one tract of land to prevent the Drainage of oil or gas to an adjoining tract where a well is being drilled or is already producing.
OIL & GAS LEASE	A contract between mineral owner, otherwise known as the lessor and a company or working interest owner, otherwise known as the lessee in which the lessor grants the lessee the right to explore, drill and produce oil, gas and other minerals for a specified primary term and as long thereafter as oil, gas or other minerals are being produced in paying quantities. This lease gives the lessee a working interest. The oil and gas lease is granted in exchange for royalty payments to the lessor. It is simply a "ticket to hunt".
OIL WELL	A well that produces crude oil, which is not associated with natural gas.
OPERATOR	Company which operates an Oil and Gas Lease, either on its own behalf, or, if a member of a consortium, on behalf of Lessee’s. Takes primary responsibility for day-to-day operations for an activity (exploration, development, or production) on the Oil and Gas Lease.
OVERRIDE ROYALTY	29 An overriding royalty interest can be assigned from a working interest owner to a person. An overriding royalty interest may also be generated by someone who has leased a person’s minerals and then assigns their leasehold to a working interest owner and retains an override. Neither a royalty nor overriding royalty interest owner pays any well costs associated with the drilling, recompletion or workover of a well. They also do not pay any of the monthly operating expenses associated with a well. Like mineral and royalty owners, the owner of overriding royalty interests receives a portion of the income from the production of oil and gas. The main difference is that the owner of an overriding royalty does not own the minerals under the ground, only proceeds from the production of minerals. Once the lease has expired and production has ceased, the overriding royalty interest expires. Conversely, the owners of minerals and royalties maintain their ownership after production ceases.
PLUG	To fill a well’s borehole with cement or other impervious material to prevent the flow of water, gas or oil from one strata to another when a well is abandoned; to screw a metal plug into a pipeline to shut off drainage or to divert the stream of oil to a connecting line to stop the flow of oil or gas.
PLUGGING A WELL	To fill up the borehole of an abandoned well with mud and cement to prevent the flow of water or oil from one strata to another or to the surface. In the industry’s early years, wells were often improperly plugged or left open. Modern practice requires that an abandoned well be properly and securely plugged.
PROPERTY	Land covered by the Oil and Gas Lease.
PRODUCTION	The process of extracting crude oil or natural gas from the underground formations to the surface via natural reservoir pressures or by artificial lift.
PROVED DEVELOPED RESERVES	Proved reserves that can be expected to be recovered (i) through existing wells with existing equipment and operating methods or in which the cost of the required equipment is relatively minor compared to the cost of a new well, and (ii) through installed extraction equipment and infrastructure operational at the time of the reserves estimate if the extraction is by means not involving a well.
PROVED RESERVES	Proved oil and gas reserves are those quantities of oil and gas, which, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be economically producible - from a given date forward from known reservoirs, and under existing economic conditions, operating methods, and government regulations – prior to the time at which contracts providing the right to operate expire, unless evidence indicates that renewal is reasonably certain, regardless of whether deterministic or probabilistic methods are used for the estimation. The project to extract the hydrocarbons must have commenced or the operator must be reasonably certain that it will commence the project within a reasonable time. (i) The area of the reservoir considered as proved includes: (A) The area identified by drilling and limited by fluid contacts, if any, and (B) Adjacent undrilled portions of the reservoir that can, with reasonable certainty, be judged to be continuous with it and to contain economically producible oil or gas on the basis of available geoscience and engineering data. (ii) In the absence of data on fluid contacts, proved quantities in a reservoir are limited by the lowest known hydrocarbons (LKH) as seen in a well penetration unless geoscience, engineering, or performance data and reliable technology establishes a lower contact with reasonable certainty. (iii) Where direct observation from well penetrations has defined a highest known oil (HKO) elevation and the potential exists for an associated gas cap, proved oil reserves may be assigned in the structurally higher portions of the reservoir only if geoscience, engineering, or performance data and reliable technology establish the higher contact with reasonable certainty. (iv) Reserves which can be produced economically through application of improved recovery techniques (including, but not limited to, fluid injection) are included in the proved classification when: (A) Successful testing by a pilot project in an area of the reservoir with properties no more favorable than in the reservoir as a whole, the operation of an installed program in the reservoir or an analogous reservoir, or other evidence using reliable technology establishes the reasonable certainty of the engineering analysis on which the project or program was based; and (B) The project has been approved for development by all necessary parties and entities, including government entities.
PROVED UNDEVELOPED RESERVES	30 Undeveloped oil and gas reserves are reserves of any category that are expected to be recovered from new wells on undrilled acreage, or from existing wells where a relatively major expenditure is required for recompletion. (i) Reserves on undrilled acreage shall be limited to those directly offsetting development spacing areas that are reasonably certain of production when drilled, unless evidence using reliable technology exists that establishes reasonable certainty of economic productbility at greater distances. (ii) Undrilled locations can be classified as having undeveloped reserves only if a development plan has been adopted indicating that they are scheduled to be drilled within five years, unless the specific circumstances, justify a longer time. (iii) Under no circumstances shall estimates for undeveloped reserves be attributable to any acreage for which an application of fluid injection or other improved recovery technique is contemplated, unless such techniques have been proved effective by actual projects in the same reservoir or an analogous reservoir, or by other evidence using reliable technology establishing reasonable certainty.
PUMPER	An employee of an operator who is responsible for gauging the oil and gas sold off the leases he has been assigned and who is also responsible for maintaining and reporting the daily production.
PUMP JACK	A pump jack (nodding donkey, pumping unit, horsehead pump, beam pump, sucker rod pump (SRP), grasshopper pump, thirsty bird, jack pump) is the over ground drive for a reciprocating piston pump in an oil well. It is used to mechanically lift liquid out of the well if there is not enough bottom hole pressure for the liquid to flow all the way to the surface.
RESERVOIR	A subsurface, porous, permeable or naturally fractured rock body in which oil or gas are stored. Most reservoir rocks are limestones, dolomites, sandstones, or a combination of these. The four basic types of hydrocarbon reservoirs are oil, volatile oil, dry gas, and gas condensate. An oil reservoir generally contains three fluids—gas, oil, and water—with oil the dominant product. In the typical oil reservoir, these fluids become vertically segregated because of their different densities. Gas, the lightest, occupies the upper part of the reservoir rocks; water, the lower part; and oil, the intermediate section. In addition to its occurrence as a cap or in solution, gas may accumulate independently of the oil; if so, the reservoir is called a gas reservoir. Associated with the gas, in most instances, are salt water and some oil. Volatile oil reservoirs are exceptional in that during early production, they are mostly productive of light oil plus gas, but, as depletion occurs, production can become almost totally completely gas. Volatile oils are usually good candidates for pressure maintenance, which can result in increased reserves. In the typical dry gas reservoir, natural gas exists only as a gas and production is only gas plus fresh water that condenses from the flow stream reservoir. In a gas condensate reservoir, the hydrocarbons may exist as a gas, but, when brought to the surface, some of the heavier hydrocarbons condense and become a liquid.
ROD (SUCKER ROD)	Steel rods that are screwed together to form a “string” that connects the pump inside a well’s tubing down hole to the pump jack on the surface; pumping rods.
ROYALTY	A percentage interest in the value of production from a lease that is retained and paid to the mineral rights owner. The share of the production or proceeds therefrom reserved to the lessor under the terms of the mineral lease. Normally, royalty interests are free of all costs of production (as distinguished from costs of marketing) except production taxes, and is established in the lease by reserving a royalty, which is usually, expressed fractionally (i.e. 1/8).
SERVICE RIG	A service rig is a piece of equipment, which is used for servicing wells such as oil and gas wells. Service rigs are not intended for drilling, but for the completion of other tasks related to operating oil and gas wells. Some companies, which operate wells, maintain their own service rigs, while others prefer to rent them because they can be very expensive. Specialty crews run service rigs when they are needed for routine maintenance and emergencies.
SWAB	A tool, which is lowered down the pipe on a wire line. The "swab" is then pulled out of the hole. As it travels up the pipe, rubber elements expand so that the fluid in the pipe is trapped above the swab and pushed to the surface. This operation is necessary when the formation pressure is not high enough to blow the fluids in the pipe to the surface.
TOP HEAD LEASE	A lease acquired while a mineral lease to the same property is still in effect. The top head lease (held by a different company) replaces the existing lease when it expires or is terminated.
TUBING	31 Relatively small-diameter pipe that is run into a well to serve as a conduit for the passage of oil and gas to the surface.
WELLBORE	The hole drilled by the bit that is equipped for oil or gas production on a completed well. Also called Well or Borehole.
WELLHEAD	The equipment at the surface of a well used to control the pressure; the point at which the hydrocarbons and water exit the ground
WELL LOCATION	Well Location is defined as a circle having a radius of the well bore centre, to a depth as allowed in the Master Lease. Does not include rights to minerals beyond the circle of the radius of the well bore centre.
WILDCAT WELL	An exploration well that is drilled to an unproven reservoir from which no oil or gas has been produced in the nearby area. A "rank" wildcat is drilled in an area distant from previous drilling.
WORKING INTEREST	The right granted to the lessee of a property to explore for and to produce and own oil, gas, or other minerals. The working interest owners bear the exploration, development, and operating costs on a cash, penalty, or carried basis.
WORKOVER	(1) Operations on a producing well to restore or increase production. A workover may be performed to stimulate the well, remove sand, or wax from the wellbore, to mechanically repair the well, or for other reasons. (2)  The performance of one or more of a variety of remedial operations on a producing oil well to try to increase production. Examples of workover jobs are deepening, plugging back, pulling resetting liners, and squeeze cementing.

General

The Company is engaged primarily in the acquisition of producing or near producing oil and gas properties and the development of these oil and gas properties. The Company acquired oil and gas properties that allow it to drill and complete 30 oil and gas wells with an option to acquire an additional 15 oil and gas well locations for drilling and completion in Venango County, Pennsylvania. There is no assurance that we will be successful in raising the necessary funds to drill and complete one or more of the 30 oil and gas well locations; there are no assurances that if we are successful in raising the necessary funds to drill and complete one or more of the 30 oil and gas well locations that they will produce oil and gas. There are no assurances that should oil and gas will be produced from one or more of the 30 oil and gas well locations, that the Company will be profitable.

The Company plans to acquire additional producing or near producing oil and gas properties that will provide cash flow and an upside for future development. Such activities are concentrated in North America onshore, primarily in the United States.   We are currently scouting and evaluating properties in Texas, Oklahoma, Pennsylvania, Kansas and in Canada. There is no assurance that we will be successful in raising the necessary funds to acquire any of producing oil and gas properties.

We were incorporated on December 20, 2007 in the State of Nevada. We are a development stage company, and to date have earned limited revenue.

Our focus is to generate cash flow.

On August 31, 2012 the Company entered into an Oil and Gas Well Location Agreement with Vencedor Energy Partners (Assignor). The agreement allows the Company to drill 30 offset oil and gas wells on 3 producing oil and gas leases in Venango County, Pennsylvania.

The Company paid $585,000 in the form of 11,700,000 shares of common stock (Shares) of the Company for the rights.

The Company will have 100% working interest in the wells and Net Revenue Interest as follows:

Lease Name	Net Revenue Interest Breakdown
Rice	Master Lease Lessor - 12.5% Royalty, Master Lease Lessee 2.5% Override royalty interest, Assignor - 2.5% Override royalty interest; and the Company - 82.5% royalty interest;
Lalley	Master Lease Lessor - 12.5% Royalty, Master Lease Lessee 2.5% Override royalty interest, Assignor - 2.5% Override royalty interest; and the Company - 82.5% royalty interest; and
Corse	Master Lease Lessor - 15.0% Royalty, Master Lease Lessee 2.5% Override royalty interest, Assignor - 2.5% Override royalty interest; and the Company - 80.0% royalty interest.

32

The Agreement allows the Company to have the exclusive right to explore, operate, produce all naturally-occurring oil, gas, casing-head gas or gasoline, gas condensate and/or all other liquid or gaseous hydrocarbons and other marketable or non-marketable substances produced (Oil and Gas) from Oil and Gas deposits contained within and under the well location and any and all other rights and privileges necessary, incident to, or convenient for the economical operation of the well location and other lands for the production of Oil and Gas to the Company. A well location is defined as a circle having a radius of l50 feet with the well, to a depth as allowed in the Master Lease, at the center thereof.

The Company owns the rights and may select up to 30 well locations from the following:

Lease Name	Locations	Rights
Rice	Up to 10	One well per location, to a depth from the surface through the Speechley sands which depth is approximately 2,200 feet on the Premises alone for producing oil and gas by any means, and all rights necessary convenient and incident thereto, granted pursuant to the Master Rice Lease.
Lalley	Up to 8	One well per location, to a depth from the surface through the Speechley sands which depth is approximately 2,200 feet on the Premises alone for producing oil and gas by any means, and all rights necessary convenient and incident thereto, granted pursuant to the Master Lalley Lease.
Corse	Up to 15	One well per location, to a depth from the surface through the Speechley sands which depth is approximately 2,000 feet on the Premises alone for producing oil and gas by any means, and all rights necessary convenient and incident thereto, granted pursuant to the Master Corse Lease.

If Company does not begin or provide proof of funds or funding for the first well on or before January 31, 2013, subject to our operator, Vencedor Energy Partners, obtaining the necessary permits to allow the Company to commence drilling and completions operations, and does not begin or provide proof of funds or funding for 3 more wells on or before March 31, 2013, then the Company will have forfeited its rights and the Agreement shall terminate and unwind and the Assignor agrees to return the Shares (11,700,000) to the Company.

After completing 8 wells and if Company does not complete any of the remaining 22 well drilling provision set forth in the Agreement within the 2 years from the date of the execution of the Agreement, then the Company will forfeit its rights to the well locations not completed. The Company will retain its rights for the well locations completed and will retain an Override Royalty of Seven and one half per cent (7.5%) on the well locations forfeited.

The Company has 2 years from the date of execution of the Agreement to complete the drilling of the 30 well locations and has the option to acquire an additional 15 well locations for the same terms and conditions of the Agreement after the first 30 wells locations have been completed.

The Company will provide funding in groups of 4 to 6 wells to optimize economies of scale, with the exception of the first 4 wells which can be funded on an individual basis.

The Company agreed, the Participation and Operating Agreement (the "POA"), to have Assignor the designated Operator (the "Operator") of the Oil and Gas Well Locations which includes all the responsibilities as a designated operator in the State of Pennsylvania which includes the duties of managing and supervising the drilling and completions of the Oil and Gas Locations.

On December 18, 2012, pursuant to the POA, the Operator invoiced the Company $835,000 for the drilling and completion of five oil wells on the Rice lease. The Company has recorded the transaction capitalizing the drilling and completions as work in progress. The liability is included in the Company's Accounts Payable.   

On January 29, 2013, pursuant to a letter agreement between the Company and the Assignor, the Company acknowledged and agreed to the notice of the delay of the permits up to 4 weeks beyond January 31, 2013.

On March 18, 2013, pursuant to a letter agreement, Amendment #3, between the Company and the Assignor, both the Company and the Assignor agreed to delete Section 4a (financing conditions) of the Oil and Gas Well Location Assignment dated August 31, 2012 between Xun Energy, Inc. and Vencedor Energy Partners.

On March 28, 2013, our Operator commenced site preparation on the Rice Lease, well numbers 3, 5, 6, 14 and 15.

By May 31, 2013, our Operator had completed the road entrance to the Rice lease and the drilling pad for Rice Lease well number #5.

33

On August 26, 2013, the Company's operator, Vencedor Energy Partners (VEP), completed the drilling, casing and cementing of our first oil well of the 30 well drilling program. Rice oil well number 15 was drilled to the Target Depth of 1,050' on the Rice lease, in Venango County, PA. Samples were taken during the drilling program for analysis. Petroleum odors were emitted at the 720', 745', and 915' levels of the wellbore, indicating oil presence at these depths.  The review of the drill cuttings (samples) from the Rice #15 supported the need for a wire line log to be conducted on the well. VEP's geologist confirmed that the samples taken on August 26, 2013 revealed a well formed zone in the Venango 2 and also potential lenses in the Venango 1 and Red Valley sequence. Oil saturation is estimated at 30-35% for the Venango sequence with a strong show in the Red Valley sequence. The log will provide enough details to determine other key factors in determining whether or not the oil well should be put into production.

Mission Statement

·

To become a leader in providing energy, through acquisition and diversification.

·

To acquire working interest positions and mineral rights leases for the purposes of oil and gas development and production using new technologies, advanced drilling and completion methods and invest in known, producing properties and surrounding areas.

·

To be aggressive in gaining interest positions in leases and existing producing properties that will produce desirable returns, utilize leading technologies, utilize methods to maximize exploration and production results while providing Return On Investment.

Strategy

We aspire to be an independent oil and gas company in North America and to provide our shareholders with returns over the long-term. To achieve this, we strive to optimize our capital investments to maximize growth in cash flows, earnings, production and establish reserves. We will do this by:

·

Generating cash flow,

·

Securing financing to acquire our planned acquisitions,

·

Exercising capital discipline,

·

Ensuring financial strength, and

·

Investing in oil and gas properties with strong full-cycle margins.

The Industry

Background:  Oil and Gas industry:

The oil and gas businesses are fundamentally commodity businesses. This means the Company’s operations and earnings may be significantly affected by changes in oil and gas prices. Oil and gas prices and margins in turn depend on local, regional, and global events or conditions that affect supply and demand for the relevant commodity. Commodity prices are subject to significant price fluctuations.

Economic conditions    

The demand for energy and petrochemicals correlates closely with general economic growth rates. The occurrence of recessions or other periods of low or negative economic growth will typically have a direct adverse impact on our results. Other factors that affect general economic conditions in the world or in a major region, such as changes in population growth rates or periods of civil unrest, also impact the demand for energy and petrochemicals. Economic conditions that impair the functioning of financial markets and institutions also pose risks to the Company, including risks to the safety of our financial assets and to the ability of our customers to fulfill their commitments to the Company.

Operational Hazards and Insurance

Our operations are subject to the usual hazards incident to the drilling and production of oil and gas, such as blowouts, cratering, explosions, uncontrollable flows of oil, gas or well fluids, fires and pollution and other environmental risks. These hazards can cause personal injury and loss of life, severe damage to and destruction of property and equipment, pollution or environmental damage and suspension of operation. In addition, the presence of unanticipated pressures or irregularities in formations, miscalculations, or accidents may cause our drilling activities to be unsuccessful and result in a total loss of our investment. We do not maintain insurance of the various types to cover our operations with policy limits and retention liability customary in the industry. The occurrence of a significant adverse event, the risks of which are not covered by insurance, could have a material adverse effect on our financial condition and results of operations. We cannot give any assurances that we will be able to obtain adequate insurance in the future at rates we consider reasonable.

34

Public Policy and Government Regulation

The oil and natural gas industry is subject to various types of regulation throughout the world. Laws, rules, regulations, and other policy implementations affecting the oil and natural gas industry have been pervasive and are under constant review for amendment or expansion. Pursuant to public policy changes, numerous government agencies have issued extensive laws and regulations binding on the oil and natural gas industry and its individual members, some of which carry substantial penalties for failure to comply. Such laws and regulations have a significant impact on oil and gas exploration, production and marketing and midstream activities. These laws and regulations increase the cost of doing business and, consequently, affect profitability. Because public policy changes affecting the oil and natural gas industry are commonplace and because existing laws and regulations are frequently amended or reinterpreted, we are unable to predict the future cost or impact of complying with such laws and regulations. However, we do not expect that any of these laws and regulations will affect our operations in a manner materially different than they would affect other oil and natural gas companies of similar size and financial strength.

Industry Competition For Leases, Materials, People and Capital Can Be Significant

Strong competition exists in all sectors of the oil and gas industry. We compete with other independent oil and gas companies for the acquisition of oil and gas leases and properties. Most of these entities have significantly greater assets and name recognition. We also compete for the equipment and personnel required to explore, develop and operate properties. Competition is also prevalent in the marketing of oil and gas. Typically, during times of high or rising commodity prices, drilling and operating costs will also increase. Higher prices will also generally increase the costs of properties available for acquisition. Certain of our competitors have financial and other resources substantially larger than ours. They also may have established strategic long-term positions and relationships in areas in which we may seek new entry. As a consequence, we may be at a competitive disadvantage in the acquisition of oil and gas leases and properties. In addition, many of our larger competitors may have a competitive advantage when responding to factors that affect demand for oil and gas production, such as changing worldwide price and production levels, the cost and availability of alternative fuels, and the application of government regulations.

United States Market

The United States relied on net imports (imports minus exports) for about 40% of the petroleum (crude oil and petroleum products) that the United States consumed in 2012. Just over half of these imports came from the Western Hemisphere. The United States dependence on foreign petroleum has declined since peaking in 2005.[1]

The United States consumed 18.6 million barrels per day (MMbd) of petroleum products during 2012, making the United States the world's largest petroleum consumer. The United States was third in crude oil production at 6.5 MMbd. Crude oil alone, however, does not constitute all U.S. petroleum supplies. Significant gains occur because crude oil expands in the refining process, liquid fuel is captured in the processing of natural gas, and the United States have other sources of liquid fuel, including biofuels. These additional supplies totaled 4.8 MMbd in 2012.[1]

The United States imported 11.0 MMbd of crude oil and refined petroleum products in 2012. The United States also exported 3.2 MMbd of crude oil and petroleum products, so the United States net imports (imports minus exports) equaled 7.4 MMbd.[1]

In 2012, the United States imported 2.1 MMbd of petroleum products such as gasoline, diesel fuel, heating oil, jet fuel, and other products while exporting 3.1 MMbd of products, making the United States a net exporter of petroleum products.[1]

Top sources of net crude oil and petroleum product imports [1]:

·

Canada (28%)[1]

·

Saudi Arabia (13%)[1]

·

Mexico (10%)[1]

·

Venezuela (9%)[1]

·

Russia (5%)[1]

[1] Source EIA, link (current August 24, 2013): http://www.eia.gov/energy_in_brief/article/foreign_oil_dependence.cfm

Crude oil imports from the top five foreign suppliers to the United States—which in 2012 were Canada, Saudi Arabia, Mexico, Venezuela, and Iraq, in that order—accounted for almost 72% of total U.S. net crude oil imports, the highest proportion since 1997. The import share of the top five suppliers increased by 8 percentage points over the past three years despite a decline in total U.S. import volumes as the United States reduced its total crude oil imports in response to higher domestic oil production.[2]

U.S. net crude oil imports from the five countries averaged almost 6.1 million barrels per day (bbl/d) in 2012, even as total U.S. crude oil imports fell to their lowest level since 1997. Crude oil from the five countries accounted for a bigger share of overall U.S. net crude oil imports in 2012 than in previous years, at almost 72%, according to EIA's Petroleum Supply Monthly report. That share is up from around 64% in 2009, when the economic recession resulted in declining U.S. crude oil demand, and the highest share since reaching almost 73% in 1997. During 2012, Iraq replaced Nigeria as the fifth-largest supplier of U.S. crude oil imports.[2]

35

Highlights from the major crude oil supplying countries to the United States in 2012 included:

·

Canada - Crude oil imports by the United States averaged a record 2.4 million bbl/d, up 8% from their 2011 level.[2]

·

Saudi Arabia - Crude oil imports averaged almost 1.4 million bbl/d, up 14% from their 2011 level, and were the highest since 2008.[2]

·

Mexico - Crude oil imports of 972,000 bbl/d were down almost 12%, and fell below 1 million bbl/day for the first time since 1994, reflecting the steady decline in Mexico's crude oil production.[2]

·

Venezuela - Crude oil imports rose 4% to 906,000 bbl/d, the first increase since 2007. Venezuela's state oil company sent more crude to U.S. refineries, which exported more gasoline and other petroleum products back to Venezuela.[2]

·

Iraq. Crude oil imports of 474,000 bbl/d were up slightly more than 3% from 2011, moving Iraq ahead of Nigeria as the fifth-largest oil supplier to the United States for the first time since 1999. Iraq's crude oil production in the second half of last year topped 3 million bbl/d for first time since the end of the Gulf War in 1990.[2]

·

Nigeria. Crude oil imports of 405,000 bbl/d were down 42% from the year before and the lowest since 1985. Growing domestic production of light sweet crude oil of similar quality to Nigerian crude and lower demand for light sweet crude from United States East Coast refineries contributed to the decline.[2]

[2 ]Source: link (current August 24, 2013): http://www.eia.gov/todayinenergy/detail.cfm?id=10911

U.S. production of liquid fuels (mostly oil) will increase for the next 29 years by 108.11% of 2011 production levels by 2040 peaking by year 2020 with an annual production of 7.47 million barrels per day, an increase of 131.7% compared to 2011 domestic crude oil production, according to the Energy Information Administration (EIA), refer to table below:  

Liquid Fuels Supply and Disposition, Reference Case[3]
Million Barrels Per Day	2011	2015	2020	2025	2030	2035	2040	Growth Rate (2011-2040)
Crude Oil
Domestic Crude Production	5.67	7.29	7.47	6.79	6.30	6.26	6.13	0.30%
Gross Imports	8.94	7.33	6.82	7.05	7.36	7.37	7.57	-0.60%
Other Crude Supply	0.26	0.00	0.00	0.00	0.00	0.00	0.00	- -
Total Crude Supply	14.81	14.62	14.29	13.84	13.66	13.63	13.70	-0.30%
Other Petroleum Supply	3.02	3.54	4.04	4.12	3.82	3.57	3.29	0.30%
Other Non-petroleum Supply	1.09	1.30	1.51	1.55	1.58	1.68	1.97	2.10%
Total Primary Supply	18.92	19.46	19.84	19.50	19.06	18.88	18.96	0.00%
			36
Percentages	2011	2015	2020	2025	2030	2035	2040	Growth Rate (2011-2040)
Crude Oil
Domestic Crude Production	30%	37%	38%	35%	33%	33%	32%	0.30%
Gross Imports	47%	38%	34%	36%	39%	39%	40%	-0.60%
Other Crude Supply	1%	0%	0%	0%	0%	0%	0%	- -
Total Crude Supply	78%	75%	72%	71%	72%	72%	72%	-0.30%
Other Petroleum Supply	16%	18%	20%	21%	20%	19%	17%	0.30%
Other Non-petroleum Supply	6%	7%	8%	8%	8%	9%	10%	2.10%
Total Primary Supply	100%	100%	100%	100%	100%	100%	100%	0.00%
[3] Source: EIA, AEO2013 link (current 08/24/2013): http://www.eia.gov/forecasts/aeo/source_oil.cfm

Projected crude oil production in the United States ranges from 6 to 8 million barrels per day (bbl/d) over the next 30 years in the Annual Energy Outlook 2013 (AEO2013) Reference case projection. However, under greater supply assumptions, crude oil production is sustained at a higher level of about 10 million bbl/d between 2020 and 2040 (see chart below).[4]

In this higher resource scenario, total U.S. liquid fuels production (which includes crude oil, natural gas liquids (NGL), refinery gains, biofuels, and other liquid fuels) increases to more than 18 million bbl/d in 2040, compared to 12 million bbl/d in the Reference case. That level of domestic production reduces net imports to 7% or less of total demand compared to 40% in 2012. Production projections inevitably reflect many uncertainties regarding the actual level of crude oil resources available, the difficulty or ease in extracting them, and the evolution of the technologies (and associated costs) used to recover them.[4]

The EIA developed a High Oil and Gas Resource case as part of the AEO2013 to examine the effects of higher domestic production on energy demand, imports, and prices. This alternative case presents a scenario in which U.S. crude oil production continues to expand after 2020, driven primarily by tight oil production. This increased production results from assumed greater technically recoverable tight oil resources, as well as undiscovered resources in Alaska and the offshore Lower 48 states. In addition, the maximum penetration rate for gas-to-liquids (GTL) is increased and kerogen (oil shale) is assumed to begin development. In the High Oil and Gas Resource case, NGL production increases from 2.2 million bbl/d in 2011 to 5.0 million bbl/d in 2040, compared to just under 3 million bb/d in 2040 in the Reference case. GTL output reaches about 0.6 million bbl/d, compared to about 0.2 million bbl/d in the Reference case (see chart below).[4]

Estimates of technically recoverable resources from the rapidly developing tight oil formations are particularly uncertain and change over time as new information is gained through drilling, production, and technology experimentation. Projections embody many assumptions that might not prove to be valid over the long term and over all tight and shale formations. In the High Oil and Gas Resource case, the tight oil resources are increased by changing the estimated ultimate recovery (EUR) per well and assuming closer well spacing.[4]

[4] Source: link (current August 24, 2013): http://www.eia.gov/todayinenergy/detail.cfm?id=11691

Facts and Figures About the U.S. Oil and Natural Gas Industry

9.8 million	Number of people directly and indirectly employed by the U.S. oil and natural gas industry in 2011.[5]
5.6% GDP	America’s oil and natural gas industry supports 5.6 percent of our nation’s GDP.[5]
$86 Million/day	Daily amount companies pay to the federal government in royalty payments, rents and bonus fees in 2010.[5]
$100 billion	Amount the U.S. oil and natural gas industry has paid to the federal government in rents, royalties and lease payments for production from  2000 to 2010.[5]
$176.7 billion	Amount the industry invested in new U.S. capital projects in 2011.[5]
$203.6 billion	Amount of wages paid to U.S. employees in 2011, plus benefits and payments to oil and natural gas leaseholders.[5]
$32 billion	Amount of dividends distributed to American shareholders in 2011.[5]

[5] Source: link (current August 24, 2013): http://energytomorrow.org

US Oil And Gas Industry Employment Growing Much Faster Than Total Private Sector Employment

From the start of 2007 through the end of 2012, total U.S. private sector employment increased by more than one million jobs, about 1%. Over the same period, the oil and natural gas industry increased by more than 162,000 jobs, a 40% increase.[6]

37

The Labor Department's Bureau of Labor Statistics (BLS) accounts for oil and natural gas industry employment in three categories: drilling, extraction, and support.[6]

·

Drilling involves any employment related to the spudding and drilling of wells, as well as reworking of wells, and accounted for more than 90,000 jobs by the end of 2012, an increase of 6,600 jobs since 2007.[6]

·

Extraction includes establishments primarily engaged in operating, developing, and producing oil and natural gas fields, including exploration and all production work up to the point of shipment from the producing property. Employment in the extraction category numbered more than 193,000 jobs by the end of 2012, 53,000 more jobs than in 2007.[6]

·

Support involves performing supporting activities for oil and natural gas operations, including exploration, excavation, well surveying, casing work, and well construction. Support is the largest oil and gas industry category, and employed more than 286,000 people by the end of 2012, up more than 102,000 jobs from 2007. (BLS considers support to be for the above activities, and does not include jobs created in other industries such as manufacturing, housing, retail, education, and food services.)[6]

About half of the workers employed in crude oil and natural gas production are in the support category of oil and natural gas industry employment, and employment in this category accounted for the bulk of the increases seen in oil and gas industry employment. Combined, the three industry categories equal just one-half of one percent of total U.S. private sector employment.[6]

Both the support and drilling industries were heavily affected by the recession, but these industries have recovered quickly, suffering only minor effects from the temporary moratorium on offshore drilling as a result of the Deepwater Horizon spill in 2010. Between January 2007 and December 2012, monthly crude oil production increased by 39%, and monthly natural gas production increased by 25% (see chart below). Employment in the oil and gas drilling, extraction, and support industries continues to contribute to overall private sector employment as the U.S. economy recovers from the 2007-09 recession. [6]

38

Beyond within-sector employment, oil and gas industry activity also directly supports output and employment in other domestic sectors, such as suppliers of pipe, drilling equipment, and other drilling materials. In addition, as with other forms of economic activity, there are indirect employment effects stemming from purchases made by industry and employees spending of their incomes. Because employee expenditures are closely tied to their incomes, higher paying jobs, such as those in the oil and gas sector, tend to have larger indirect effects on output and employment than lower paying ones. A recent TIE article reviews the experience of North Dakota, which has seen significant gains in real gross domestic product per capita, coinciding with the development of the Bakken shale play.[6]

[6] Source: link (current August 24, 2013): http://www.eia.gov/todayinenergy/detail.cfm?id=12451

Company Operations

The Company is engaged primarily in the acquisition of producing or near producing oil and gas properties and the development of these oil and gas properties. The Company plans to acquire producing or near producing oil and gas properties that will provide cash flow and an upside for future development. Such activities are concentrated in North America onshore, primarily in the United States. We are currently scouting and evaluating properties in Texas, Oklahoma, Pennsylvania, Kansas and as well in Canada.

The implementation of our business plan will require significant capital. We do not have this capital and as a result, we will require additional financing to acquire and develop our leasehold obligations. We may use debt or equity to fund our ongoing operations. There can be no assurance that any financing will be available, and if available, will be on terms and conditions acceptable to the Company. If we rely on equity financing, our shareholders will experience significant dilution. If we rely on debt financing, we may not be able to satisfy our debt obligations.

Identification of leasehold interests.

The Company plans to acquire producing or near producing leaseholds that will provide cash flow and an upside for future development. However, it is unlikely that we will be able to exploit these leaseholds without a significant capital infusion.        

The Company may acquire the leaseholds in consideration for cash or shares of the company or a combination of cash and shares of the Company and may include an Overriding Royalty. Typical Overriding Royalty’s range from 2.5% to as much as 25% depending upon the current production on the leaseholds and the potential for Oil and Gas production.

A typical leasehold grants the Company the exclusive right to explore the land (“Property”) covered by the Oil and Gas Lease by geophysical and other methods, and to operate same for and produce there from all naturally-occurring oil, gas, casing-head gas or gasoline, gas condensate and/or all other liquid or gaseous hydrocarbons and other marketable or non-marketable substances produced therewith ("Oil and Gas"); and the exclusive right to inject gas, water, brine and other fluids into subsurface strata; and rights of way and easements for laying pipelines, telephone, telegraph and power lines, and the right to erect or install power stations, compressor stations, roadways, storage tanks or other storage facilities, separators and any fixtures and other structures thereon for producing, treating, processing, maintaining, storing and caring for the oil and gas; and oil and gas from other properties and any and all other rights and privileges necessary, incident to, or convenient for the economical operation of the Property and other lands for the production of Oil and Gas, and the injecting of gas, water, brine and other fluids into subsurface strata.

The Company may, at any time and from time-to-time pool all or part of the Property with other properties to create one or more drilling units. The production of Oil or Gas from such a pooled unit is generally treated as though the production occurred from a well on the Property, except the Lessor shall be entitled to royalty only on its pro-rata share of such production.

It is intended that the leasehold also include all lands and interests of the Lessor, which are contiguous to or in the vicinity of the Property.

Usually the leasehold will remain in force for a term of one year from the date executed and for as long thereafter as Oil and/or Gas is produced from the Property, or as long as operations for drilling are continued or as long as operations are continued for injection of gas, water, brine and other fluids into subsurface strata.

When a well is worked over or offset well drilled, an access road is constructed to the well site or upgraded. This results in surface damages that the surface owner is compensated for the loss of property. Timber may also be cut down during construction, the Company may cut and stack the timber at a location convenient for the surface owner to sell or a value may be assessed on the timber and the surface owner compensated.

Depending upon jurisdiction of the leasehold, the state can force a "pooling" of the oil and gas interests of a landowner with the interests of other landowners where the size or condition of lands does not allow the neighbor to find a drill site while respecting distance limits from property lines. A mineral owner has five options in the context of forced pooling. They can: 

1.

Lease their mineral interest.

2.

Sell their mineral interest.

39

3.

Participate materially in the development of the gas field. 

4.

Be a non-consenting owner.

5.

Protest forced pooling. 

A rework well or producing well requires maintenance by a company representative sometimes referred to as a “pumper” to insure the well(s) produce at their capacity and to monitor production. As per the terms of the lease, a gate may be installed by the well Operator to prohibit access to the Property by unauthorized personnel. The gate is typically locked and a key may be provided to the landowner. The well may require periodic maintenance by a service rig during the life of the well. Surface equipment includes a wellhead, gas meter, storage tank (for oil wells), separator, and pipeline. Lease is held-by-production during the life of the well(s).

When the well is no longer considered productive, the Company is required to plug the well under the direction of the Division of Oil and Gas inspector for the State. This involves placing cement plugs at various depths to isolate producing intervals, protect fresh water aquifers and coal seams. The site is reclaimed and vegetation is established to prevent erosion from the well site. After all wells on a lease are plugged, the lease is terminated and returned to the mineral owner.

After completion and testing of a workover well or an offset well, the well is put into production. As in the case of oil, the oil is pumped into a 100 BBL or 200 BBL tank(s). The pumper inspects the well on a daily or regular routine basis and monitors the production of oil. As the tank(s) nears capacity, the pumper will make arrangements for pickup of the oil for delivery to the Purchaser. The cost of hauling the oil to the refinery varies by distance from the well to the refinery and can range from $3 to $6 per BBL. The cost of the freight charge is borne by the Company. Oil collected or shipped during the month is paid by the Purchaser in the following month. The price paid for the produced oil is based on the average monthly market price.   

Conflicts of Interest

Management is not required to commit their full time to our affairs and, accordingly, such persons may have conflicts of interest in allocating management time among various business activities. Our affiliates, officers, and directors may engage in other business activities similar and dissimilar to those we are engaged in. To the extent that management engages in such other activities, they will have possible conflicts of interest in diverting opportunities to other companies, entities, or persons with which they are or may be associated or have an interest, rather than diverting such opportunities to us. As no policy has been established for the resolution of such a conflict, we could be adversely affected should management choose to place their other business interests before ours. No assurance can be given that such potential conflicts of interest will not cause us to lose potential opportunities. Management may become aware of investment and business opportunities, which may be appropriate for presentation to us as well as the other entities with which they are affiliated. Management may have conflicts of interest in determining which entity a particular business opportunity should be presented. Accordingly, as a result of multiple business affiliations, management may have similar legal obligations relating to presenting certain business opportunities to multiple entities. In addition, conflicts of interest may arise in connection with evaluations of a particular business opportunity by the board of directors with respect to the foregoing criteria. There can be no assurances that any of the foregoing conflicts will be resolved in our favor. We may consider Business Combinations with entities owned or controlled by persons other than those persons described above. There can be no assurances that any of the foregoing conflicts will be resolved in our favor.

Employees

Other than our officers and directors, we have no employees.    

40

MANAGEMENT'S DISCUSSION AND ANALYSIS AND RESULTS OF OPERATIONS

You should read the following discussion together with our consolidated financial statements and the related notes included elsewhere in this prospectus. This discussion contains forward-looking statements, which involve risks and uncertainties. Our actual results may differ materially from those we currently anticipate as a result of many factors, including the factors we describe under "Risk Factors," and elsewhere in this prospectus.

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 and Section 21E of the Exchange Act. 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 effect 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.

General

The Company is engaged primarily in the acquisition of producing or near producing oil and gas properties and the development of these oil and gas properties. The Company acquired oil and gas properties that allow it to drill and complete 30 oil and gas wells with an option to acquire an additional 15 oil and gas well locations for drilling and completion in Venango County, Pennsylvania. The Company plans to acquire additional producing or near producing oil and gas properties that will provide cash flow and an upside for future development. Such activities are concentrated in North America onshore, primarily in the United States.

There is no assurance that we will be successful in raising the necessary funds to drill and complete one or more of the 30 oil and gas well locations. There are no assurances that if we are successful in raising the necessary funds to drill and complete one or more of the 30 oil and gas well locations that they will produce oil and gas. There are no assurances that should oil and gas will be produced from one or more of the 30 oil and gas well locations, that the Company will be profitable.

We are currently scouting and evaluating properties in Texas, Oklahoma, Pennsylvania, Kansas and in Canada.

We were incorporated on December 20, 2007 in the State of Nevada. We are a development stage company, and to date have earned limited revenue.

Unless we secure equity, debt financing or Joint Venture partners, of which there can be no assurance, or identify a profitable acquisition candidate, we will not be able to continue any operations for longer than 12 months. We based this estimate on that majority of our operating costs are for salaries of the officers and directors of the Company, which are being accrued.  Our negative cash flow is for our auditors, attorneys, transfer agent, Edgar filer and travel expenses. We have sufficient cash to cover auditors, attorneys, transfer agent, Edgar filer and limited travel expenses for the next 12 months.  After such time, the Company would be forced to cease operations.

Introduction

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

We have a limited operating history of oil and gas production and no proven reserves, no production and negative cash flow. To date, we have had limited revenues and have not been able to generate sustainable positive earnings on a Company-wide basis.

41

 Our management cannot provide any assurances that the Company will ever operate profitably. As a result of our limited operating history, we are more susceptible to the numerous business, investment and industry risks that have been described in Item 1A. Risk Factors of this Annual Report on Form 10K.

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

Our acquisition of the 30 oil and gas well locations, with the option for an additional 15 oil and gas well locations, in Venango County, Pennsylvania on August 31, 2012 will require $7,500,000 to complete the drilling and completions program. We have not completed our financing to be able to pay for the 30 oil and gas well drilling and completions program. We have an agreement with AGS Capital Group, LLC for a $15 Million Reserve Equity Financing (REF) which requires the Company to register 75 Million shares with the SEC. There is no guarantee that the Company will be successful in registering the 75 Million shares with the SEC or any guarantee that the Company will be successful in drawing down on the REF.

We have also applied for a $5 Million Small Business Administration (SBA) loan for the 30 oil and gas well program in Venango County, Pennsylvania. There is no guarantee that the Company will be approved for an SBA Loan or close on a SBA loan.   

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

Our inability to generate revenue for the 12 month period ending May 31, 2013 is due primarily to difficulties in our ability to raise sufficient funds necessary to close on the financing to commence drilling and completions on the 30 oil and gas well locations in Venango County, Pennsylvania during the fiscal year. There are no assurances that the Company will be successful in raising sufficient funds to accomplish our goals and objectives.

Results of Operations for Fiscal Year Ended May 31, 2013 as compared to May 31, 2012.

Revenues

We generated no revenue for the fiscal period ending May 31, 2013 and for the period ending May 31, 2012. Our operations to date have been financed by the sale of our common stock and third party loans.  Operating expenses increased for the year ended May 31, 2013 which totalled $1,620,461 as compared to $557,330 for the year ended May 31, 2012. Our largest single operating expense to date has been professional fees totalling $1,577,002 for the year ended May 31, 2013 as compared to $540,033 for the year ended May 31, 2012. Most of these expenses have been incurred in connection with our attempts to establish field operations and in connection with ongoing corporate activities. General and Administrative expenses, including professional fees, totalled $1,620,461 and $557,330 respectively.

We incurred a net loss of $1,752,791 for the period ending May 31, 2013 compared to the net loss of $985,517, which includes a one-time impairment charge of $399,743, for the period ending May 31, 2012.

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

Liquidity and Capital Resources

Assets and Liabilities

Our primary financial resource is our base of our unproven oil and gas leases. Our ability to fund our capital expenditure program is dependent upon the availability of capital resource financing. In the next fiscal year, we plan on spending approximately $7,500,000 in new capital investments for a 30 well offset drilling program including exercising our option for an additional 15 oil and gas wells. However our actual expenditures may vary significantly from this estimate if our plans for to obtain financing changes during the year. Factors such as changes in operating margins due to changes in the price of oil and gas and the availability of capital resources could increase or decrease our ultimate level of expenditures during the next fiscal year.

42

The changes in our capital resources at May 31, 2013 compared with May 31, 2012 are:

		May 31, 2013		May 31, 2012		Increase (Decrease)	Percentage Change
Cash	$	23,400	$	-	$	23,400	23400.00%
Current Assets	$	1,004,400	$	833,274	$	171,126	20.54%
Total Assets	$	2,482,970	$	833,964	$	1,649,006	197.73%
Current Liabilities	$	3,021,901	$	1,456,318	$	1,565,584	107.50%
Total Liabilities	$	3,021,901	$	1,582,128	$	1,439,774	91.00%
Working Capital Deficit	$	2,017,502	$	623,044	$	1,394,458	223.81%

Our working capital deficit increased by $1,394,458, from ($623,044) as of May 31, 2012 to ($2,017,502) as of May 31, 2013. This increase in the deficit was due to the amount of resources that was expended to source financing for the drilling and completions of our 30 oil and gas leases in Venango County, PA, and complete all the necessary SEC filings.

Over the last year, we better positioned our Company to better meet our corporate goals and objectives with the sourcing of the $15 Million REF, which have allowed us to move forward with our goals and objectives of being an oil and gas producing company. Our business is capital intensive. Our ability to grow is dependent upon favorably obtaining outside debt and capital and generating cash flows from operating activities necessary to fund our investment activities. There is no assurance that we will be able to achieve profitability. Since our future operations will continue to be dependent on successful development activities and our ability to seek and secure capital from external sources, should we be unable to achieve sustainable profitability this could cause any equity investment in the Company to become worthless.

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

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

Cash Flows

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

		May 31, 2013		May 31, 2012		Increase (Decrease)	Percentage Change
Net cash provided by (used in) operating activities	$	175,841	$	(360,147)	$	535,988	148.82%
Net cash provided by (used in) investing activities	$	(835,000)	$	(70)	$	(834,930)	1,192,757%
Net cash provided by (used by) financing activities	$	682,559	$	335,149	$	347,410	103.66%

Cash Flow Used in Operating activities:

Cash flow from operating activities is derived from the limited production of our oil and changes in the balances of  payables, or other non-oil property asset account balances. For the year ended May 31, 2013, we had a positive cash flow from operating activities of $175,841, in comparison to a cash flow of ($360,147) for the year ended May 31, 2012. The increase of $535,988 was the result of an increase in our payables balance. Variations in cash flow from operating activities may affect our level of development expenditures. Our expenditures consist primarily of our General and Administrative (G&A) expenses, which consist of consulting and professional services, employee compensation, legal, accounting, travel and other G&A expenses, which we have incurred in order to address necessary organizational activities.

Cash Flow from Investing Activities:

Cash flow from investing activities is derived from the acquisitions of our oil and gas property, plant and equipment and Other Assets. Cash used in investing activities for the year ended May 31, 2013 was ($835,000), an increase of $834,930 from the ($70) for the year ended May 31, 2012.

Cash Flow from Financing activities:

Cash flow from financing activities is derived from long-term liability account balances or in equity, account balances excluding retained earnings. Cash flow provided by financing activities was $682,559 for the year ended May 31, 2013. This is in comparison to $335,149 provided by financing activities for the year ended May 31, 2012. The increase of $347,410 in funds was borrowed for the acquisition of oil and gas leases and for our G&A expenses. We anticipate it will be necessary to rely on additional funding from the debt financing and from capital markets in the current fiscal year.

43

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

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

Plan of Operation For Fiscal Year 2013

We will attempt to continue to source equity or debt financing, or Joint Venture partners for our operating costs and for our oil and gas well drilling programs or attempt to identify a profitable acquisition candidate. Our REF agreement with AGS Capital Group, LLC for $15 Million requires the Company to register 75 Million shares of our stock with the SEC. This will take time to become effective. There is no guarantee that the Company will be successful in registering the 75 Million shares with the SEC. We have had discussions with several companies and individuals for funding and/or Joint Ventures. However, we have not come to terms with any company or individual as of May 31, 2013. We will attempt to finance our operating expenses with additional debt or through equity financing.

Critical Accounting Policies

Financial Reporting Release No. 60, which was released by the Securities and Exchange Commission (the “SEC”), encourages all companies to include a discussion of critical accounting policies or methods used in the preparation of financial statements. The Company’s financial statements include a summary of the significant accounting policies and methods used in the preparation of the financial statements. Management believes the following critical accounting policies affect the significant judgments and estimates used in the preparation of the financial statements.

Use of Estimates - Management’s discussion and analysis or plan of operation is based upon the Company’s financial statements, which have been prepared in accordance with generally accepted accounting principles. The preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, management evaluates these estimates, including those related to allowances for doubtful accounts receivable and long-lived assets. Management bases these estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis of making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

We review the carrying value of property and equipment for impairment at least annually or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of long-lived assets is measured by comparison of its carrying amount to the undiscounted cash flows that the asset or asset group is expected to generate. If such assets are considered impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the property, if any, exceeds its fair market value.

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

Financial Statements and Supplementary Data.

Our financial statements have been audited by Weinberg & Baer LLC, Certified Public Accountants, and have been prepared in accordance with generally accepted accounting principles and pursuant to Regulation S-X as promulgated by the SEC and are included herein.

Governmental Regulations

The oil and natural gas industry is subject to various types of regulation throughout the world. Laws, rules, regulations, and other policy implementations affecting the oil and natural gas industry have been pervasive and are under constant review for amendment or expansion. Pursuant to public policy changes, numerous government agencies have issued extensive laws and regulations binding on the oil and natural gas industry and its individual members, some of which carry substantial penalties for failure to comply. Such laws and regulations have a significant impact on oil and gas exploration, production and marketing and midstream activities. These laws and regulations increase the cost of doing business and, consequently, affect profitability. Because public policy changes affecting the oil and natural gas industry are commonplace and because existing laws and regulations are frequently amended or reinterpreted, we are unable to predict the future cost or impact of complying with such laws and regulations. However, we do not expect that any of these laws and regulations will affect our operations in a manner materially different than they would affect other oil and natural gas companies of similar size and financial strength.

44

Environmental

Our operations are subject to the usual hazards incident to the drilling and production of oil and gas, such as blowouts, cratering, explosions, uncontrollable flows of oil, gas or well fluids, fires and pollution and other environmental risks. These hazards can cause personal injury and loss of life, severe damage to and destruction of property and equipment, pollution or environmental damage and suspension of operation. In addition, the presence of unanticipated pressures or irregularities in formations, miscalculations, or accidents may cause our drilling activities to be unsuccessful and result in a total loss of our investment. We do not maintain insurance of the various types to cover our operations with policy limits and retention liability customary in the industry. The occurrence of a significant adverse event, the risks of which are not covered by insurance, could have a material adverse effect on our financial condition and results of operations. We cannot give any assurances that we will be able to obtain adequate insurance in the future at rates we consider reasonable.

Off-Balance Sheet Arrangements

We have not entered into any off-balance sheet arrangements. We do not anticipate entering into any off-balance sheet arrangements during the next 12 months.

DESCRIPTION OF PROPERTY

Our executive offices are located at 12759 NE Whitaker Way, #C453, Portland, OR 97230, an office leased by Peter Matousek, one of our executives. Mr. Matousek provides this office for a monthly fee of $150 per month. This office space is currently sufficient for our needs and we expect it to be sufficient for the foreseeable future or until such time as we acquire a target company.

Oil and Gas Leases

On August 31, 2012, the Company acquired 30 oil and gas well locations in Venango County, Pennsylvania with an option to acquire an additional 15 oil and gas locations.

LEGAL PROCEEDINGS

On May 10, 2011, the Company accepted an Offer to Purchase from Lea Kennedy d/b/a LuxemBarings (“Purchaser”) to purchase $10 million of the Company’s common stock based on the average of 5 consecutive trading day’s close prior to date of closing. The Offer to Purchase was scheduled to close on or before June 24, 2011. The Purchaser failed to complete the transaction, after mutually agreed extensions of the closing date. The Company has retained legal counsel to take legal action against the Purchaser for failing to complete the purchase transaction and for damages to the Company as a result of the failure to complete the transaction. The Company has recognized losses, at cost, in the financial statements for the period ended May 31, 2012 and legal costs for the fiscal year ending May 31, 2013.

On March 23, 2013 The United States District Court For The Southern District Of Illinois granted summary judgment on Xun Energy’s breach of contract claim against Lea Kennedy d/b/a/ LuxemBarings. The amount of damages remains an issue to be resolved in the case and the Company's "fraud in the inducement claim" alleged in its complaint remains pending.

On July, 8, 2013, the Company was awarded a judgment dismissing, without prejudice, the legal action between Xun Energy, Inc., as Plaintiff and Lea Kennedy, an individual, d/b/a LUXEMBARINGS, as Defendant. The Company filed for a voluntary dismissal without prejudice on the legal action.

DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS

Directors, Executive Officers and Corporate Governance.

The following information sets forth the names of our officers and directors, their present positions, and some brief information about their background as of the date of this filing:

Name:	Position:	Held Since:
Jerry G. Mikolajczyk	President/Chief Financial Officer/Director	June 2011
Wayne St. Cyr	Executive Vice President, Marketing and Strategic Development	January 2011
Peter Matousek	Vice President – Investor Relations/Director	June 2011
William D. Spier	Director	May  2012
Peter Matousek	Director	May  2012

46

Mr. Jerry G. Mikolajczyk

Mr. Jerry G. Mikolajczyk was a key consultant to the Company who identified the opportunities available to us in Kentucky, helped negotiate our contracts, and assisted the Company with its financial reporting over the two years including SEC filings and our financial statements. Mr. Mikolajczyk consulted to the Company from March 2010 to May 31, 2011. On May 31, 2011, the Board of Directors appointed Mr. Mikolajczyk as our President, CEO, CFO, and a director of the Company.

Mr. Mikolajczyk has had an extensive career in the oil and gas, construction, and mining industries. Mr. Mikolajczyk has worked for Fortune 500 companies such as BP Resources (British Petroleum), SCI Group of Companies, Husky Oil, Syncrude, Bechtel, Guy F. Atkinson and INCO. He has worked as a heavy equipment operator on surface and open pit mining operations.

After completing his Business Administration diploma, Mr. Mikolajczyk went on to obtain his professional designation as a Certified General Accountant (CGA) and Certified Internal Auditor (CIA). As a professional accountant and auditor, he has been involved with planning, designing, and testing operations to ensure that the operations are efficient and effective.

In 2008, Mr. Mikolajczyk was awarded “CFO of the Year” for the application of his knowledge and expertise in a turnaround assignment for the Santa Clara Valley Transportation Authority (VTA), a $3.3 Billion asset transportation authority in Silicon Valley (San Jose, California).

Mr. Mikolajczyk has an aggregate of 41 years of experience, which include:     

·

Twenty-two (22) years of C-Level experience.

·

Ten (10) years in the Oil and Gas Industry evaluating and analyzing systems and operations to improve effectiveness, increase profits, and streamline operations without compromising controls.

·

Eighteen (18) years in the Mining Industry with operational experience in tar sands, copper, gold, limestone and precious stones. Mines were both open pit and deep rock (shaft) as well as alluvial and placer mining operations.

·

Twenty Seven (27) years of experience in the Construction Industry ranging in Oil and Gas, Mining, Transportation and Housing sectors. Specialty is Project Control and Reporting.

Mr. Mikolajczyk, through consulting agencies, has provided various consulting services to clients, which included, but not limited to:

·

Global Power and Water Industries, Inc.

·

VTA (Santa Clara Valley Transportation Authority)

·

MineCore International, Inc.

·

Platinum Works, Inc.

·

Blue Green Corp

·

J.M.E.L. International, Inc.

·

Nova Petrochemicals

·

BP Resources

Mr. Mikolajczyk is an acknowledged speaker and presenter. He has moderated various panels on P3’s (Private Public Partnerships) projects such as the Confederation Bridge, the longest bridge in North America, joining Prince Edward Island and New Brunswick in Canada, which Mr. Mikolajczyk was involved in the bidding, award and financing of the project. Mr. Mikolajczyk also presented a paper to the 1990 Western Regional Conference of the Institute of Internal Auditors entitled: "Is Your Project Control Out of Control?" and a paper in 1991 to the Institute of Internal Auditors, Calgary Chapter, entitled: "Operational Audit of the Procurement Function".

Mr. Wayne St. Cyr.

Mr. Wayne St. Cyr is our Executive Vice President, Marketing and Strategic Development and our Corporate Secretary.

Mr. St. Cyr comes to us leaving a distinguished 10 year career with RBS Group (Royal Bank of Scotland) which includes a six-time recipient of the President's Award for exceeding company objectives. During his tenure at RBS/Citizens Financial Group, he was responsible for developing the key alliances with Citizens Bank.

Mr. St. Cyr’s education includes an Associate's degree in Business Administration and a Bachelor of Science degree in Marketing.

Mr. Peter Matousek.

Mr. Matousek is the Vice President of Investor Relations.  He served as the Company’s President and CEO from  February 2010 to May 2011 and as a director from February 2010 to August 2011 before his term expired.

46

Mr. Matousek is an international consultant and entrepreneur with a European background. He attended University of Maryland University College and Warner Pacific College, where he earned degrees in Associates of Arts and Bachelors of Business Administration.

Mr. Matousek is member of the United States Navy and a Veteran of Foreign War and recently served in Operation Iraqi Freedom. He received the Army Achievement Medal, Navy Achievement Medal and Honorable Discharge.

Mr. Matousek has worked extensively with the public markets for companies throughout the United States and Canada in the financial and natural resource sector, including oil & gas and precious metal mining.  He has represented numerous companies in the capacity of Investor & Public Relations.  He speaks German, Czech, English and Russian.

Mr. William D Spier, PhD

Dr. Spier has been an advisor in economics and business development to private equity funds in the U.S. and Europe for the past six years. Prior to that, he was a business growth consultant to major proprietary and public institutions of higher education with 5-1 year appointments.

Dr. Spier was Senior Vice President for Whitman Medical and Executive Director for Ultrasound Technical Services, a reporting issuer, for 13 years during which he was responsible for the founding and growth of the pioneering institute for medical ultrasound training which expanded to 15 major markets in the U.S.  For two years, Dr. Spier was affiliated with Diamond Turk & Company, a specialist firm on the American Stock Exchange.

From 1969 to 1981, Dr. Spier held various positions with the New York Board of Education and was a graduate instructor at Washington University, St. Louis and Assistant Professor of Sociology at St. Louis University.  Dr. Spier was a member of the United States Teacher Corps.

Dr. Spier received his Bachelor of Arts degree from Hobart College, his Masters degree from the Washington University, St. Louis and his Doctorate in Sociology with concentration in political economy from Washington University, St. Louis.

Dr. Spier has an extensive history of publications and has authored more than fifty business plans for both start-ups and mature companies.  He is a member of economic, education and medical societies and participates on the board of public companies.  He is often a visiting instructor at NYC and metropolitan-area institutions of higher education for graduate level teaching.

Penalties or Sanctions

To the best of our knowledge, none of our directors, officers or stockholders holding a sufficient number of securities to affect materially the control of the Company, has been subject to any penalties or sanctions imposed by a court relating to securities legislation or by a securities regulatory authority or has entered into a settlement agreement with a securities regulatory authority or been subject to any other penalties or sanctions imposed by a court or regulatory body that would likely be considered important to a reasonable investor making an investment decision.

Personal Bankruptcies

To the best of our knowledge, none of our directors, officers or stockholders holding a sufficient number of securities to affect materially the control of the Company, nor any personal holding company of any such person has, within the last ten years become bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency, or been subject to or instituted any proceedings, arrangement or compromise with creditors, or had a receiver, receiver manager or trustee appointed to hold the assets of that person.

Compensation of Directors

Our directors do not receive cash compensation for their services as directors. However, each director receives 5,000 shares of common stock per month and will have their out of pocket expenses such as travel for Board meetings reimbursed by the Company.

Terms of Office

Our directors are appointed for one-year terms to hold office or until the next annual general meeting of the holders of our common stock or until removed from office in accordance with our by-laws.   

Family Relationships

There are no family relationships among our directors and/or officers.

47

Involvement in Certain Legal Proceedings

To the best of our knowledge, during the past five years, none of the following occurred with respect to a present or former director, executive officer, or employee: (1) any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time; (2) any conviction in a criminal proceeding or being subject to a pending criminal proceeding  (excluding traffic violations and other minor offences); (3) being subject to any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his or her involvement in any type of business, securities or banking activities; and (4) being found by a court of competent jurisdiction (in a civil action), the SEC or the Commodities Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended or vacated.

Corporate Governance

Audit committee

While we have adopted a charter for the Audit Committee, due to the small size of the board, we do not have a separately-designated audit committee. The Board of Directors performs the functions of an audit committee. A written charter governs the actions of the Board of Directors when performing the functions that would generally be performed by an audit committee. The Board of Directors approves the selection of our independent accountants and meets and interacts with the independent accountants to discuss issues related to financial reporting. In addition, the Board of Directors reviews the scope and results of the audit with the independent accountants, reviews with management and the independent accountants our annual operating results, considers the adequacy of our internal accounting procedures and considers other auditing and accounting matters including fees to be paid to the independent auditor and the performance of the independent auditor.

Compensation and Nominations Committees

We currently have no compensation or nominating committee or other board committee performing equivalent functions. Currently, the member of our Board of Directors participates in discussions concerning executive officer compensation and nominations to the Board of Directors.

Finance committee

While we have adopted a charter for the Finance Committee, due to the small size of the board, we do not have a separately-designated finance committee. Currently, the members of our Board of Directors participates in discussions concerning the finances of the Company.

Code of Conduct and Ethics

We have not adopted a Code of Ethics, as required by sections 406 and 407 of the Sarbanes-Oxley Act of 2002. Our management believes that the size of our company and current operations at this time do not require a code of ethics to govern the behaviour of our officer. We anticipate that we will adopt a code of ethics once we are in a position to do so.

Indemnification of Executive Officers and Directors

The Nevada Revised Statutes permits indemnification of directors, officers, and employees of corporations under certain conditions subject to certain limitations. In the event that a claim for indemnification (other than the payment by us of expenses incurred or paid by our directors and officers in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, we will, unless in the opinion of our counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is appropriate and will be governed by the final adjudication of such issue.

Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons pursuant to the foregoing provisions, or otherwise, we have been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.

EXECUTIVE COMPENSATION

Mr. Jerry G. Mikolajczyk was appointed our acting president, chief executive officer and chief financial officer on May 31, 2011 effective June 1, 2011. His employment contract terminated on May 31, 2012. The Company has not renewed the contract with Mr. Mikolajczyk and has retained Mr. Mikolajczyk on a month to month basis.  The Company pays Mr. Mikolajczyk $10,000 per month.

Mr. Wayne St. Cyr was appointed our Executive Vice President, Marketing and Strategic Development on January 1, 2011. His employment contract terminated on December 31, 2011. The Company has not renewed the contract with Mr. Ct. Cyr and has retained Mr. St. Cyr on a month to month basis. The Company pays Mr. Wayne St. Cyr $10,000 per month.

48

Mr. Peter Matousek was appointed our Vice President – Investor Relations on May 31, 2011. His employment contract terminated May 31, 2012.  The Company has not renewed the contract with Mr. Matousek and has retained Mr. Matousek on a month to month basis.  The Company pays Mr. Peter Matousek $7,500 per month.

Mr. William D. Spier was appointed Treasurer of the Company on October 23, 2012. The Company paid Mr. Spier $4,000 per month until May 31, 2013. Mr. Spier's appointment was renewed for another 12 months with a salary commitment of $7,500 per month.

The following table discloses compensation paid/accrued during the fiscal years ended May 31, 2013 and 2012 to the Company’s Officers and the most highly compensated executive officer whose total compensation exceeded $100,000 for the fiscal year ended May 31, 2013 (Collectively, the “Named Executive Officers”). No restricted stock awards, long-term incentive plan payouts or other types of compensation, other than the compensation identified in the table below, were paid/accrued to the Named Executive Officers during these fiscal years.

Name and Principal Position	Year Ended May 31	Salary*2 ($)	Bonus ($)	Stock Awards ($)	Option Awards ($)	Total ($)
Jerry G. Mikolajczyk, President/CEO/CFO	2013	$120,000	-0-	-0-	-0-	$120,000
Wayne St. Cyr, Executive Vice President	2013	$120,000	-0-	-0-	-0-	$120,000
Peter Matousek, VP-Investor Relations*1	2013	$90,000	-0-	-0-	-0-	$90,000
Dr. William D. Spier, Treasurer	2013	$29,032	-0-	-0-	-0-	$29,032

Name and Principal Position	Year Ended May 31	Salary*2 ($)	Bonus ($)	Stock Awards ($)	Option Awards ($)	Total ($)
Jerry G. Mikolajczyk, President/CEO/CFO	2012	$120,000	-0-	-0-	-0-	$120,000
Wayne St. Cyr, Executive Vice President	2012	$120,000	-0-	-0-	-0-	$120,000
Peter Matousek, VP-Investor Relations*1	2012	$90,000	-0-	-0-	-0-	$90,000

*1 - Former President/CEO during 2011

*2 - Does not include stock compensation as Board members, refer to Item 5.E of this Form 10-K

Stock Options Granted/Exercised in Last Year

The Company has never issued any stock options.

Employment Agreements

The Company entered in a Management and Financial Service Agreement with Mr. Wayne St. Cyr as the Executive Vice President, Marketing and Strategic Development on December 21, 2010 for a ten day period ending December 31, 2010 which was extended for a 12 month term to December 31, 2011, whereby the Executive Vice President, Marketing and Strategic Development is paid $10,000 per month. The Company has not renewed the contract with Mr. Ct. Cyr and has retained Mr. St. Cyr on a month to month basis. In addition to his duties as Executive Vice President, Marketing and Strategic Development, Mr. St. Cyr is the Corporate Secretary for the Company. Mr. St Cyr is paid $10,000 per month.

The Company entered into a Management and Financial Service Agreement for Mr. Jerry G. Mikolajczyk for a 12-month period commencing on June 1, 2011 and ending May 31, 2012. Mr. Mikolajczyk is hired through a service company, and will be paid $120,000 in cash payments for the services of Mr. Mikolajczyk. The terms and conditions will be renegotiated upon the successful consummation of a Business Combination through the acquisition of, or merger or consolidation with, a company that has substantial additional capital and or operating revenues; or the Company is able to finance operating expenses with additional debt or through equity financing of not less than $5,000,000. The Company has not renewed the contract with Mr. Mikolajczyk. Mr. Mikolajczyk continues to work for the Company on a month-to-month basis and is paid $10,000 per month.

The Company entered into a Management and Financial Service Agreement with Mr. Peter Matousek for a 12-month period commencing June 1, 2011 and ending May 31, 2012 whereby Mr. Matousek will be paid $90,000 in cash payments. The terms and conditions will be renegotiated upon the successful consummation of a Business Combination through the acquisition of, or merger or consolidation with, a company that has substantial additional capital and or operating revenues; or the Company is able to finance operating expenses with additional debt or through equity financing of not less than $5,000,000. The Company has not renewed the contract with Mr. Matousek. Mr. Matousek continues to work for the Company on a month-to-month basis and is paid $7,500 per month.

49

The Company entered into a Management and Financial Service Agreement with Dr. William D. Spier for a 7.25-month period commencing October 23 and ending May 31, 2013 whereby Dr. Spier was paid $29,032 in cash payments. The agreement was renewed for an additional year at $7,500 per month. The terms and conditions will be renegotiated upon the successful consummation of a Business Combination through the acquisition of, or merger or consolidation with, a company that has substantial additional capital and or operating revenues; or the Company is able to finance operating expenses with additional debt or through equity financing of not less than $5,000,000.

Significant Employees

As our business progresses and grows, we expect to hire and begin paying salaries to other officers. We also expect to hire part-time and full-time employees and consultants who will be paid compensation and consulting fees.

Employee Pension, Profit Sharing or other Retirement Plans

We do not have a defined benefit, pension plan, profit sharing or other retirement plan, although we may adopt one or more of such plans in the future.

Director's compensation

On May 31, 2013, the Company entered into a Board Member Compensation Agreement with Dr. William D. Spier as a director of the Company for a term of one (1) year ending May 31, 2014.

On May 31, 2013, the Company entered into a Board Member Compensation Agreement with Mr. Peter Matousek as a director of the Company for a term of one (1) year ending May 31, 2014.

On August 31, 2013, the Company entered into a Board Member Compensation Agreement with Mr. Jerry G. Mikolajczyk as a director of the Company for a term of one (1) year ending August 31, 2014.

Mr. Mikolajczyk, Dr. Spier and Mr. Matousek will receive 5,000 shares per month of the Company’s common stock in consideration for them serving on the Company’s Board of Directors. The common stock will be valued based on the average of the 5 trading day close price prior to each month end. This amount includes all costs related to the engagement Director of the Company except 3^rd party or travel expenses.

Related Party Transactions

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

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

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

On March 28, 2011, the Company entered into Redemption Agreement with Peter Matousek, the Company’s president and director, which provides in part for the Company to redeem from Mr. Matousek 140 million shares of the Company’s common stock at a price of $87,500 or $0.000625 per share. On May 31, 2011, Mr. Matousek assigned the Note Payable to Comtax Services, Inc.

The Company issued an aggregate of 142,500 shares for the period ending May 31, 2012 with an average price of $0.0518 per share to the Executive and Board pursuant to a Management and Financial Service Agreement with Mr. Peter Matousek and a Board Member Compensation Agreement with Mr. Peter Matousek, Mr. Donald Lynch, Mr. Kevin M. Grapes, Mr. Jerry G. Mikolajczyk, and Dr. William D. Spier.

The Company issued an aggregate of 180,000 shares for the period ending May 31, 2013 with an average price of $0.01846 per share to the Board pursuant to Board Member Compensation Agreements with Mr. Peter Matousek, Mr. Jerry G. Mikolajczyk, and Dr. William D. Spier.

50

Prior to June 1, 2011, our President, CEO and Director, Jerry G. Mikolajczyk, performed services for the Company on a consulting contract through a consulting agency, Comtax Services, Inc. (Comtax). From April 1, 2010 to February 28, 2011, Comtax charged a fixed monthly fee of $2,500, a minimum of 10 hours per month for Mr. Mikolajczyk, an aggregate of $27,500 for the 11 months for Mr. Mikolajczyk’s services to the Company. For the period March 1, 2011 to May 31, 2011, Comtax charged the Company an aggregate of $387,275 (1,106.5 hours) for the services of Mr. Mikolajczyk plus $9,656.50 in travel expenses Mr. Mikolajczyk incurred on behalf of the Company. On October 31, 2012, Comtax assigned the trade payables to Mr. Mikolajczyk d/b/a/ Lighthouse Investments, as unsecured Promissory Notes. The Promissory Notes, an aggregate of $398,248.50, are non-interest bearing. Mr. Mikolajczyk was an officer of Comtax until his resignation on May 31, 2011 and terminated his consulting contract with Comtax as of May 31, 2011 prior to accepting his executive and director positions with the Company.

On May 1, 2013, President, CEO and Director, Jerry G. Mikolajczyk, loaned to the Company $20,000 to be applied against the purchase of Series B Preferred Shares. The loan is unsecured and non-interest bearing.

51

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following tables set forth, as of May 31, 2013, the ownership of our common stock by each person known by us to be the beneficial owner of more than 5% of our outstanding common stock, our director, or executive officer and our executive officers and directors as a group. To the best of our knowledge, the person named has sole voting and investment power with respect to such shares, except as otherwise noted. There are no known pending or anticipated arrangements that may cause a change in control.

		Percentage of Outstanding Common Stock
Name and Address of Beneficial Owner*1	Shares Beneficially Owned*2	Prior to Offering	After Offering*3
Jerry G. Mikolajczyk	188,579,421	48.92%	40.95%
Peter Matousek	158,629	0.04%	0.03%
Dr. William D. Spier	76,613	0.02%	0.02%
Officers with Directors as a group	188,814,663	48.98%	41.01%

(1)

The address for each beneficial owner is c/o Xun Energy, Inc., 12759 NE Witaker Way, #C453, Portland, OR 97230

(2)

Includes all shares each director and officer has the right to acquire within sixty days.

(3)

Assumes that all of the shares being offered are sold

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Except as described below, none of the following persons has any direct or indirect material interest in any transaction to which we are a party during the past two years, or in any proposed transaction to which the Company is proposed to be a party:

A.

any director or officer;

B.

any proposed nominee for election as a director;

C.

any person who beneficially owns, directly or indirectly, shares carrying more than 5% of the  voting  rights  attached  to our common stock; or

D.

any  relative  or  spouse  of  any of the  foregoing  persons,  or any relative of such spouse,  who has the same house as such person or who is a director or officer of any parent or subsidiary.

Potential Conflict of Interest

Prior to June 1, 2011, our President, CEO and Director, Jerry G. Mikolajczyk, performed services for the Company on a consulting contract through a consulting agency, Comtax Services, Inc. (Comtax). From April 1, 2010 to February 28, 2011, Comtax charged a fixed monthly fee of $2,500, a minimum of 10 hours per month for Mr. Mikolajczyk, an aggregate of $27,500 for the 11 months for Mr. Mikolajczyk’s services to the Company. For the period March 1, 2011 to May 31, 2011, Comtax charged the Company an aggregate of $387,275 (1,106.5 hours) for the services of Mr. Mikolajczyk plus $9,656.50 in travel expenses Mr. Mikolajczyk incurred on behalf of the Company. On October 31, 2012, Comtax assigned the trade payables to Mr. Mikolajczyk d/b/a/ Lighthouse Investments, as unsecured Promissory Notes. The Promissory Notes, an aggregate of $398,248.50, are non-interest bearing. Mr. Mikolajczyk was an officer of Comtax until his resignation on May 31, 2011 and terminated his consulting contract with Comtax as of May 31, 2011 prior to accepting his executive and director positions with the Company.

The current officers and directors of the Company shall devote full-time to the Company. If a specific business opportunity becomes available, such person may face a conflict in selecting between our business interest and their other business interests. The policy of the Board is that any personal business or corporate opportunity incurred by an officer or director of the Company must be examined by the Board and turned down by the Board in a timely basis before an officer or director can engage or take advantage of a business opportunity which could result in a conflict of interest.

DESCRIPTION OF SECURITIES

Common Stock

The Company is authorized to issue 5,000,000,000 shares of $0.0001 par value common stock. All common stock shares have equal voting rights, are non-assessable, and have one vote per share. Voting rights are not cumulative and, therefore, the holders of more than 50% of the common stock could, if they choose to do so, elect all of the directors of the Company. Holders of our common stock are entitled to receive such dividends as our Board may declare from time to time from any surplus that we may have. We have not paid dividends on our common stock since the date of our incorporation and we do not anticipate paying any common stock dividends in the foreseeable future. We anticipate that any earnings will be retained for development and expansion of our businesses and we do not anticipate paying any cash dividends in the foreseeable future. Future dividend policy will depend upon our earnings, financial condition, contractual restrictions and other factors considered relevant by our Board and will be subject to limitations imposed under Nevada law.

52

Preferred Stock

The Company is authorized to issue 50,000,000 shares of preferred stock, par value $0.0001. On November 30, 2011 and January 12, 2013, the Board of Directors of the Company approved the allocation of 4,000,000 of the 50,000,000 authorized Preferred Shares of the Company as Series A Preferred Shares with the following rights:

·

Convertible to one hundred (100) common shares of the Company for each one (1) Series A Preferred Share

·

Voting rights equal to one hundred (100) votes for each Series A Preferred Share

The consideration for one (1) Series A Preferred Share is set at $0.50.

On April 29, 2013, the Board of Directors of the Company approved the allocation of 750,000 of the 50,000,000 authorized Preferred Shares of the Company as Series B Preferred Shares with the following rights:

1.

May be converted by the holder into Company common stock. The conversion ratio is such that if the full 750,000 Series B Shares are issued, they will convert into Company common shares representing 70% of the fully diluted outstanding common shares outstanding after the conversion (which includes all common shares outstanding plus all common shares potentially issuable upon the conversion of all derivative securities not held by the holder).

2.

If the full 750,000 Series B Shares are not issued, the issued Series B Shares divided by 750,000 multiplied by 70% will represent the percentage of the fully diluted outstanding common shares outstanding after the conversion (which includes all common shares outstanding plus all common shares potentially issuable upon the conversion of all derivative securities not held by the holder). For example: 500,000 Series B Shares issued will result in the holder having 46.67% (500,000/750,000 X 70% = 46.67%) of the fully diluted outstanding common shares.

3.

The holder of Series B Shares may cast the number of votes at a shareholders meeting or by written consent that equals the number of common shares into which the Series B Shares are convertible on the record date for the shareholder action.

4.

In the event the Board of Directors declares a dividend payable to Company common shareholders, the holders of Series B Shares will receive the dividend that would be payable if the Series B Shares were converted into Company common shares prior to the dividend.

5.

In the event of a liquidation of the Company, the holders of Series B Shares will receive a preferential distribution of $0.001 per share, and will share in the distribution as if the Series B Shares had been converted into common shares.

The consideration for one (1) Series B Preferred Share is set at $0.50.

MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Market Information

Our common stock trades on the Over-the-Counter-Bulletin Board under the symbol ("XNRG"). There is a very limited market for our common stock, with very limited trading activities. Until October 2009 there was no posted bid or ask price for our common stock. The following table shows the high and low closing sales prices for our Common Stock for the two most recent fiscal years. The quotations reflect inter dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions. The information is derived from information received from online stock quotation services.

	Year ended May 31, 2013		Year ended May 31, 2012
	HIGH	LOW	HIGH	LOW
First Quarter	$0.0800	$0.0250	$0.140	$0.011
Second Quarter	$0.0440	$0.0035	$0.015	$0.002
Third Quarter	$0.0240	$0.0040	$0.120	$0.020
Fourth Quarter	$0.0180	$0.0059	$0.080	$0.010

Holders

As of May 31, 2013, the Company had 63 active shareholders of record. This number does not include an indeterminate number of shareholders whose shares are held by brokers in street name.

Transfer Agent

Our transfer agent is Holladay Stock Transfer, Inc. whose address is 2939 N. 67^th Place #C, Scottsdale, Arizona  85251 and their telephone number is (480)481-3940.  

53

Dividends

Holders of our common stock are entitled to receive such dividends as our Board may declare from time to time from any surplus that we may have. We have not paid dividends on our common stock since the date of our incorporation and we do not anticipate paying any common stock dividends in the foreseeable future. We anticipate that any earnings will be retained for development and expansion of our businesses and we do not anticipate paying any cash dividends in the foreseeable future. Future dividend policy will depend upon our earnings, financial condition, contractual restrictions and other factors considered relevant by our Board and will be subject to limitations imposed under Nevada law.

Executive and Board Compensation

The Company entered in a Management and Financial Service Agreement with Mr. Wayne St. Cyr as the Executive Vice President, Marketing and Strategic Development on December 21, 2010 for a ten day period ending December 31, 2010 which was extended for a 12 month term to December 31, 2011, whereby the Executive Vice President, Marketing and Strategic Development is paid $10,000 per month. The Company has not renewed the contract with Mr. Ct. Cyr and has retained Mr. St. Cyr on a month to month basis. In addition to his duties as Executive Vice President, Marketing and Strategic Development, Mr. St. Cyr is the Corporate Secretary for the Company. Mr. St Cyr is paid $10,000 per month.

The Company entered into a Management and Financial Service Agreement for Mr. Jerry G. Mikolajczyk for a 12-month period commencing on June 1, 2011 and ending May 31, 2012. Mr. Mikolajczyk is hired through a service company, and will be paid $120,000 in cash payments for the services of Mr. Mikolajczyk. The terms and conditions will be renegotiated upon the successful consummation of a Business Combination through the acquisition of, or merger or consolidation with, a company that has substantial additional capital and or operating revenues; or the Company is able to finance operating expenses with additional debt or through equity financing of not less than $5,000,000. The Company has not renewed the contract with Mr. Mikolajczyk. Mr. Mikolajczyk continues to work for the Company on a month-to-month basis and is paid $10,000 per month.

The Company entered into a Management and Financial Service Agreement with Mr. Peter Matousek for a 12-month period commencing June 1, 2011 and ending May 31, 2012 whereby Mr. Matousek will be paid $90,000 in cash payments. The terms and conditions will be renegotiated upon the successful consummation of a Business Combination through the acquisition of, or merger or consolidation with, a company that has substantial additional capital and or operating revenues; or the Company is able to finance operating expenses with additional debt or through equity financing of not less than $5,000,000. The Company has not renewed the contract with Mr. Matousek. Mr. Matousek continues to work for the Company on a month-to-month basis and is paid $7,500 per month.

The Company entered into Board Member Compensation Agreements with Mr. Kevin M. Grapes and Mr. Jerry G. Mikolajczyk as directors of the Company for a term of one (1) year ending August 31, 2012. Both Mr. Grapes and Mr. Mikolajczyk will receive 5,000 shares per month of the Company’s common stock in consideration for them serving on the Company’s Board of Directors. The common stock will be valued based on the average of the 5 trading day close price prior to each month end. This amount includes all costs related to the engagement Director of the Company except 3^rd party or travel expenses.  

On May 21, 2012, Mr. Kevin M. Grapes resigned as a Board member.

On May 22, 2012, Company entered into a Board Member Compensation Agreement with Dr. William D. Spier as a director of the Company for a term of one (1) year ending May 31, 2013. Dr. Spier will receive 5,000 shares per month of the Company’s common stock in consideration for them serving on the Company’s Board of Directors. The common stock will be valued based on the average of the 5 trading day close price prior to each month end. This amount includes all costs related to the engagement Director of the Company except 3^rd party or travel expenses.

On May 25, 2012, Company entered into a Board Member Compensation Agreement with Mr. Peter Matousek as a director of the Company for a term of one (1) year ending May 31, 2013. Mr. Matousek will receive 5,000 shares per month of the Company’s common stock in consideration for them serving on the Company’s Board of Directors. The common stock will be valued based on the average of the 5 trading day close price prior to each month end. This amount includes all costs related to the engagement Director of the Company except 3^rd party or travel expenses.

The Company authorized and approved an aggregate of 136,129 shares for the period ended May 31, 2012 with an average price of $0.0333 per share to the Board pursuant to a Board Member Compensation Agreements with Mr. Jerry G. Mikolajczyk, Mr. Kevin M. Grapes, Mr. Peter Matousek and Dr. William D. Spier. The Company issued 105,000 of the 136,129 shares to the Board as of May 31, 2012.  The balance,  31,129 shares, cost of $2,106 for the period March 1, 2012 to May 31, 2012,  were issued to the Board on June 25, 2012.

The Company authorized and approved an aggregate of 45,000 shares for the period ended August 31, 2012 with an average price of $0.04033 per share to the Board pursuant to Board Member Compensation Agreements with Mr. Jerry G. Mikolajczyk, Mr. Peter Matousek and Dr. William D. Spier. The 45,000 shares were issued to the Board on October 26, 2012.

54

On August 31, 2012, Jerry G. Mikolajczyk was re-appointed as a director by the Board of Directors of  the Company for another one-year term ending August 31, 2013.  In consideration for Mr. Mikolajczyk’s service as director, the Company will issue 5,000 shares per month of the Company’s stock, which will be valued based on the average of the five trading day close price prior to each month end.  In addition, the Company will reimburse Mr. Mikolajczyk for the preapproved cost of airfare, travel expenses and disbursements made on behalf of the Company.

The Company authorized and approved an aggregate of 45,000 shares for the period ended November 30, 2012 with an average price of $0.01228 per share to the Board pursuant to Board Member Compensation Agreements with Mr. Jerry G. Mikolajczyk, Mr. Peter Matousek and Dr. William D. Spier.

The Company authorized and approved an aggregate of 45,000 shares for the period ended February 28, 2013 with an average price of $0.01093 per share to the Board pursuant to Board Member Compensation Agreements with Mr. Jerry G. Mikolajczyk, Mr. Peter Matousek and Dr. William D. Spier.

On May 30, 2013, the Board of Directors renewed the Board Member Compensation Agreement with Dr. William D. Spier as a director of the Company for a term of one (1) year ending May 31, 2014. Mr. Spier will receive 5,000 shares per month of the Company’s common stock in consideration for them serving on the Company’s Board of Directors. The common stock will be valued based on the average of the 5 trading day close price prior to each month end. This amount includes all costs related to the engagement Director of the Company except 3^rd party or travel expenses. The terms and conditions will be renegotiated upon the successful consummation of a Business Combination through the acquisition of, or merger or consolidation with, a company that has substantial additional capital and or operating revenues; or the Company is able to finance operating expenses with additional debt or through equity financing of not less than $5 million.

On May 30, 2013, the Board of Directors renewed the Board Member Compensation Agreement with Mr. Peter Matousek as a director of the Company for a term of one (1) year ending May 31, 2014. Mr. Matousek will receive 5,000 shares per month of the Company’s common stock in consideration for them serving on the Company’s Board of Directors. The common stock will be valued based on the average of the 5 trading day close price prior to each month end. This amount includes all costs related to the engagement Director of the Company except 3^rd party or travel expenses. The terms and conditions will be renegotiated upon the successful consummation of a Business Combination through the acquisition of, or merger or consolidation with, a company that has substantial additional capital and or operating revenues; or the Company is able to finance operating expenses with additional debt or through equity financing of not less than $5 million.

On May 31, 2013, the Company entered into a Management and Financial Service Agreement with Dr. William D. Spier as Treasurer of the Company for a 12-month period commencing June 1, 2013 and ending May 31, 2014 whereby Dr. Spier will be paid $90,000 in cash payments. The terms and conditions will be renegotiated upon the successful consummation of a Business Combination through the acquisition of, or merger or consolidation with, a company that has substantial additional capital and or operating revenues; or the Company is able to finance operating expenses with additional debt or through equity financing of not less than $5 million.

The Company authorized and approved an aggregate of 45,000 shares for the quarter ending May 31, 2013 with an average price of $0.01033 per share to the Board pursuant to Board Member Compensation Agreements with Mr. Jerry G. Mikolajczyk, Mr. Peter Matousek and Dr. William D. Spier.

The Schedule of Board Compensation below represents the shares issued or approved to the Board with the 5-Day Average Share Closing Price for each month during the fiscal year ending May 31, 2013:

Schedule of Board Compensation
Month	Board Shares Approved, Not Issued	Board Shares Issued	5 Day Average Share Closing Price	Amount
June	0	15,000	$0.03800	$570.00
July	0	15,000	$0.04400	$660.00
August	0	15,000	$0.03900	$585.00
Quarter Total	0	45,000	$0.04033	$1,815.00
September	0	15,000	$0.02320	$348.00
October	0	15,000	$0.00770	$115.60
November	0	15,000	$0.00590	$89.10
Quarter Total	0	45,000	$0.01228	$552.70
December	0	15,000	$0.00774	$116.10
January	0	15,000	$0.00982	$147.30
February	0	15,000	$0.01522	$228.30
Quarter Total	0	45,000	$0.01093	$491.70
March	0	15,000	$0.01392	$208.80
April	0	15,000	$0.01028	$154.20
May	0	15,000	$0.00680	$102.00
Quarter Total	0	45,000	$0.01033	$465.00
Year Total	0	180,000	$0.01846	$3,323.50

55

Sales of Unregistered Securities

We issued shares of our common stock to investors which were exempt from the registration requirements of the Securities Act of 1933, as amended (the "Securities Act") by virtue of Section 4(2) thereof, or Regulation D or Regulation S promulgated thereunder. All recipients had adequate access, through their relationships with us, to information about us.

The Company authorized and approved an aggregate of 136,129 shares for the period ended May 31, 2012 with an average price of $0.0333 per share to the Executive and Board pursuant to Board Member Compensation Agreements with Mr. Peter Matousek, Mr. Donald Lynch, Mr. Jerry G. Mikolajczyk,  Mr. Kevin M. Grapes and Dr. William D. Spier. The Company issued 105,000 of the 136,129 shares to the Board as of May 31, 2012. The balance of 31,129 shares was issued to the Board on June 25, 2012.

The Company issued 20 Million shares on August 31, 2012 for $1,000,000 pursuant to a twenty-four month agreement with Prodigy Asset Management, LLC.

The Company issued 11.7 Million shares on August 31, 2012 for $585,000 pursuant to a Purchase and Sales agreement with Vencedor Energy Partners for the acquisition of 30 oil and gas well locations in Venango County, Pennsylvania.

On September 20, 2012, the Company and Charles Morgan Securities Inc. ("CMS") mutually agreed to terminate the Investment Banking Agreement between the Company and CMS. The 18 Million shares issued on April 12, 2012 for $900,000 to CMS was memorialized and cancelled.

The Company issued 1,428,571 shares on October 22, 2012 for $5,000 pursuant to a Convertible Promissory Note dated October 19, 2012.

The Company issued 16.2 Million shares on October 26, 2012 for $810,000 pursuant to a twelve month Financial Consulting Services Agreement with Vaquero Private Capital, Inc. (“VPC”) effective as of June 1, 2012. On December 18, 2012, the Company issued a Notice of Termination to VPC for breach of contract by VPC, thus terminating the September 4, 2012 twelve months Financial Consulting Services Agreement. The Company has placed a Stop Order on the transference of 16.2 million shares pending resolution of the breach of contract with VPC.

The Company issued 243,103 shares on October 26, 2012 for $6,077 for interest and penalties to a 3rd party lender.

The Company issued 45,000 shares with an average price of 0.01227 per share on October 26, 2012 for Board Member Compensation Agreements with Mr. Peter Matousek, Mr. Jerry G. Mikolajczyk, and Dr. William D. Spier.

The Company issued 1,162,790 shares on November 12, 2012 for $5,000 pursuant to a Convertible Promissory Note dated October 19, 2012.

The Company issued 45,000 shares for the period ended November 30, 2012 with an average price of $0.012167 per share on December 18, 2012 for Board Member Compensation Agreements with Mr. Peter Matousek, Mr. Jerry G. Mikolajczyk, and Dr. William D. Spier.

The Company issued 54,322 shares on December 18, 2012 for $1,880 for interest and penalties to a 3rd party lender.

The Company issued 423,728 shares on April 17, 2013 for $2,500 pursuant to a Convertible Promissory Note dated October 19, 2012.

The Company issued 45,000 shares for the period ended February 28, 2013 with an average price of $0.0109267 per share on April 30, 2013 for Board Member Compensation Agreements with Mr. Peter Matousek, Mr. Jerry G. Mikolajczyk, and Dr. William D. Spier.

The Company issued 4,081,633 shares on April 30, 2013 for $40,000 pursuant to a reserve equity financing agreement dated May 7, 2013.

The Company issued 2,061,855 shares on April 30, 2013 for $10,000 pursuant to a Convertible Promissory Note dated October 19, 2012.

The Company issued 2,857,143 shares on May 2, 2013 for $12,000 pursuant to a Convertible Promissory Note dated October 26, 2012.

56

The Company issued 2,222,222 shares on May 8, 2013 for $10,000 pursuant to a Convertible Promissory Note dated October 19, 2012.

The Company issued 3,658,537 shares on May 9, 2013 for $15,000 pursuant to a Convertible Promissory Note dated October 26, 2012.

The Company issued 1,700,000 shares on May 10, 2013 for $6,800 pursuant to a Convertible Promissory Note dated October 26, 2012.

The Company issued 4,811,707 shares on May 13, 2013 for $19,728 pursuant to a Convertible Promissory Note dated October 19, 2012.

The Company issued 45,000 shares for the period ended May 31, 2013 with an average price of $0.010333 per share on May 31, 2013 for Board Member Compensation Agreements with Mr. Peter Matousek, Mr. Jerry G. Mikolajczyk, and Dr. William D. Spier.

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

Penny Stock Considerations

Our common stock will be deemed to be "penny stock" as that term is generally defined in the Securities Exchange Act of 1934 to mean equity securities with a price of less than $5.00. Our shares thus will be subject to rules that impose sales practice and disclosure requirements on broker-dealers who engage in certain transactions involving a penny stock.

Under the penny stock regulations, a broker-dealer selling a penny stock to anyone other than an established customer or accredited investor must make a special suitability determination regarding the purchaser and must receive the purchaser's written consent to the transaction prior to the sale, unless the broker-dealer is otherwise exempt. Generally, an individual with a net worth in excess of $1,000,000 or annual income exceeding $100,000 individually or $300,000 together with his or her spouse is considered an accredited investor. In addition, under the penny stock regulations the broker-dealer is required to:

Deliver, prior to any transaction involving a penny stock, a disclosure schedule prepared by the SEC relating to the penny stock market, unless the broker-dealer or the transaction is otherwise exempt;

Disclose commissions payable to the broker-dealer and our registered representatives and current bid and offer quotations for the securities;

Send monthly statements disclosing recent price information pertaining to the penny stock held in a customer's account, the account's value and information regarding the limited market in penny stocks; and

Make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written agreement to the transaction, prior to conducting any penny stock transaction in the customer's account.

Because of these regulations, broker-dealers may encounter difficulties in their attempt to buy or sell shares of our common stock, which may affect the ability of selling stockholders or other holders to sell their shares in the secondary market and have the effect of reducing the level of trading activity in the secondary market. These additional sales practice and disclosure requirements could impede the sale of our common stock even if our common stock becomes publicly traded. In addition, the liquidity for our common stock may be decreased, with a corresponding decrease in the price of our common stock. Our shares are likely to be subject to such penny stock rules for the foreseeable future.

Common Stock Currently Outstanding

As of September 13, 2013, all of our currently outstanding shares consist of 554,723,874 shares of common stock.

Dividends

We have not declared any cash dividends on our common stock since our inception and do not anticipate paying any dividends in the foreseeable future. We plan to retain future earnings, if any, for use in our business. Any decisions as to future payments of dividends will depend on our earnings and financial position and such other facts, as the Board of Directors deems relevant.

Reports to Stockholders

We have filed all necessary periodic reports, and other information with the SEC. We have provided annual reports to our stockholders containing audited financial statements.

57

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

On March 11, 2009, we dismissed the auditing firm of Moore & Associates, Chartered Independent Registered Public Accounting Firm (“Moore and Associates”) and approved the engagement of Weinberg & Baer LLC, Certified Public Accountants. During the fiscal year ended May 31, 2008 and the subsequent interim periods until the change, there were no disagreements with Moore & Associates, on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of Moore & Associates, would have caused them to make reference in connection with their report to the subject matter of the disagreement, and Moore & Associates, Chartered has not advised the Company of any reportable events.

DISCLOSURE OF COMMISSION POSITION OF INDEMNIFICATION FOR SECURITIES ACT LIABILITIES

Our Bylaws, subject to the provisions of the Nevada Revised Statutes, contain provisions which allow the Company to indemnify any person against liabilities and other expenses incurred as the result of defending or administering any pending or anticipated legal issue in connection with service to us if it is determined that person acted in good faith and in a manner which he reasonably believed was in or not opposed to the best interest of the Company. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to our directors, officers and controlling persons, we have been advised that in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable.

EXPERTS

Financial Auditors

Our most current audited consolidated financial statements for the period ending May 31, 2013 from inception are included in this prospectus have been so included in reliance on the report of Weinberg & Baer LLC, 115 Sudbrook Lane, Suite 210, Baltimore, MD 21208, independent public accountant, given on that firm’s authority as experts in auditing and accounting.

Legal Counsel Providing Legal Opinion  

The validity of the issuance of the shares of common stock will be passed upon for the company by Matthew McMurdo, Esq. Counsel has additionally consented to his opinion being included as an exhibit to this filing. Additionally, counsel has consented to being named in the prospectus.   

The legal counsel that passed their opinion on the legality of these securities is:

Matthew McMurdo, Esq.

140 West 57^th Street

New York, NY 10019

WHERE YOU CAN FIND MORE INFORMATION

We have filed with the SEC a registration statement on Form S-1 (File Number _______________) under the Securities Act of 1933 regarding the shares of common stock offered hereby. This prospectus does not contain all of the information found in the registration statement, portions of which are omitted as permitted under the rules and regulations of the SEC. For further information regarding us and the securities offered by this prospectus, please refer to the registration statement, including its exhibits and schedules. Statements made in this prospectus concerning the contents of any contract, agreement or other document filed as an exhibit to the registration statement are summaries of the terms of those documents. The registration statement of which this prospectus forms a part, including its exhibits and schedules, may be inspected and copied at the public reference room maintained by the SEC at 100 F Street, N.E., Washington, D.C. 20549. You may obtain information on the operation of the public reference room by calling the SEC at 1-800-SEC-0330.

The SEC maintains a web site on the Internet at www.sec.gov. Our registration statement and other information that we file with the SEC are available at the SEC's website.

We make available to our stockholders annual reports (on Form 10-K) containing our audited consolidated financial statements and make available quarterly reports (on Form 10-Q) containing our unaudited interim consolidated financial information for the first three fiscal quarters of each of our fiscal years.

If you are a stockholder, you may request a copy of these filings at no cost by contacting us at:

Xun Energy, Inc.

12759 NE Whitaker Way, #C453

Portland, Oregon, 97230, Telephone: (775)-200-0505

58

XUN ENERGY, INC. AND SUBSIDIARIES

(A DEVELOPMENT STAGE COMPANY)

AUDITED CONSOLIDATED FINANCIAL STATEMENTS

May 31, 2013

	Page
Report of Registered Independent Auditors	F2
Consolidated Balance Sheets at May 31, 2013 and May 31, 2012	F3
Consolidated Statement of Operations for the year ended May 31, 2013 and May 31, 2012 and from Inception (December 20, 2007) to May 31, 2013	F4
Consolidated Statements of Stockholders Equity from Inception (December 20, 2007) to May 31, 2013	F5
Consolidated Statements of Cash Flows for the year ended May 31, 2013 and May 31, 2012 and Cumulative since Inception to May 31, 2013	F6
Consolidated Statements Of Cash Flows For The Year Ended May 31, 2013 And May 31, 2012 And Cumulative Since Inception To May 31, 2013 - Supplemental Disclosures With Respect To Cash Flows	F7
Notes to Consolidated Financial Statements as of May 31, 2013	F8

F1

REPORT OF REGISTERED INDEPENDENT AUDITORS

To the Board of Directors and Stockholders

of Xun Energy, Inc.

We have audited the accompanying balance sheets of Xun Energy, Inc. and subsidiaries (a Nevada corporation in the development stage) as of May 31, 2013 and 2012, and the related statements of operations, stockholders’ equity, and cash flows for the years ended May 31, 2013 and 2012, and from inception (December 20, 2007) through May 31, 2013. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with standards of the Public Company Accounting Oversight Board (United States of America). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Xun Energy, Inc. and subsidiaries as of May 31, 2013 and 2012, and the results of its operations and its cash flows for the years ended May 31, 2013 and 2012, and from inception (December 20, 2007) through May 31, 2013, in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 6 to the financial statements, the Company is in the development stage, and has not established any source of revenue to cover its operating costs. As such, it has incurred an operating loss since inception. Further, as of May 31, 2013, the cash resources of the Company were insufficient to meet its planned business objectives. These and other factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plan regarding these matters is also described in Note 6 to the financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Respectfully submitted,

Weinberg & Baer LLC

Baltimore, Maryland

September 2, 2013

F2

XUN ENERGY, INC. AND SUBSIDIARIES

(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED BALANCE SHEETS

As of MAY 31, 2013  and  MAY 31, 2012

(Expressed in U.S. dollars)

ASSETS		2013		2012
Current Assets:
Cash	$	23,400	$	-
Other Current Assets	$	981,000	$	833,274
Total Current Assets	$	1,004,400	$	833,274
Fixed Assets:
Property, Plant and Equipment		942,250		-
Total Property, Plant and Equipment	$	942,250	$	-
Other Assets:
Intangible Assets - Legal and Contractual
Rights - Oil and Gas Leases	$	536,250	$	-
Trademarks	$	-	$	20
Incorporation Costs	$	70	$	170
Total Legal and Contractual	$	536,320	$	190
Total Intangible Assets	$	536,320	$	190
Other Long Term Assets
Bonds	$	-	$	500
Total Other Long Terms Assets	$	-	$	500
Total Other Assets	$	536,320	$	690
Total Assets	$	2,482,970	$	833,964
LIABILITIES AND STOCKHOLDERS' EQUITY
Current  Liabilities:
Accounts payable and accrued expenses	$	2,083,338	$	1,036,669
Loans payable	$	544,746	$	419,649
Convertible Promissory Notes, net of discount	$	393,818	$	-
Total Current Liabilities	$	3,021,901	$	1,456,318
Long Term Liabilities:
Notes - 3 Years and Less	$	-	$	116,374
Notes - 3 Years and Less Related Party	$	-	$	9,436
Total Long Term Liabilities	$	-	$	125,810
Total Liabilities	$	3,021,901	$	1,582,128
Stockholders' Equity (Deficit):
Preferred Stock, par value $0.0001, 50,000,000 shares authorized,
none issued and outstanding	$	-	$	-
Common Stock, par value $0.0001, 5,000,000,000 shares authorized,
385,460,240 and 330,643,500 shares issued and outstanding, respectively	$	38,546	$	33,064
Paid in Capital	$	2,876,422	$	919,881
Accumulated Deficit	$	(3,453,899)	$	(1,701,109)
Total Stockholders' Equity (Deficit)	$	(538,932)	$	(748,164)
Total Liabilities and Stockholders' Equity (Deficit)	$	2,482,970	$	833,964

The accompanying notes are an integral part of these consolidated financial statements.

F3

XUN ENERGY, INC. AND SUBSIDIARIES

(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE YEAR ENDED MAY 31, 2013 AND  May 31, 2012

AND CUMULATIVE FROM INCEPTION (DECEMBER 20, 2007)

(Expressed in U.S. dollars)

		For the year ended May 31, 2013		For the year ended May 31, 2012		December 20, 2007 (Inception) To May 31, 2013
Revenue
Revenue - Operations	$	-	$	-	$	4,637
Total Revenue	$	-	$	-	$	4,637
Cost of Goods Sold	$	-	$	-	$	1,653
Gross Profit	$	-	$	-	$	2,984
Expenses
General and Administrative	$	1,620,461	$	557,330	$	2,893,073
Loss before income taxes	$	(1,620,461)	$	(557,330)	$	(2,890,089)
Other income (expense)	$	(132,330)	$	(428,187)	$	(563,810)
Provision for Income Taxes	$	-	$	-	$	-
Net (Loss)	$	(1,752,791)	$	(985,517)	$	(3,453,899)
Basic and Diluted
(Loss) per Common Shares		A		a
Weighted Average
Number of Common Shares*1		354,002,196		313,943,234
a = Less than ($0.01) per share

The accompanying notes are an integral part of these consolidated financial statements.

F4

XUN ENERGY, INC. AND SUBSIDIARIES

(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

FOR THE PERIOD FROM INCEPTION (DECEMBER 20, 2007) THROUGH MAY 31, 2013

(Expressed in U.S. dollars)

	Common Stock  Shares*1		Common Stock Amount		Additional Paid in Capital		Retained Earnings		Total Equity
Inception December 20, 2007	-	$	-	$	-	$	-	$	-
Common stock issued  to Directors	400,000,000	$	40,000	$	(35,000)	$	-	$	5,000
Common stock issued - Private Placement	110,416,000	$	11,042	$	44,166	$	-	$	55,208
Net loss for the year		$		$		$	(85)	$	(85)
Balance, May 31, 2008	510,416,000	$	51,042	$	9,166	$	(85)	$	60,123
Net loss for the year		$		$		$	(50,170)	$	(50,170)
Balance, May 31, 2009	510,416,000	$	51,042	$	9,166	$	(50,255)	$	9,953
Net loss for the year		$		$		$	(50,744)	$	(50,744)
Balance, May 31, 2010	510,416,000	$	51,042	$	9,166	$	(100,999)	$	(40,791)
Common stock issued  to Directors	75,000	$	8	$	9,243	$	-	$	9,250.00
Common stock issued - Asset Purchase	1,259,000	$	126	$	62,824	$	-	$	62,950.00
Common stock issued	741,000	$	74	$	36,976	$	-	$	37,050.00
Common stock issued  to Consultant	10,000	$	1	$	1,099	$	-	$	1,100.00
Common stock retirement	(200,000,000)	$	(20,000)	$	(105,000)	$	-	$	(125,000.00)
Net loss for the period	0	$	0	$	0	$	(614,592)	$	(614,592.43)
Balance, May 31, 2011	312,501,000	$	31,250	$	14,308	$	(715,592)	$	(670,034)
Common stock issued  to Directors	142,500	$	14	$	7,373	$	-	$	7,387.00
Common stock issued  to Consultant	18,000,000	$	1,800	$	898,200	$	-	$	900,000.00
Net loss for the period						$	(985,517)	$	(985,517)
Balance, May 31, 2012	330,643,500	$	33,064	$	919,881	$	(1,701,109)	$	(748,164)
Common stock issued  to Directors	211,129	$	21	$	5,409	$	-	$	5,430
Common stock issued for Assets	11,700,000	$	1,170	$	583,830	$	-	$	585,000
Common Stock issued to Consultants	40,281,633	$	4,028	$	1,845,972	$	-	$	1,850,000
Common stock issued to Lenders for Interest	1,165,839	$	117	$	11,369	$	-	$	11,486
Common Stock issued to reduce CPN's	19,458,139	$	1,946	$	28,675	$	-	$	30,621
Common Stock Cancelled - Note 3	(18,000,000)	$	(1,800)	$	(898,200)	$	-	$	(900,000)
Discount on CPN's		$		$	379,486	$		$	379,486
Net loss for the period		$		$		$	(1,752,791)	$	(1,752,791)
Balance, May 31, 2013	385,460,240	$	38,546	$	2,876,422	$	(3,453,899)	$	(538,932)
*1 - The number of issued and outstanding shares of common stock has been adjusted to reflect an 80:1 forward split effective August 3, 2010

The accompanying notes are an integral part of these consolidated financial statements.

F5

XUN ENERGY, INC. AND SUBSIDIARIES

(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEAR ENDED MAY 31, 2013 AND MAY 31, 2012

AND CUMULATIVE FROM INCEPTION (DECEMBER 20, 2007)

(Expressed in U.S. dollars)

		For the Year end May  31, 2013			For the Year end May  31, 2012			December 20, 2007 (Inception) to May 31, 2013
Net Cash Provided by (Used in) Operating Activities
Net Income (Loss), Including Portion Attributable to Noncontrolling Interest	$	(1,752,791)	$	(985,517)		$	(3,453,899)
Adjustments to Reconcile Net Income (Loss) to Cash Provided by (Used in) Operating Activities
Adjustments, Noncash Items, to Reconcile Net Income (Loss) to Cash Provided by (Used in) Operating Activities
Share based - compensation	$	5,430	$	7,387		$	23,167
Share based - interest	$	11,486	$	0		$	11,486
Share based - financial services	$	950,000	$	75,000		$	1,025,000
Non-cash amortization - debt discount	$	116,950	$	0		$	116,950
Non-cash - Inventory	$	0	$	283		$	283
Gain on debt extinguishment	$	(30,000)	$	0		$	(30,000)
Corporate Overhead allocated to Fixed Assets	$	(58,500)	$	0		$	(60,822)
Depletion	$	0	$	0		$	835
Other Current Assets, net	$	(147,726)	$	(408,017)		$	(555,743)
Interest Accrued	$	33,703	$	689		$	34,513
Adjustments, Noncash Items, to Reconcile Net Income (Loss) to Cash Provided by (Used in) Operating Activities	$	881,343	$	(324,658)		$	565,669
Increase (Decrease) in Operating Capital
Increase (Decrease) in Operating Assets
Property, Plant and Equipment impairment	$	0	$	18,840		$	18,840
Oil and Gas leases forfeitures	$	0	$	5,583		$	5,583
Oil and Gas leases impairment	$	0	$	399,743		$	399,743
Other Asset Impairment	$	120	$	0		$	120
Reclamation Bonds returned	$	500	$	0		$	500
Increase (Decrease) in Operating Assets	$	620	$	424,166		$	424,786
Increase (Decrease) in Operating Liabilities	$		$			$
Accounts payable and accrued liabilities	$	1,046,669	$	525,861		$	2,083,337
Increase (Decrease) in Operating Liabilities	$	1,046,669	$	525,861		$	2,083,337
Adjustments to Reconcile Net Income (Loss) to Cash Provided by (Used in) Operating Activities	$	1,928,631	$	625,370		$	3,073,793
Net Cash Provided by (Used in) Operating Activities	$	175,841	$	(360,147)		$	(380,107)
Net Cash Provided by (Used in) Investing Activities
Payments to Acquire Property, Plant, and Equipment	$	(835,000)	$	0		$	(852,637)
Payments to Acquire Intangible Assets	$	0	$	(70)		$	(5,773)
Payments to Acquire Other Productive Assets	$	0	$	0		$	(500)
Net Cash Provided by (Used in) Investing Activities	$	(835,000)	$	(70)		$	(858,909)
Net Cash Provided by (Used in) Financing Activities
Proceeds from issuance of common stock	$	0	$	0		$	160,208
Repayments of Short-term Debt	$	(10,500)	$	(35,642)		$	(127,142)
Proceeds from Short-term Debt	$	693,059	$	370,791		$	1,229,350
Net Cash Provided by (Used in) Financing Activities	$	682,559	$	335,149		$	1,262,416
Cash and Cash Equivalents, Period Increase (Decrease)	$	23,400	$	(25,069)		$	23,400
Cash and Cash Equivalents, beginning of period	$	0	$	25,069		$	0
Cash and Cash Equivalents, at end of period	$	23,400	$	0		$	23,400

The accompanying notes are an integral part of these consolidated financial statements.

F6

XUN ENERGY, INC. AND SUBSIDIARIES

(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEAR ENDED MAY 31, 2013 AND MAY 31, 2012

AND CUMULATIVE FROM INCEPTION (DECEMBER 20, 2007)

SUPPLEMENTAL DISCLOSURES WITH RESPECT TO CASH FLOWS

(Expressed in U.S. dollars)

		For the Year end May  31, 2013		For the Year end May  31, 2012		December 20, 2007 (Inception) to May 31, 2013
SUPPLEMENTAL DISCLOSURE WITH RESPECT TO CASH FLOWS:
Cash paid for income taxes	$	0	$	0	$	0
Cash paid for interest	$	0	$	0	$	222
NON-CASH FINANCING AND INVESTING ACTIVITIES:						0
Inventory - non cash capitalization	$	0	$	(283)	$	0
Convertible Promissory Note - non-cash capitalization	$	51,879	$	0	$	51,879
Prepaid Expenses - non-cash capitalization	$	950,000	$	900,000	$	1,850,000
Purchase of Intangible Assets - non-cash capitalization	$	585,000	$	0	$	585,000
Debt Discount - non cash capitalization	$	327,607	$	0	$	327,607
Common Stock issued for repayment of loans	$	82,500	$	0	$	82,500

The accompanying notes are an integral part of these consolidated financial statements.

F7

XUN ENERGY, INC. AND SUBSIDIARIES

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MAY 31, 2013

NOTE 1: ORGANIZATION, CONSOLIDATION AND PRESENTATION OF FINANCIAL STATEMENTS

NATURE OF BUSINESS

The Company is engaged primarily in the acquisition, work-over development, and production of oil and gas properties. Such activities are concentrated in North American onshore, primarily in the United States in the State of Pennsylvania. The Company plans to acquire producing or near producing oil and gas properties that will provide cash flow and an upside for future development. We will be scouting for additional properties in and around Texas, Oklahoma, Pennsylvania, Kansas and in Canada.

The Company was incorporated under the laws of the state of Nevada on December 20, 2007 as Real Value Estates, Inc. On July 20, 2010, the Company changed its name to Xun Energy, Inc. and on February 7, 2011, the Company established two subsidiaries in the State of Kentucky.  The Company acquired three oil and gas leases in the State of Kentucky on February 28, 2011 and began production of oil on one of its leases in March 2011.

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

On August 31, 2012, the Company acquired 30 oil and gas well locations in Venango County, Pennsylvania with an option to acquire an additional 15 oil and gas locations. Work commenced on the first 5 oil well locations on the Rice lease in Venango, County, Pennsylvania, USA in March 2013 and as of May 31, 2013 the roads and drill pads were under constructed.

OPERATING COMPANY

On April 18, 2011, the Company filed a Form 8-K with the United States Securities and Exchange Commission (“SEC”) disclosing that the Company is no longer considered a shell and has completed a workover program on one of its wells. Subsequent to filing of the Form 8-K with the SEC, the Company has filed its required four quarterly filings to "cure" itself of  "shell status". The Company operations are extensively involved in oil and gas operations even though the Company has had limited revenue from the oil and gas operations.

NOTE  2: SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES

BASIS OF ACCOUNTING

Our consolidated financial statements include the accounts of all of our wholly-owned subsidiaries and we have eliminated all significant intercompany balances and transactions in consolidation.

FISCAL YEAR

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

PRINCIPLES OF CONSOLIDATION

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

INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS)

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

F8

EARNINGS PER SHARE

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

CASH EQUIVALENTS

The Company may, from time to time, invest cash in excess of our immediate operating requirements in short-term time deposits and money market instruments generally with original maturities at the date of purchase of three months or less. The Company considers all liquid investments with maturity of three months or less when purchased to be cash equivalents.

USE OF ESTIMATES -

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual amounts could differ from these estimates, and changes in these estimates are recorded when known. Significant items subject to such estimates and assumptions include, but are not limited to, the following:

·

Estimates of proved reserves and related estimates of the present value of future net revenues;

·

Carrying value of oil and gas properties;

·

Estimates of the fair value of reporting units and related assessment of goodwill for impairment;

·

Income taxes;

·

Asset retirement obligations;

·

Legal contingencies and environmental risks and exposures.

PROPERTY AND EQUIPMENT

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

All costs incidental to the acquisition, exploration, and development of oil and gas properties, including costs of undeveloped leasehold, and leasehold equipment, are capitalized.  Please refer to INTANGIBLE ASSETS - LEGAL AND CONTRACTUAL - RIGHTS in this NOTE for further detail.

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

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

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

Capitalized costs are depleted by an equivalent unit-of-production cost method, converting gas to oil at the ratio of six thousand cubic feet of gas to one barrel of oil. Depletion is calculated using the capitalized costs, including estimated asset retirement costs, plus the estimated future expenditures (based on current costs) to be incurred in developing or working over an oil or gas well, proved reserves, net of estimated salvage values.

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

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

F9 

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

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

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

The Schedule of  Plant, Property and Equipment details are as follows:

Schedule of  Plant, Property and Equipment
Description		May 31, 2013		May 31, 2012
Plant - Oil Wells: Beginning of year	$	0	$	0
Work in Progress-Intangible	$	694,035	$	0
Work in Progress-Tangible	$	140,965	$	0
Rights (leases)	$	107,250	$	0
Subtotal	$	942,250	$	0
Depletion	$	0	$	0
Depreciation	$	0	$	0
Net Plant - Oil Wells: End of year	$	942,250	$	0

OIL AND GAS EXPLORATION

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

OIL AND GAS DEVELOPMENT - OFFSET DRILLING

The Company's development - offset drilling program consists of drilling new wells within a proven and producing property. Well locations are selected by geologists based on known and historical data from producing oil and gas wells within the property or adjoining properties. All costs of drilling a new offset well are capitalized and amortized (depletion) on a per-unit of barrel equivalent of production.

OIL AND GAS DEVELOPMENT - WORKOVER PROGRAM

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

OIL AND GAS RESERVES

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

 INTANGIBLE ASSETS - LEGAL AND CONTRACTUAL - RIGHTS

The Company capitalizes the expenses incurred for acquiring oil and gas leases. The oil and gas leases are contracts between

F10

mineral owner, otherwise known as the lessor and the Company or working interest owner, otherwise known as the lessee in

which the lessor grants the lessee the rights to explore, drill and produce oil, gas and other minerals for a specified primary term and thereafter as long as oil, gas, or other minerals are being produced in paying quantities. This lease gives the lessee a working interest. The oil and gas lease is granted in exchange for royalty payments to the lessor.

The capitalized costs include but are not limited to: the acquisition cost of the oil and gas leases, legal, travel, consultant studies, reserve reports, financing charges including an overhead allocation on closing. Many of the oil and gas leases have production covenants, which if not complied with during the term of the lease, the Company may forfeit the oil and gas lease. On a yearly basis, the oil and gas leases are reviewed for expiry and or non performance by the Company of any of the covenants in the oil and gas leases.

The Schedule of Oil and Gas Rights are as follows:

Schedule of Oil and Gas Rights
Description		May 31, 2013		May 31, 2012
Oil and Gas Leases: Beginning of year	$	0	$	5,583
Acquisitions/Work in Progress	$	643,500	$	399,743
Subtotal	$	643,500	$	405,326
Capitalized as Fixed Assets		(107,250)		0
Forfeitures during the period	$	0	$	(5,583)
Impairments during the period	$	0	$	(399,743)
Oil and Gas Leases: End of year	$	536,250	$	0

OIL AND GAS REVENUE RECOGNITION

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

GENERAL AND ADMINISTRATIVE EXPENSES

General and administrative expenses are reported net of amounts reimbursed by working interest owners of the oil and gas properties operated by the Company.

ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying value of the Company’s financial instruments, consisting of accounts payable and accrued liabilities approximate their fair value due to the short-term maturity of such instruments. Unless otherwise noted, it is management’s opinion that the Company is not exposed to significant interest, currency, or credit risks arising from these financial statements.

INCOME TAX POLICY

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

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

NOTE 3: OTHER CURRENT ASSETS

The Other Current Assets account consists of inventory and prepaid expenses. During the fiscal year, the Company entered into two financial advisory contracts to provide consulting services in connection with the Company’s business affairs and assist the Company in raising capital. One consulting contract is with Vaquero Private Capital, Inc. (VPC) is for $810,000 for a 12 month period effective June 1, 2012.

F11

As consideration for the services to be provided by VPC, the Company paid VPC 16.2 Million shares of the Company on execution of the agreement. The Company charged $810,000 as a prepaid financial services expense and is amortizing the prepaid expense over 12 months. Refer to additional information on this agreement in Note 21: TERMINATION OF FINANCIAL SERVICES AGREEMENT.

The second consulting contract is with Prodigy Asset Management, Inc. (PAM) is for $1,000,000 for a 24 month period effective August 31, 2012. As one of the considerations for the services to be provided by PAM, the Company paid PAM 20 Million shares of the Company on execution of the agreement. The Company charged $1,000,000 as a prepaid financial services expense and is amortizing the prepaid expense over 24 months.

For the fiscal year ending May 31, 2012, the Company entered into a Investment Banking and Advisory (IBA) agreement with Charles Morgan Securities, Inc. (CMS). As one of the considerations for the services to be provided by CMS, the Company paid CMS 18 Million shares of the Company on execution of the agreement. The Company charged $900,000 as a prepaid financial services expense and is amortizing the prepaid expense over 24 months. On September 20, 2012, the Company and CMS mutually agreed to terminate the IBA agreement between the Company and CMS.  The Company and CMS agreed that the IBA agreement and all rights, obligations, interest, claims and causes of action pursuant thereto shall automatically be canceled, terminated, released and extinguished. As a condition of the Termination Agreement, the Company is obligated to pay $4,000 for legal fees incurred by CMS. The Company issued 18 million common stock (Shares) to CMS of which 7.5 million Shares were released to CMS. These shares are being held as collateral until the Company's pays the $4,000 of legal fees incurred per The Termination Agreement.

On March 18, 2013, the Company entered into an Investor Relations and Marketing Agreement (IRMA) for $351,000 with a third party payable in cash. The IRMA requires the fees to be pre-paid prior to services rendered. The Company has been invoiced for the pre-payment and recorded the invoice in our accounts payable and recorded the expense as a prepaid charge. The Company may terminate the IRMA without penalties or damages.

The Schedule of Other Current Assets are as follows:

Schedule of Other Current Assets
Other Current Asset		May 31, 2013		May 31, 2012
Other Current Assets, Beginning Balance	$	833,274	$	0
Prepaid Legal	$	(3,274)	$	8,274
Prepaid Financial Services	$	1,336,000	$	900,000
Less: Amortization		(1,185,000)		(75,000)
Other Current Assets, Balance end of period	$	981,000	$	833,274

NOTE 4: OTHER ASSETS

The Schedule of Other Assets are as follows:

Schedule of Other Assets
Description - Other Assets		May 31, 2013		May 31, 2012
Rights - Oil and Gas Leases	$	536,250	$	0
Trademarks	$	0	$	20
Incorporation Costs	$	70	$	170
Bonds	$	0	$	500
Total Other Assets	$	536,320	$	690

NOTE 5. ADVERTISING

The Company’s policy regarding advertising is to expense advertising when incurred. The Company had notincurred any advertising expense as of May 31, 2013.

F12

NOTE 6. GOING CONCERN

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company has net losses for the period from inception (December 20, 2007) to May 31, 2013. This condition raises substantial doubt about the Company’s ability to continue as a going concern. The Company’s continuation as a going concern is dependent on its ability to meet its obligations, to obtain additional financing as may be required and ultimately to attain profitability. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Management is planning to raise additional funds through debt or equity offerings. There is no guarantee that the Company will be successful in these efforts. There is no guarantee that the Company will be successful generating profits from its oil and gas operations. There is no guarantee that the Company will be able to drawdown on the $15 Million Reserve Equity Financing Agreement with AGS Capital Group, LLC.

NOTE 7: RELATED PARTY TRANSACTIONS

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

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

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

On March 28, 2011, the Company entered into Redemption Agreement with Peter Matousek, the Company’s president and director, which provides in part for the Company to redeem from Mr. Matousek 140million shares of the Company’s common stock at a price of $87,500 or $0.000625 per share. On May 31, 2011, Mr. Matousek assigned the Note Payable to Comtax Services, Inc.

Prior to June 1, 2011, our President, CEO and Director, Jerry G. Mikolajczyk, performed services for the Company on a consulting contract through a consulting agency, Comtax Services, Inc. (Comtax). From April 1, 2010 to February 28, 2011, Comtax charged a fixed monthly fee of $2,500, a minimum of 10 hours per month for Mr. Mikolajczyk, an aggregate of $27,500 for the 11 months for Mr. Mikolajczyk’s services to the Company. For the period March 1, 2011 to May 31, 2011, Comtax charged the Company an aggregate of $387,275 (1,106.5 hours) for the services of Mr. Mikolajczyk plus $9,656.50 in travel expenses Mr. Mikolajczyk incurred on behalf of the Company. On October 31, 2012, Comtax assigned the trade payables to Mr. Mikolajczyk d/b/a/ Lighthouse Investments, as unsecured Promissory Notes. The Promissory Notes, an aggregate of $398,248.50, are non-interest bearing. Mr. Mikolajczyk was an officer of Comtax until his resignation on May 31, 2011 and terminated his consulting contract with Comtax as of May 31, 2011 prior to accepting his executive and director positions with the Company.

The Company issued an aggregate of 142,500 shares for the period ending May 31, 2012 with an average price of $0.0518 per share to the Executive and Board pursuant to a Management and Financial Service Agreement with Mr. Peter Matousek and a Board Member Compensation Agreement with Mr. Peter Matousek, Mr. Donald Lynch, Mr. Kevin M. Grapes, Mr. Jerry G. Mikolajczyk, and Dr. William D. Spier, refer to NOTE 17: EXECUTIVE AND BOARD COMPENSATION for additional detail.

The Company issued an aggregate of 180,000 shares for the period ending May 31, 2013 with an average price of $0.01846 per share to the Board pursuant to Board Member Compensation Agreements with Mr. Peter Matousek, Mr. Jerry G. Mikolajczyk, and Dr. William D. Spier, refer to NOTE 17: EXECUTIVE AND BOARD COMPENSATION for additional detail.

On May 1, 2013, President, CEO and Director, Jerry G. Mikolajczyk, loaned to the Company $20,000 to be applied against the purchase of Series B Preferred Shares. The loan is unsecured and non-interest bearing.

NOTE 8.  INCOME TAXES

The Company uses the liability method, where deferred tax assets and liabilities are determined based on the expected future tax consequences of temporary differences between the carrying amounts of assets and liabilities for financial and income tax reporting purposes. During each fiscal year from 2008 thru 2013, the Company incurred net losses and, therefore, has no tax liability. The net deferred tax asset of approximately $1,208,865 (assuming a 35% effective tax rate) generated by the loss carry-forward has been fully reserved as of May 31, 2013.

F13

The Company files income tax returns in the United States, the states of Kentucky, Florida and Pennsylvania.

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

NOTE 9. NET OPERATING LOSSES

As of May 31, 2013, the Company has a net operating loss carry-forward of approximately $3,453,900, which will expire 20 years from the date the loss was incurred.

NOTE 10: STOCKHOLDERS’ EQUITY

AUTHORIZED

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

On July 20, 2010, the Company filed a Certificate of Amendment to the Company’s certificate of incorporation with the Nevada Secretary of State, which increased the Company’s authorization to issue 5,000,000,000 shares of $0.0001 par value common stock, refer to NOTE 15: CORPORATE ACTIONS.  

On November 30, 2011 and January 12, 2013, the Board of Directors of the Company approved the allocation of 4,000,000 of the 50,000,000 authorized Preferred Shares of the Company as Series A Preferred Shares with the following rights:

·

Convertible to one hundred (100) common shares of the Company for each one (1) Series A Preferred Share

·

Voting rights equal to one hundred (100) votes for each Series A Preferred Share

The consideration for one (1) Series A Preferred Share is set at $0.50.

On April 29, 2013, the Board of Directors of the Company approved  the authorization of seven hundred fifty thousand (750,000) Preferred Shares, designated as Series B Preferred Shares (Series B Shares), with a value of fifty cents ($0.50) per Series B Preferred Share, each with the following rights:

·

May be converted by the holder into Company common stock. The conversion ratio is such that if the full 750,000 Series B Shares are issued, convert into Company common shares representing 70% of the fully diluted outstanding common shares outstanding after the conversion (which includes all common shares outstanding plus all common shares potentially issuable upon the conversion of all derivative securities not held by the holder).

·

If the full 750,000 Series B Shares are not issued, the issued Series B Shares divided by 750,000 multiplied by 70% will represent the percentage of the fully diluted outstanding common shares outstanding after the conversion (which includes all common shares outstanding plus all common shares potentially issuable upon the conversion of all derivative securities not held by the holder). For example: 500,000 Series B Shares issued  will result in the holder having 46.67% (500,000/750,000 X 70% = 46.67%) of the fully diluted outstanding common shares.

·

The holder of Series B Shares may cast the number of votes at a shareholders meeting or by written consent that equals the number of common shares into which the Series B Shares are convertible on the record date for the shareholder action.

·

In the event the Board of Directors declares a dividend payable to Company common shareholders, the holders of Series B Shares will receive the dividend that would be payable if the Series B Shares were converted into Company common shares prior to the dividend.

·

In the event of a liquidation of the Company, the holders of Series B Shares will receive a preferential distribution of $0.001 per share, and will share in the distribution as if the Series B Shares had been converted into common shares.

The Series B Preferred Shares would be offered by the discretion of the President to existing shareholders holding more than 10% of the issued and outstanding shares of the Company or to directors of the Company. The subscribers for the Series B Shares will agree to execute a Series B Shares Unanimous Shareholders Agreement which will include right of first refusal to buy or sell the Series B Shares between the Series B Share holders or directors of the Company.

ISSUED AND OUTSTANDING

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

F14

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

The Company issued 1,259,000 common shares on November 30, 2010 for $62,950 for Accounts Receivable assignment.

The Company issued 741,000 common shares on November 30, 2010 for $37,050 cash in a negotiated transaction with an investor to fund the ongoing operations of the Company.

The Company issued 10,000 common shares on February 28, 2011 for $1,100 pursuant to an Oil and Gas Field Operations Services agreement with the Company.

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

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

The Company issued 18 Million shares on April 12, 2012 for $900,000 pursuant to a twenty-four month agreement with Charles Morgan Securities Inc. On September 20, 2012, the Company and CMS mutually agreed to terminate the IBA agreement between the Company and CMS and the 18 Million shares were cancelled.

The Company authorized and approved an aggregate of 136,129 shares for the period ended May 31, 2012 with an average price of $0.0333 per share to the Executive and Board pursuant to Board Member Compensation Agreements with Mr. Peter Matousek, Mr. Donald Lynch, Mr. Jerry G. Mikolajczyk, Mr. Kevin M. Grapes and Dr. William D. Spier, refer to NOTE 17: EXECUTIVE AND BOARD COMPENSATION for additional detail. The Company issued 105,000 of the 136,129 shares to the Board as of May 31, 2012.  The balance,  31,129 shares, cost of $2,106 for the period March 1, 2012 to May 31, 2012, were issued to the Board on June 25, 2012.

The Company issued 20 Million shares on August 31, 2012 for $1,000,000 pursuant to a twenty-four month agreement with Prodigy Asset Management, LLC.

The Company issued 11.7 Million shares on August 31, 2012 for $585,000 pursuant to a Purchase and Sales agreement with Vencedor Energy Partners for the acquisition of 30 oil and gas well locations in Venango County, Pennsylvania.

The Company issued 1,428,571 shares on October 22, 2012 for $5,000 pursuant to a Convertible Promissory Note dated October 19, 2012.

The Company issued 16.2 Million shares on October 26, 2012 for $810,000 pursuant to a twelve month Financial Consulting Services Agreement with Vaquero Private Capital, Inc. effective as of June 1, 2012.

The Company issued 243,103 shares on October 26, 2012 for $6,077 for interest and penalties to a 3rd party lender.

The Company authorized and approved 45,000 shares for the period ended August 31, 2012 with an average price of $0.04033 per share to the Board pursuant to Board Member Compensation Agreements with Mr. Jerry G. Mikolajczyk, Mr. Peter Matousek and Dr. William D. Spier, refer to NOTE 17: EXECUTIVE AND BOARD COMPENSATION for additional detail. The 45,000 shares were issued to the Board on October 26, 2012.

The Company issued 1,162,790 shares on November 12, 2012 for $5,000 pursuant to a Convertible Promissory Note dated October 19, 2012.

The Company authorized and approved 45,000 shares for the period ended November 30, 2012 with an average price of $0.012167 per share to the Board pursuant to Board Member Compensation Agreements with Mr. Jerry G. Mikolajczyk, Mr. Peter Matousek and Dr. William D. Spier, refer to NOTE 17: EXECUTIVE AND BOARD COMPENSATION for additional detail. The 45,000 shares were issued to the Board on December 18, 2012.

The Company issued 54,322 shares on December 18, 2012 for $1,880 for interest and penalties to a 3rd party lender.

F15

The Company issued 423,728 shares on April 17, 2013 for $2,500 pursuant to the conversion of a Convertible Promissory Note dated October 19, 2012.

The Company issued 45,000 shares on April 30, 2013 for the period ended February 28, 2013 with an average price of $0.0109267 per share for Board Member Compensation Agreements with Mr. Peter Matousek, Mr. Jerry G. Mikolajczyk, and Dr. William D. Spier.

The Company issued 4,081,633 shares on April 30, 2013 for $40,000 as incentive to enter into a reserve equity financing agreement dated May 7, 2013.

The Company issued 2,061,855 shares on April 30, 2013 for $10,000 pursuant to the conversion of a Convertible Promissory Note dated October 19, 2012.

The Company issued 2,857,143 shares on May 2, 2013 for $12,000 pursuant to the conversion of a Convertible Promissory Note dated October 26, 2012.

The Company issued 2,222,222 shares on May 8, 2013 for $10,000 pursuant to the conversion of a Convertible Promissory Note dated October 19, 2012.

The Company issued 3,658,537 shares on May 9, 2013 for $15,000 pursuant to the conversion of a Convertible Promissory Note dated October 26, 2012.

The Company issued 1,700,000 shares on May 10, 2013 for $6,800 including $1,300 for interest pursuant to the conversion of a Convertible Promissory Note dated October 26, 2012.

The Company issued 4,811,707 shares on May 13, 2013 for $19,728 including $2,228 for interest pursuant to the conversion of a Convertible Promissory Note dated October 19, 2012.

The Company issued 45,000 shares on May 31, 2013 for the period ended May 31, 2013 with an average price of $0.010333 per share for Board Member Compensation Agreements with Mr. Peter Matousek, Mr. Jerry G. Mikolajczyk, and Dr. William D. Spier.

NOTE 11: RECENT ACCOUNTING PRONOUNCEMENTS

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

NOTE 12: CHANGE OF CONTROL

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

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

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

F16

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

On May 31, 2011, Mr. Jerry G. Mikolajczyk, the Company's President, CEO and Director, acquired 180,000,000 common stock shares of the Company from Mr. Peter Matousek, former President, CEO and Director of the Company. The acquisition by Mr. Mikolajczyk gave him control of 57.6% of the issued and outstanding shares of the Company. Subsequent to May 31, 2011, Mr. Mikolajczyk acquired additional shares directly and indirectly in the Company. As of Mr. Mikolajczyk’s last Form 4 filed with the SEC on August 27, 2012, Mr. Mikolajczyk is beneficial owner of 188,534,421 (48.92%) of the issued and outstanding shares of the Company.

NOTE 13: LOANS PAYABLE

SHORT TERM LOANS

The Company has loans in the amount of $398,249, non-interest bearing and unsecured, with our President, CEO and Director, Jerry G. Mikolajczyk d/b/a Lighthouse Investments.

The Company has a loan in the amount of $20,000, is non-interest bearing and unsecured, with our President, CEO and Director, Jerry G. Mikolajczyk.

Our President, CEO and Director, Jerry G. Mikolajczyk, acquired 100% interest in Womack Holdings, Inc. on July 15, 2011. Womack Holdings, Inc. holds a unsecured Note Payable by the Company. The Note Payable is in the amount of $9,375. The principal, $9,375, will accrue interest at the rate of 0.55% (IRS Short Term AFR – April 2011) per annum, until March 31, 2014 (the “Maturity Date”). Principal plus all accrued interest will be due on the Maturity Date. The Company accrued $112 interest as of May 31, 2013.

On March 28, 2011, the Company entered into Redemption Agreement with Peter Matousek, the Company’s president and director, which provides in part for the Company to redeem from Mr. Matousek a total of 140 million shares of the Company’s common stock at a price of $87,500 or $0.000625 per share. On May 31, 2011, Mr. Matousek assigned the unsecured Note Payable to Comtax Services, Inc. The terms of the stock redemption, agreement is a non-callable 3-year note. The principal will accrue interest at the rate of 0.55% (IRS Short Term AFR – April 2011) per annum, until March 31, 2014 (the “Maturity Date”). Principal plus all accrued interest will be due on the Maturity Date. The Company accrued $1048 interest as of May 31, 2013.

On March 28, 2011, the Company entered into redemption agreements with four shareholders, which in total provided for the redemption of 60 million shares of the Company’s common stock. The purchase price for the 60 million totaled $37,500 or $0.000625 per share. The terms of the stock redemption, agreement is a non-callable 3-year note. The principal will accrue interest at the rate of 0.55% (IRS Short Term AFR – April 2011) per annum, until March 31, 2014 (the “Maturity Date”). Principal plus all accrued interest will be due on the Maturity Date. The Company accrued $337 interest on the three Promissory Notes (face value - $28,125) as of May 31, 2013.

CONVERTIBLE PROMISSORY NOTES (CPN)

CPN#3 - The Company issued an unsecured 9 month 8% Convertible Promissory Note (CPN#3) on December 6, 2012 due on September 10, 2013 for $37,500. The principal and accrued interest is convertible into shares of common stock at the discretion of the note holder at a price equal to 55% of the Market Price. "Market Price" means the average of the lowest three (3) Trading Prices for the Common Stock during the ten (10) Trading Day period ending on the latest complete Trading Day prior to the Conversion Date. "Trading Price" means, for any security as of any date, the closing bid price on the Over-the-Counter Bulletin Board or applicable trading market as reported by a reliable reporting service designated by the note holder. The note holder is limited to owning 4.99% of the Company’s issued and outstanding shares. Default interest is 22% per annum should the Company default on the CPN#3. The Company may prepay CPN#3 at any time for the period beginning on the date of the CPN#3 and ending on the date which is ninety (90) days following the date of the CPN#3, the CPN#3 may be prepaid by the Company upon payment to the note holder of an amount equal to the outstanding principal amount of the CPN#3 multiplied by 125% together with accrued and unpaid interest thereon. At any time during the period beginning on the ninety (91) day from the date of the CPN#3 and ending on the date which is one hundred twenty (120) days following the date of CPN#3, the Company may prepay the CPN#3 to the note holder upon payment of an amount equal to the outstanding principal amount of the CPN#3 multiplied by 135% together with accrued and unpaid interest thereon. At any time during the period beginning on the date which is one hundred twenty one (121) days from the date of the CPN#3 and ending on one hundred eighty (180) days following the date of this CPN#3, the Company may prepay the CPN#3 to the note holder upon payment of an amount equal to the outstanding principal amount of the CPN#3 multiplied by 145% together with accrued and unpaid interest thereon. After the expiration of one hundred eighty (180) days following the date of the CPN#3, the Company shall have no right of prepayment. On January 9, 2013, CPN#3 was amended to have a floor price of $0.00005. As of May 31, 2013, the Company accrued interest of $690.

F17

CPN#4  - The Company has loans in the amount of $231,160, non-interest bearing, with Comtax Services, Inc. The loans from Comtax Services, Inc. have been provided to the Company as working capital.  On January 12, 2013 the Company amended the Promissory Notes with Comtax Services, Inc. and issued an unsecured one year 10% Convertible Promissory Note (CPN#4) effective October 19, 2012 due on October 18, 2013 for $231,160. The principal and accrued interest is convertible up to 509,520 Series A Preferred Shares at a strike price of $0.50 per Series A Preferred Share with the following rights:

1.

Convertible to one hundred (100) common shares of the Company for each one (1) Series A Preferred Share; and

2.

Voting rights equal to one hundred (100) votes for each Series A Preferred Share.

On April 30, 2013, Comtax Services, Inc. assigned $75,000 of the principal of CPN#4 reducing the Company's obligations for CPN#4 to $156,160. As of May 31, 2013, the Company accrued interest of $16,262.

CPN#5  - The Company has a loans in the amount of $62,000, non-interest bearing, with Comtax Services, Inc. The loans from Comtax Services, Inc. have been provided to the Company as working capital.  On January 12, 2013 the Company amended the Promissory Notes for $62,000 with Comtax Services, Inc. and issued an unsecured one year 10% Convertible Promissory Note (CPN#5) effective December 1, 2012 due on November 30, 2013  for $62,000. The principal and accrued interest is convertible up to 136,400 Series A Preferred Shares at a strike price of $0.50 per Series A Preferred Share with the following rights:  

1.

Convertible to one hundred (100) common shares of the Company for each one (1) Series A Preferred Share; and

2.

Voting rights equal to one hundred (100) votes for each Series A Preferred Share.

As of May 31, 2013, the Company accrued interest of $3,092.

CPN#6 - On February 14, 2012, the Company issued a Promissory Note for $100,000 and is carrying a contingent liability of $30,000, with Altmann Revocable Living Trust, Rlt. (ALRT), totaling $130,000 which became due December 31, 2012 with interest calculated at 8% per annum. The Company amended the $100,000 Promissory Note plus accrued interest of $7,036 to an unsecured one year 8% Convertible Promissory Note (CPN#6) effective January 1, 2013 due on January 1, 2014 for $100,000 with accrued interest of $7,036. The principal and accrued interest is convertible into shares of common stock at the discretion of the note holder at the Conversion Price which shall be the greater of: (i) the Variable Conversion Price and (ii) the Fixed Conversion Price (subject to equitable adjustments for stock splits, stock dividends or rights offerings by the Company relating to the Company's securities or the securities of any subsidiary of the Company, combinations, recapitalization, reclassifications, extraordinary distributions and similar events). The "Variable Conversion Price is 80% of the Market Price. "Market Price" means the average of the Closing Prices (as defined below) for the Common Stock during the five (5) Trading Day period ending one Trading Day prior to the date the Conversion Notice is sent by the Holder to the Company via facsimile (the "Conversion Date"). "Closing Price" means, for any security as of any date, the closing price on the OTCQB (or such other OTC Markets or OTC Tiers, stock markets or stock exchange upon which the Company’s common stock is listed or traded). The note holder is limited to owning 4.99% of the Company’s issued and outstanding shares. The Company may prepay CPN#6 in advance in full or in part at any time and from time to time without premium or penalty. "Fixed Conversion Price" shall mean $0.0001. As of May 31, 2013, the Company accrued interest of $10,345.

CPN#7 - On June 25, 2012, the Company issued an unsecured Promissory Note for $25,000 to a 3rd party due on July 16, 2012 with a default penalty of $2,500, default interest at 20% per annum plus late fees. The Promissory Note was renegotiated with a due date of December 31, 2012. The Company paid the 3rd party $7,958.04 in interest, default fees and late fees for the period June 25, 2012 and December 31, 2012. The Company amended the $25,000 Promissory Note plus default penalty of  $2,500 to an unsecured one year 20% Convertible Promissory Note (CPN#7) effective January 1, 2013 due on August 1, 2013. The principal and accrued interest is convertible into shares of common stock at the discretion of the note holder at the Conversion Price which shall be the greater of: (i) the Variable Conversion Price and (ii) the Fixed Conversion Price (subject to equitable adjustments for stock splits, stock dividends or rights offerings by the Company relating to the Company's securities or the securities of any subsidiary of the Company, combinations, recapitalization, reclassifications, extraordinary distributions and similar events). The "Variable Conversion Price is 80% of the Market Price. "Market Price" means the average of the Closing Prices (as defined below) for the Common Stock during the five (5) Trading Day period ending one Trading Day prior to the date the Conversion Notice is sent by the Holder to the Company via facsimile (the "Conversion Date"). "Closing Price" means, for any security as of any date, the closing price on the OTCQB (or such other OTC Markets or OTC Tiers, stock markets or stock exchange upon which the Company’s common stock is listed or traded). The note holder is limited to owning 4.99% of the Company’s issued and outstanding shares. The Company may prepay CPN#7 in advance in full or in part at any time and from time to time without premium or penalty. "Fixed Conversion Price" shall mean $0.0001. As of May 31, 2013, the Company accrued interest of $2,275.

CPN#8 - On April 30, 2013, the Company issued an amended unsecured one year 8% Convertible Promissory Note (CPN#8) for $75,000 previously issued on October 19, 2012, assigned from CPN#4, due on October 19, 2013. The principal and accrued interest is convertible into shares of common stock at the discretion of the note holder. The Conversion Price (the “Conversion Price”) shall be the greater of: (i) the Variable Conversion Price (as defined herein) and (ii) the Fixed Conversion Price (subject to equitable adjustments for stock splits, stock dividends or rights offerings by the Company relating to the Company’s securities or the securities of any subsidiary of the Company, combinations, recapitalization, reclassifications, extraordinary distributions and similar events).

F18

The “Variable Conversion Price” shall mean % multiplied by the Market Price (as defined herein) (representing a discount rate of 50%). “Market Price” means the average of the lowest three (3) Closing Prices (as defined below) for the Common Stock during the five (5) Trading Day period ending one Trading Day prior to the date the Conversion Notice is sent by the Holder to the Company via facsimile (the “Conversion Date”).  “Closing Price” means, for any security as of any date, the closing price on the Over-the-Counter Bulletin Board (the “OTCBB”) as reported by a reliable reporting service (“Reporting Service”) mutually acceptable to Company and Holder, or, if the OTCBB is not the principal trading market for such security, the closing price of such security on the principal securities exchange or trading market where such security is listed or traded or, if no closing price of such security is available in any of the foregoing manners, the average of the closing prices of any market makers for such security that are listed in the “pink sheets” by the National Quotation Bureau, Inc.  If the Closing Price cannot be calculated for such security on such date in the manner provided above, the Trading Price shall be the fair market value as mutually determined by the Company and the holders of a majority in interest of the Notes being converted for which the calculation of the Closing Price is required in order to determine the Conversion Price of such Notes.  “Trading Day” shall mean any day on which the Common Stock is traded for any period on the OTCBB, or on the principal securities exchange or other securities market on which the Common Stock is then being traded. The “Fixed Conversion Price” shall mean $0.0001. The Company shall have the right, exercisable on not less than three (3) Trading Days prior written notice to the Holder of the Note to prepay the outstanding Note (principal and accrued interest), in full, of an amount in cash (the “Prepayment Amount”) equal to 150%, multiplied by the sum of: (a) the then outstanding principal amount of CPN#8  plus (b) accrued and unpaid interest on the unpaid principal amount of CPN#8 to the Prepayment Date plus (c) Default Interest, if any, on the amounts referred to in clauses (a) and (b). As of May 31, 2013, the Company accrued interest of $510.

CPN#9 - The Company issued an unsecured 9 month 8% Convertible Promissory Note (CPN#9) on May 2, 2013 due on February 6, 2014 for $32,500. The principal and accrued interest is convertible into shares of common stock at the discretion of the note holder.  The Conversion Price shall be the greater of: (i) the Variable Conversion Price (as defined herein) and (ii) the Fixed Conversion Price (subject, in each case, to equitable adjustments for stock splits, stock dividends or rights offerings by the Company relating to the Company’s securities or the securities of any subsidiary of the Company, combinations, recapitalization, reclassifications, extraordinary distributions and similar events). The "Variable Conversion Price" shall mean 55% multiplied by the Market Price (representing a discount rate of 45%). "Market Price" means the average of the lowest three (3) Trading Prices for the Common Stock during the ten (10) Trading Day period ending on the latest complete Trading Day prior to the Conversion Date. "Trading Price" means, for any security as of any date, the closing bid price on the Over-the-Counter Bulletin Board or applicable trading market as reported by a reliable reporting service designated by the note holder. The note holder is limited to owning 4.99% of the Company’s issued and outstanding shares. Default interest is 22% per annum should the Company default on the CPN#9. The Company may prepay CPN#9 at any time for the period beginning on the date of the CPN#9 and ending on the date which is ninety (90) days following the date of the CPN#9, the CPN#9 may be prepaid by the Company upon payment to the note holder of an amount equal to the outstanding principal amount of the CPN#9 multiplied by 125% together with accrued and unpaid interest thereon. At any time during the period beginning on the ninety (91) day from the date of the CPN#9 and ending on the date which is one hundred twenty (120) days following the date of CPN#9, the Company may prepay the CPN#9 to the note holder upon payment of an amount equal to the outstanding principal amount of the CPN#9 multiplied by 135% together with accrued and unpaid interest thereon. At any time during the period beginning on the date which is one hundred twenty one (121) days from the date of the CPN#9 and ending on one hundred eighty (180) days following the date of this CPN#9, the Company may prepay the CPN#9 to the note holder upon payment of an amount equal to the outstanding principal amount of the CPN#9 multiplied by 145% together with accrued and unpaid interest thereon. After the expiration of one hundred eighty (180) days following the date of the CPN#9, the Company shall have no right of prepayment. The floor price of $0.00005. As of May 31, 2013, the Company accrued interest of $207.

CPN#10 - The Company issued an unsecured 9 month 8% Convertible Promissory Note (CPN#10) on May 13, 2013 due on February 17, 2014 for $42,500. The principal and accrued interest is convertible into shares of common stock at the discretion of the note holder. The Conversion Price shall be the greater of: (i) the Variable Conversion Price and (ii) the Fixed Conversion Price (subject, in each case, to equitable adjustments for stock splits, stock dividends or rights offerings by the Company relating to the Company’s securities or the securities of any subsidiary of the Company, combinations, recapitalization, reclassifications, extraordinary distributions and similar events). The "Variable Conversion Price" shall mean 55% multiplied by the Market Price (representing a discount rate of 45%). "Market Price" means the average of the lowest three (3) Trading Prices for the Common Stock during the ten (10) Trading Day period ending on the latest complete Trading Day prior to the Conversion Date. "Trading Price" means, for any security as of any date, the closing bid price on the Over-the-Counter Bulletin Board or applicable trading market as reported by a reliable reporting service designated by the note holder. The note holder is limited to owning 4.99% of the Company’s issued and outstanding shares. Default interest is 22% per annum should the Company default on the CPN#10. The Company may prepay CPN#10 at any time for the period beginning on the date of the CPN#10 and ending on the date which is ninety (90) days following the date of the CPN#10, the CPN#10 may be prepaid by the Company upon payment to the note holder of an amount equal to the outstanding principal amount of the CPN#10 multiplied by 125% together with accrued and unpaid interest thereon. At any time during the period beginning on the ninety (91) day from the date of the CPN#10 and ending on the date which is one hundred twenty (120) days following the date of CPN#10, the Company may prepay the CPN#10 to the note holder upon payment of an amount equal to the outstanding principal amount of the CPN#10 multiplied by 135% together with accrued and unpaid interest thereon. At any time during the period beginning on the date which is one hundred twenty one (121) days from the date of the CPN#10 and ending on one  hundred eighty (180) days following the date of this CPN#10, the Company

F19

may prepay the CPN#10 to the note holder upon payment of an amount equal to the outstanding principal amount of the CPN#10 multiplied by 145% together with accrued and unpaid interest thereon. After the expiration of one hundred eighty (180) days following the date of the CPN#10, the Company shall have no right of prepayment. The floor price of $0.00005. As of May 31, 2013, the Company accrued interest of $168.

CPN#11 - The Company issued an unsecured 9 month 8% Convertible Promissory Note (CPN#11) on May 29, 2013 due on March 1, 2014 for $37,750. The principal and accrued interest is convertible into shares of common stock at the discretion of the note holder. The conversion price (the “Conversion Price”) shall equal the greater of (i) the Variable Conversion Price and (ii) the Fixed Conversion Price (subject to equitable adjustments for stock splits, stock dividends or rights offerings by the Company relating to the Company’s securities or the securities of any subsidiary of the Company, combinations, recapitalization, reclassifications, extraordinary distributions and similar events).  The "Variable Conversion Price" shall mean 57.5% multiplied by the Market Price (as defined herein) (representing a discount rate of 42.5%).  “Market Price” means the average of the lowest three (3) Trading Prices (as defined below) for the Common Stock during the ten (10) Trading Day period ending on the latest complete Trading Day prior to the Conversion Date.  “Trading Price” means, for any security as of any date, the closing bid price on the Over-the-Counter Bulletin Board (the “OTCBB”), OTCQB or applicable trading market as reported by a reliable reporting service (“Reporting Service”) designated by the Holder or, if the OTCBB is not the principal trading market for such security, the closing bid price of such security on the principal securities exchange or trading market where such security is listed or traded or, if no closing bid price of such security is available in any of the foregoing manners, the average of the closing bid prices of any market makers for such security that are listed in the “pink sheets” by the National Quotation Bureau, Inc.  In the case that the Company’s Common Stock is not deliverable by DWAC, an additional 5% discount will apply.  In the case that the Company’s Common Stock is “chilled” for deposit into the DTC system and only eligible for clearing deposit, an additional 7.5% discount shall apply.  If the Trading Price cannot be calculated for such security on such date in the manner provided above, the Trading Price shall be the fair market value as mutually determined by the Company and the holders of a majority in interest of the Notes being converted for which the calculation of the Trading Price is required in order to determine the Conversion Price of such Notes.  “Trading Day” shall mean any day on which the Common Stock is tradable for any period on the OTCBB, OTCQB or on the principal securities exchange or other securities market on which the Common Stock is then being traded.  “Fixed Conversion Price” shall mean $0.00005. The Company may prepay the amounts outstanding hereunder pursuant to the following terms and conditions:  (I) at any time during the period beginning on the Issue Date and ending on the date which is thirty (30) days following the Issue Date, the Company shall have the right, exercisable on not less than three (3) Trading Days prior written notice to the Holder of CPN#11 to prepay the outstanding CPN#11 (principal and accrued interest), in full by making a payment to the Holder of an amount in cash equal to 125%, multiplied by the sum of: (w) the then outstanding principal amount of CPN#11 plus (x) accrued and unpaid interest on the unpaid principal amount of  CPN#11 plus (y) Default Interest; (II) at any time during the period beginning the day which is thirty one (31) days following the Issue Date and ending on the date which is sixty (60) days following the Issue Date, the Company shall have the right, exercisable on not less than three (3) Trading Days prior written notice to the Holder of CPN#11 to prepay the outstanding CPN#11 (principal and accrued interest), in full by making a payment to the Holder of an amount in cash equal to 130%, multiplied by the sum of: (w) the then outstanding principal amount of  CPN#11 plus (x) accrued and unpaid interest on the unpaid principal amount of CPN#11 plus (y) Default Interest; (III) at any time during the period beginning the day which is sixty one (61) days following the Issue Date and ending on the date which is ninety(90) days following the Issue Date, the Company shall have the right, exercisable on not less than three (3) Trading Days prior written notice to the Holder of CPN#11 to prepay the outstanding CPN#11 (principal and accrued interest), in full by making a payment to the Holder of an amount in cash equal to 135%, multiplied by the sum of: (w) the then outstanding principal amount of CPN#11 plus (x) accrued and unpaid interest on the unpaid principal amount of  CPN#11 plus (y) Default Interest; (IV) at any time during the period beginning the day which is ninety one (91) days following the Issue Date and ending on the date which is one hundred twenty (120) days following the Issue Date, the Company shall have the right, exercisable on not less than three (3) Trading Days prior written notice to the Holder of CPN#11 to prepay the outstanding CPN#11 (principal and accrued interest), in full by making a payment to the Holder of an amount in cash equal to 140%, multiplied by the sum of: (w) the then outstanding principal amount of CPN#11 plus (x) accrued and unpaid interest on the unpaid principal amount of CPN#11 plus (y) Default Interest; (V) at any time during the period beginning the day which is one hundred twenty one (121) days following the Issue Date and ending on the date which is one hundred fifty (150) days following the Issue Date, the Company shall have the right, exercisable on not less than three (3) Trading Days prior written notice to the Holder of CPN#11 to prepay the outstanding CPN#11 (principal and accrued interest), in full by making a payment to the Holder of an amount in cash equal to 145%, multiplied by the sum of: (w) the then outstanding principal amount of CPN#11 plus (x) accrued and unpaid interest on the unpaid principal amount of CPN#11 plus (y) Default Interest; (VI) at any time during the period beginning the day which is one hundred fifty one (151) days following the Issue Date and ending on the date which is one hundred eighty (180) days following the Issue Date, the Company shall have the right, exercisable on not less than three (3) Trading Days prior written notice to the Holder of CPN#11 to prepay the outstanding CPN#11 (principal and accrued interest), in full by making a payment to the Holder of an amount in cash equal to 150%, multiplied by the sum of: (w) the then outstanding principal amount of CPN#11 plus (x) accrued and unpaid interest on the unpaid principal amount of CPN#11 plus (y) Default Interest; (VII) after the expiration of one hundred eighty (180) following the date of CPN#11, the Company shall have no right of prepayment. As of May 31, 2013, the Company accrued interest of $17.

F20

ASC DISCLOSURE

In accordance with ASC 470-20 Debt with Conversion and Other Options, the Company recorded total debt discounts of $379,486, and $-0- for the variable conversion feature of the convertible debts incurred during the fiscal year ended May 31, 2013 and year ended May 31, 2012, respectively. The discount will be amortized to debt discount over the term of the debentures using the effective interest method. The Company recorded $116,950 and $-0- of debt discount expense pursuant to the amortization of the convertible promissory note discounts during the fiscal year ended May 31, 2013 and May 31, 2012, respectively. The Company recorded $33,564 and $-0- of accrued interest payable for convertible promissory notes the during the fiscal year ended May 31, 2013 and May 31, 2012, respectively.

In accordance with ASC 815-15, the Company determined that the variable conversion feature and shares to be issued are not embedded derivative features, and these are included in Loan Payable on the balance sheet.

NOTE 14: FAIR VALUE OF FINANCIAL INSTRUMENTS

Under FASB ASC 820-10-5, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). The standard outlines a valuation framework and creates a fair value hierarchy in order to increase the consistency and comparability of fair value measurements and the related disclosures. Under GAAP, certain assets and liabilities must be measured at fair value, and FASB ASC 820-10-50 details the disclosures that are required for items measured at fair value.

The Company’s financial assets and liabilities are measured using inputs from the three levels of the fair value hierarchy. The three levels are as follows:

Level 1 - Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.

Level 2 - Inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates, yield curves, etc.), and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs).

Level 3 - Unobservable inputs that reflect our assumptions about the assumptions that market participants would use in pricing the asset or liability.

The Company estimates the fair value of financial instruments using the available market information and valuation methods. Considerable judgment is required in estimating fair value. Accordingly, the estimates of fair value may not be indicative of the amounts the Company could realize in a current market exchange.

As of May 31,2012 and 2011,the carrying value of accounts payable and loans approximated fair value due to the short-term nature and maturity of these instruments.

NOTE 16: CORPORATE ACTION

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

·

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

·

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

·

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

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

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

NOTE 16: COMMITMENTS

The Company entered in a Management and Financial Service Agreement with Mr. Wayne St. Cyr as the Executive Vice President, Marketing and Strategic Development on December 21, 2010 for a ten day period ending December 31, 2010 which

F21

as extended for a 12 month term to December 31, 2011, whereby the Executive Vice President, Marketing and Strategic Development is paid $10,000 per month. The Company has not renewed the contract with Mr. Ct. Cyr and has retained Mr. St. Cyr on a month to month basis. In addition to his duties as Executive Vice President, Marketing and Strategic Development, Mr. St. Cyr is the Corporate Secretary for the Company. Mr. St Cyr is paid $10,000 per month.

The Company entered into a Management and Financial Service Agreement for Mr. Jerry G. Mikolajczyk for a 12 month period commencing on June 1, 2011 and ending May 31, 2012. Mr. Mikolajczyk is hired through a service company, and will be paid $120,000 in cash payments for the services of Mr. Mikolajczyk. The terms and conditions will be renegotiated upon the successful consummation of a Business Combination through the acquisition of, or merger or consolidation with, a company that has substantial additional capital and or operating revenues; or the Company is able to finance operating expenses with additional debt or through equity financing of not less than $5,000,000. The Company has not renewed the contract with Mr. Mikolajczyk. Mr. Mikolajczyk continues to work for the Company on a month-to-month basis and is paid $10,000 per month.

The Company entered into a Management and Financial Service Agreement with Mr. Peter Matousek for a 12 month period commencing June 1, 2011 and ending May 31, 2012 whereby Mr. Matousek will be paid $90,000 in cash payments. The terms and conditions will be renegotiated upon the successful consummation of a Business Combination through the acquisition of, or merger or consolidation with, a company that has substantial additional capital and or operating revenues; or the Company is able to finance operating expenses with additional debt or through equity financing of not less than $5,000,000. The Company has not renewed the contract with Mr. Matousek. Mr. Matousek continues to work for the Company on a month-to-month basis and is paid $7,500 per month.

The Company entered into a Management and Financial Service Agreement with Dr. William D. Spier for a 7.25-month period commencing October 23 and ending May 31, 2013 whereby Dr. Spier was paid $29,032 in cash payments. The agreement was renewed for an additional 12 months at $7,500 per month ending May 31, 2014. The terms and conditions will be renegotiated upon the successful consummation of a Business Combination through the acquisition of, or merger or consolidation with, a company that has substantial additional capital and or operating revenues; or the Company is able to finance operating expenses with additional debt or through equity financing of not less than $5,000,000.

NOTE 17: EXECUTIVE AND BOARD COMPENSATION

The Company entered in a Management and Financial Service Agreement with Mr. Wayne St. Cyr as the Executive Vice President, Marketing and Strategic Development on December 21, 2010 for a ten day period ending December 31, 2010 which was extended for a 12 month term to December 31, 2011, whereby the Executive Vice President, Marketing and Strategic Development is paid $10,000 per month. The Company has not renewed the contract with Mr. Ct. Cyr and has retained Mr. St. Cyr on a month to month basis. In addition to his duties as Executive Vice President, Marketing and Strategic Development, Mr. St. Cyr is the Corporate Secretary for the Company. Mr. St Cyr is paid $10,000 per month.

The Company entered into a Management and Financial Service Agreement for Mr. Jerry G. Mikolajczyk for a 12-month period commencing on June 1, 2011 and ending May 31, 2012. Mr. Mikolajczyk is hired through a service company, and will be paid $120,000 in cash payments for the services of Mr. Mikolajczyk. The terms and conditions will be renegotiated upon the successful consummation of a Business Combination through the acquisition of, or merger or consolidation with, a company that has substantial additional capital and or operating revenues; or the Company is able to finance operating expenses with additional debt or through equity financing of not less than $5,000,000. The Company has not renewed the contract with Mr. Mikolajczyk. Mr. Mikolajczyk continues to work for the Company on a month-to-month basis and is paid $10,000 per month.

The Company entered into a Management and Financial Service Agreement with Mr. Peter Matousek for a 12-month period commencing June 1, 2011 and ending May 31, 2012 whereby Mr. Matousek will be paid $90,000 in cash payments. The terms and conditions will be renegotiated upon the successful consummation of a Business Combination through the acquisition of, or merger or consolidation with, a company that has substantial additional capital and or operating revenues; or the Company is able to finance operating expenses with additional debt or through equity financing of not less than $5,000,000. The Company has not renewed the contract with Mr. Matousek. Mr. Matousek continues to work for the Company on a month-to-month basis and is paid $7,500 per month.

The Company entered into Board Member Compensation Agreements with Mr. Kevin M. Grapes and Mr. Jerry G. Mikolajczyk as directors of the Company for a term of one (1) year ending August 31, 2012. Both Mr. Grapes and Mr. Mikolajczyk will receive 5,000 shares per month of the Company’s common stock in consideration for them serving on the Company’s Board of Directors. The common stock will be valued based on the average of the 5 trading day close price prior to each month end. This amount includes all costs related to the engagement Director of the Company except 3^rd party or travel expenses.  

On May 21, 2012, Mr. Kevin M. Grapes resigned as a Board member.

F22

On May 22, 2012, Company entered into a Board Member Compensation Agreement with Dr. William D. Spier as a director of the Company for a term of one (1) year ending May 31, 2013. Dr. Spier will receive 5,000 shares per month of the Company’s common stock in consideration for them serving on the Company’s Board of Directors. The common stock will be valued based on the average of the 5 trading day close price prior to each month end. This amount includes all costs related to the engagement Director of the Company except 3^rd party or travel expenses.

On May 25, 2012, Company entered into a Board Member Compensation Agreement with Mr. Peter Matousek as a director of the Company for a term of one (1) year ending May 31, 2013. Mr. Matousek will receive 5,000 shares per month of the Company’s common stock in consideration for them serving on the Company’s Board of Directors. The common stock will be valued based on the average of the 5 trading day close price prior to each month end. This amount includes all costs related to the engagement Director of the Company except 3^rd party or travel expenses.

The Company authorized and approved an aggregate of 136,129 shares for the period ended May 31, 2012 with an average price of $0.0333 per share to the Board pursuant to a Board Member Compensation Agreements with Mr. Jerry G. Mikolajczyk, Mr. Kevin M. Grapes, Mr. Peter Matousek and Dr. William D. Spier. The Company issued 105,000 of the 136,129 shares to the Board as of May 31, 2012.  The balance,  31,129 shares, cost of $2,106 for the period March 1, 2012 to May 31, 2012,  were issued to the Board on June 25, 2012.

The Company authorized and approved an aggregate of 45,000 shares for the period ended August 31, 2012 with an average price of $0.04033 per share to the Board pursuant to Board Member Compensation Agreements with Mr. Jerry G. Mikolajczyk, Mr. Peter Matousek and Dr. William D. Spier. The 45,000 shares were issued to the Board on October 26, 2012.

On August 31, 2012, Jerry G. Mikolajczyk was re-appointed as a director by the Board of Directors of  the Company for another one-year term ending August 31, 2013.  In consideration for Mr. Mikolajczyk’s service as director, the Company will issue 5,000 shares per month of the Company’s stock, which will be valued based on the average of the five trading day close price prior to each month end.  In addition, the Company will reimburse Mr. Mikolajczyk for the preapproved cost of airfare, travel expenses and disbursements made on behalf of the Company.

The Company authorized and approved an aggregate of 45,000 shares for the period ended November  30, 2012 with an average price of $0.01228 per share to the Board pursuant to Board Member Compensation Agreements with Mr. Jerry G. Mikolajczyk, Mr. Peter Matousek and Dr. William D. Spier.

The Company authorized and approved an aggregate of 45,000 shares for the period ended February 28, 2013 with an average price of $0.01093 per share to the Board pursuant to Board Member Compensation Agreements with Mr. Jerry G. Mikolajczyk, Mr. Peter Matousek and Dr. William D. Spier.

On May 30, 2013, the Board of Directors renewed the Board Member Compensation Agreement with Dr. William D. Spier as a director of the Company for a term of one (1) year ending May 31, 2014. Mr. Spier will receive 5,000 shares per month of the Company’s common stock in consideration for them serving on the Company’s Board of Directors. The common stock will be valued based on the average of the 5 trading day close price prior to each month end. This amount includes all costs related to the engagement Director of the Company except 3^rd party or travel expenses. The terms and conditions will be renegotiated upon the successful consummation of a Business Combination through the acquisition of, or merger or consolidation with, a company that has substantial additional capital and or operating revenues; or the Company is able to finance operating expenses with additional debt or through equity financing of not less than $5 million.

On May 30, 2013, the Board of Directors renewed the Board Member Compensation Agreement with Mr. Peter Matousek as a director of the Company for a term of one (1) year ending May 31, 2014. Mr. Matousek will receive 5,000 shares per month of the Company’s common stock in consideration for them serving on the Company’s Board of Directors. The common stock will be valued based on the average of the 5 trading day close price prior to each month end. This amount includes all costs related to the engagement Director of the Company except 3^rd party or travel expenses. The terms and conditions will be renegotiated upon the successful consummation of a Business Combination through the acquisition of, or merger or consolidation with, a company that has substantial additional capital and or operating revenues; or the Company is able to finance operating expenses with additional debt or through equity financing of not less than $5 million.

On May 31, 2013, the Company entered into a Management and Financial Service Agreement with Dr. William D. Spier as Treasurer of the Company for a 12-month period commencing June 1, 2013 and ending May 31, 2014 whereby Dr. Spier will be paid $90,000 in cash payments. The terms and conditions will be renegotiated upon the successful consummation of a Business Combination through the acquisition of, or merger or consolidation with, a company that has substantial additional capital and or operating revenues; or the Company is able to finance operating expenses with additional debt or through equity financing of not less than $5 million.

The Company authorized and approved an aggregate of 45,000 shares for the period ended May 31, 2013 with an average price of $0.01033 per share to the Board pursuant to Board Member Compensation Agreements with Mr. Jerry G. Mikolajczyk, Mr. Peter Matousek and Dr. William D. Spier.

F23

The Schedule of Board Compensation below represents the shares issued or approved to the Board with the 5-Day Average Share Closing Price for each month during the fiscal year ending May 31, 2013:

	Schedule of Board Compensation
Month		Board Shares Approved, Not Issued	Board Shares Issued	5 Day Average Share Closing Price	Cost Base
June		0	15,000	$ 0.03800	$ 570.00
July		0	15,000	$ 0.04400	$ 660.00
August		0	15,000	$ 0.03900	$ 585.00
Quarter Total		0	45,000	$ 0.04033	$ 1,815.00
September		0	15,000	$ 0.02320	$ 348.00
October		0	15,000	$ 0.00770	$ 115.60
November		0	15,000	$ 0.00590	$ 89.10
Quarter Total		0	45,000	$ 0.01228	$ 552.70
December		0	15,000	$ 0.00774	$ 116.10
January		0	15,000	$ 0.00982	$ 147.30
February		0	15,000	$ 0.01522	$ 228.30
Quarter Total		0	45,000	$ 0.01093	$ 491.70
March		0	15,000	$ 0.01392	$ 208.80
April		0	15,000	$ 0.01028	$ 154.20
May		0	15,000	$ 0.00680	$ 102.00
Quarter Total		0	45,000	$ 0.01033	$ 465.00
Year Total		0	180,000	$ 0.01846	$ 3,323.50

The following Schedules of Executive Compensation discloses compensation paid/accrued during the fiscal years ended May 31, 2013 and 2012 to the Company’s Officers and the most highly compensated executive officer whose total compensation exceeded $100,000 for the fiscal year ended May 31, 2013 (Collectively, the “Named Executive Officers”). No restricted stock awards, long-term incentive plan payouts or other types of compensation, other than the compensation identified in the table below, were paid/accrued to the Named Executive Officers during these fiscal years.

2013 Schedule of Executive Compensation
Name and Principal Position	Salary[2]	Bonus	Stock Award	Option Awards	Total Salary
Jerry G. Mikolajczyk, President/CEO/CFO	$ 120,000	0	0	0	$ 120,000
Wayne St. Cyr, Executive Vice President	$ 120,000	0	0	0	$ 120,000
Peter Matousek, VP-Investor Relations[1]	$ 90,000	0	0	0	$ 90,000
Dr. William D. Spier, Treasurer	$ 29,032	0	0	0	$ 29,032

2012 Schedule of Executive Compensation
Name and Principal Position	Salary[2]	Bonus	Stock Award	Option Awards	Total Salary
Jerry G. Mikolajczyk, President/CEO/CFO	$ 120,000	0	0	0	$ 120,000
Wayne St. Cyr, Executive Vice President	$ 120,000	0	0	0	$ 120,000
Peter Matousek, VP-Investor Relations[1]	$ 90,000	0	0	0	$ 90,000

F24

NOTE 18: COMMON SHARES PURCHASE LITIGATION

On May 10, 2011, the Company accepted an Offer to Purchase from Lea Kennedy d/b/a LuxemBarings (“Purchaser”) to purchase $10 million of the Company’s common stock based on the average of 5 consecutive trading day’s close prior to date of closing. The Offer to Purchase was scheduled to close on or before June 24, 2011. The Purchaser failed to complete the transaction, after mutually agreed extensions of the closing date. The Company has retained legal counsel to take legal action against the Purchaser for failing to complete the purchase transaction and for damages to the Company as a result of the failure to complete the transaction. The Company has recognized losses, at cost, in the financial statements for the period ended May 31, 2012 and legal costs for the fiscal year ending May 31, 2013.

On March 23, 2013 The United States District Court For The Southern District Of Illinois granted summary judgment on Xun Energy’s breach of contract claim against Lea Kennedy d/b/a/ LuxemBarings. The amount of damages remains an issue to be resolved in the case and the Company's "fraud in the inducement claim" alleged in its complaint remains pending.

Subsequent to May 31, 2013, on July, 8, 2013, the Company was awarded a judgment dismissing, without prejudice, the legal action between Xun Energy, Inc., as Plaintiff and Lea Kennedy, an individual, d/b/a LUXEMBARINGS, as Defendant. The Company filed for a voluntary dismissal without prejudice on the legal action, refer to NOTE 23: SUBSEQUENT EVENTS.

NOTE 19: EXECUTIVE AND BOARD CHANGES

On May 31, 2011, Mr. Matousek, our President and CEO, advised that the roles and responsibilities are increasing for the Company and that Mr. Jerry G. Mikolajczyk, while as consultant to the Company, has been instrumental in developing and building the Company to its current status including funding and operations. Mr. Matousek advised that it is in the best interests for the Company and the Shareholders that Mr. Mikolajczyk have authority to continue developing the Company and have authority to make decisions at an Executive Level of the Company. Subsequently, Mr. Matousek resigned as President, CEO and CFO and the Company appointed Jerry G. Mikolajczyk as Interim President, CEO and CFO until a permanent President and CEO is recruited and a permanent CFO is recruited. The Company entered into a Management and Financial Service Agreement for Mr. Jerry G. Mikolajczyk for a 12-month period commencing on June 1, 2011 and ending May 31, 2012. Mr. Mikolajczyk is hired through a service company, and will be paid $120,000 in cash payments for the services of Mr. Mikolajczyk. The terms and conditions will be renegotiated upon the successful consummation of a Business Combination through the acquisition of, or merger or consolidation with, a company that has substantial additional capital and or operating revenues; or the Company is able to finance operating expenses with additional debt or through equity financing of not less than $5,000,000. The Company has not renewed the contract with Mr. Mikolajczyk. Mr. Mikolajczyk continues to work for the Company on a month-to-month basis and is paid $10,000 per month.

The Company also appointed Mr. Peter Matousek as the Company’s Vice-President of Investor Relations. The Company entered into a Management and Financial Service Agreement with Mr. Peter Matousek for a 12-month period commencing June 1, 2011 and ending May 31, 2012 whereby Mr. Matousek will be paid $90,000 in cash payments. The terms and conditions will be renegotiated upon the successful consummation of a Business Combination through the acquisition of, or merger or consolidation with, a company that has substantial additional capital and or operating revenues; or the Company is able to finance operating expenses with additional debt or through equity financing of not less than $5 million. The Company has not renewed the contract with Mr. Matousek. Mr. Matousek continues to work for the Company on a month-to-month basis and is paid $7,500 per month.

On August 31, 2011, directors Peter Matousek, Donald Lynch and Jerry G. Mikolajczyk termed out. On September 1, 2011, the Company obtained the written consent of the stockholders holding a majority, 86.51%, of the outstanding voting rights of the Company (the "Consent"). The Consent approved the election of Kevin M. Grapes and Jerry G. Mikolajczyk as directors of the Company for a term of one (1) year ending August 31, 2012.

On May 21, 2012, Mr. Kevin M. Grapes resigned as a Board member.

On May 22, 2012, Company entered into a Board Member Compensation Agreement with Dr. William D. Spier as a director of the Company for a term of one (1) year ending May 31, 2013.

On May 25, 2012, Company entered into a Board Member Compensation Agreement with Mr. Peter Matousek as a director of the Company for a term of one (1) year ending May 31, 2013.

On August 31, 2012, Company entered into a Board Member Compensation Agreement with Mr. Jerry G. Mikolajczyk as a director of the Company for a term of one (1) year ending August 31, 2013.

F25

Each Board member will receive 5,000 shares per month of the Company’s common stock in consideration for them serving on the Company’s Board of Directors. The common stock will be valued based on the average of the 5 trading day close price prior to each month end. This amount includes all costs related to the engagement Director of the Company except 3^rd party or travel expenses. The terms and conditions will be renegotiated upon the successful consummation of a Business Combination through the acquisition of, or merger or consolidation with, a company that has substantial additional capital and or operating revenues; or the Company is able to finance operating expenses with additional debt or through equity financing of not less than $5 million.

NOTE 20:  VENANGO 30 WELL LOCATION

On August 31, 2012 the Company entered into an Oil and Gas Well Location Agreement with Vencedor Energy Partners (Assignor). The agreement allows the Company to drill 30 offset oil and gas wells on 3 producing oil and gas leases in Venango County, Pennsylvania.

The Company paid $585,000 in the form of 11,700,000 shares of common stock (Shares) of the Company for the rights.

The Company will have 100% working interest in the wells and Net Revenue Interest as follows:

Lease Name	Net Revenue Interest Breakdown
Rice	Master Lease Lessor - 12.5% Royalty, Master Lease Lessee 2.5% Override royalty interest, Assignor - 2.5% Override royalty interest; and the Company - 82.5% royalty interest;
Lalley	Master Lease Lessor - 12.5% Royalty, Master Lease Lessee 2.5% Override royalty interest, Assignor - 2.5% Override royalty interest; and the Company - 82.5% royalty interest; and
Corse	Master Lease Lessor - 15.0% Royalty, Master Lease Lessee 2.5% Override royalty interest, Assignor - 2.5% Override royalty interest; and the Company - 80.0% royalty interest.

The Agreement allows the Company to have the exclusive right to explore, operate, produce all naturally-occurring oil, gas, casing-head gas or gasoline, gas condensate and/or all other liquid or gaseous hydrocarbons and other marketable or non-marketable substances produced (Oil and Gas) from Oil and Gas deposits contained within and under the well location and any and all other rights and privileges necessary, incident to, or convenient for the economical operation of the well location and other lands for the production of Oil and Gas to the Company. A well location is defined as a circle having a radius of l50 feet with the well, to a depth as allowed in the Master Lease, at the center thereof.

The Company owns the rights and may select up to 30 well locations from the following:

Lease Name	Locations	Rights
Rice	Up to 10	One well per location, to a depth from the surface through the Speechley sands which depth is approximately 2,200 feet on the Premises alone for producing oil and gas by any means, and all rights necessary convenient and incident thereto, granted pursuant to the Master Rice Lease.
Lalley	Up to 8	One well per location, to a depth from the surface through the Speechley sands which depth is approximately 2,200 feet on the Premises alone for producing oil and gas by any means, and all rights necessary convenient and incident thereto, granted pursuant to the Master Lalley Lease.
Corse	Up to 15	One well per location, to a depth from the surface through the Speechley sands which depth is approximately 2,000 feet on the Premises alone for producing oil and gas by any means, and all rights necessary convenient and incident thereto, granted pursuant to the Master Corse Lease.

If Company does not begin or provide proof of funds or funding for the first well on or before January 31, 2013, subject to our operator, Vencedor Energy Partners, obtaining the necessary permits to allow the Company to commence drilling and completions operations, and does not begin or provide proof of funds or funding for 3 more wells on or before March 31, 2013, then the Company will have forfeited its rights and the Agreement shall terminate and unwind and the Assignor agrees to return the Shares (11,700,000) to the Company.

On January 29, 2013, pursuant to a letter agreement between the Company and the Assignor, the Company acknowledged and agreed to the notice of the delay of the permits up to 4 weeks beyond January 31, 2013.

After completing 8 wells and if Company does not complete any of the remaining 22 well drilling provision set forth in the Agreement within the 2 years from the date of the execution of the Agreement, then the Company will forfeit its rights to the well locations not completed. The Company will retain its rights for the well locations completed and will retain an Override Royalty of Seven and one half per cent (7.5%) on the well locations forfeited.

F26

The Company has 2 years from the date of execution of the Agreement to complete the drilling of the 30 well locations and has the option to acquire an additional 15 well locations for the same terms and conditions of the Agreement after the first 30 wells locations have been completed.

The Company will provide funding in groups of 4 to 6 wells to optimize economies of scale, with the exception of the first 4 wells which can be funded on an individual basis.

The Company agreed, the Participation and Operating Agreement (the "POA"), to have Assignor the designated Operator (the "Operator") of the Oil and Gas Well Locations which includes all the responsibilities as a designated operator in the State of Pennsylvania which includes the duties of managing and supervising the drilling and completions of the Oil and Gas Locations.

On December 18, 2012, pursuant to the POA, the Operator invoiced the Company $835,000 for the drilling and completion of five oil wells on the Rice lease. The Company has recorded the transaction capitalizing the drilling and completions as work in progress. The liability is included in the Company's Accounts Payable.  

On March 18, 2013, pursuant to a letter agreement, Amendment #3, between the Company and Vencedor Energy Partners, the Company has agreed to delete Section 4a (financing conditions) of the Oil and Gas Well Location Assignment dated August 31, 2012 between Xun Energy, Inc. and Vencedor Energy Partners.

On March 30, 2013, the Company's operator, Vencedor Energy Partners, began site work on the Rice lease.

THE COMPANY WILL NEED TO RAISE ADDITIONAL FUNDS TO DRILL THE OIL AND GAS WELLS AND THERE IS NO GUARANTEE THAT THE COMPANY WILL BE SUCCESSFUL IN RAISING THE FUNDS NECESSARY TO COMPLETE 1 OR ANY OF THE 30 OFFSET OIL AND GAS WELLS.

NOTE 21: TERMINATION OF FINANCIAL CONSULTING SERVICES AGREEMENT

On December 18, 2012, the Company issued a Notice of Termination to Vaquero Private Capital, Inc. (“VPC”) for breach of contract by VPC, terminating the September 4, 2012 twelve month Financial Consulting Services Agreement (the “Agreement”) effective as of June 1, 2012, pursuant to which VPC would provide consulting services in connection with the Company’s business affairs and assist the Company in raising capital.  In consideration of the services to be provided by VPC, the Company paid VPC a prepaid fee of $810,000 in the form of 16.2 million common shares of the Company. The Company has placed a Stop Order on the transference of 16.2 million shares pending resolution of the breach of contract by VPC.

NOTE 22: FINANCING AGREEMENTS

On May 7, 2013, Xun Energy, Inc., (the “Company”) entered into a reserve equity financing agreement (the “Financing Agreement”) with AGS Capital Group, LLC, (“AGS”). Pursuant to the Financing Agreement, the Company has the right, but not the obligation, to issue $15,000,000 of the Company’s common stock to AGS over the course of 3 years. The Company has full control and discretion over the timing and amount of any shares that they sell to AGS when the Market Price, as defined in the Financing Agreement, is $0.50 or higher per share. For each advance, the Company may issue an amount of stock up to $250,000. Such advance will not exceed more than 200% of the average daily trading volume for the previous 10 trading days. The purchase price of the shares shall be set at ninety percent (90%) of the average of the three (3) lowest closing bid prices of the stock during the ten (10) consecutive weekday trading days (the “Pricing Period”) immediately after the date on which the Company provides an advance notice. The Company, at its option, may select a safety net price for any specified advance which the Company will not sell shares to AGS under that advance when the Purchase Price (Market Price less 10% discount) falls below such safety net price during the Pricing Period. The Company issued 4,081,633 shares of common stock as a commitment fee deposit towards the commitment fee of $40,000 to be deducted from the first advance.

On May 7, 2013, the Company entered into a registration rights agreement with AGS (the “RRA,” and along with the Financing Agreement, the “Agreements”).  According to the RRA, the Company must file a registration statement on Form S-1, registering the shares of common stock which may be issued to AGS pursuant to the Financing Agreement within thirty (30) days of the date of the RRA.

Prior to the date of the Agreements, AGS had no material interaction, other than the negotiation of the Agreements, with the Company.

On May 29, 2013, the Company filed a Registration Statement, Form S-1,  registering  the shares of common stock of the Company as follows:

1.

75,000,000 shares of the Company's common stock (the “Put Shares”) that the Company will put to AGS pursuant to Financing Agreement between AGS and the Company, dated May 7, 2013, and

2.

4,081,633 commitment shares of the Company's common stock the Company paid to AGS as a fee for providing the facility.

F27

In the event of stock splits, stock dividends, or similar transactions involving the common stock, the number of common shares registered shall, unless otherwise expressly provided, automatically be deemed to cover the additional securities to be offered or issued pursuant to Rule 416 promulgated under the Securities Act of 1933, as amended (the “Securities Act”). In the event that adjustment provisions of the Drawdown Agreement require the registrant to issue more shares than are being registered in this registration statement, for reasons other than those stated in Rule 416 of the Securities Act of 1933, as amended, the Company will file a new registration statement to register those additional shares.

NOTE 23: SUBSEQUENT EVENTS

On June 5, 2013, the Company issued an unsecured Convertible Promissory Note (CPN#12) for $250,000 plus accrued and unpaid interest and other fees with a $25,000 original issue discount (the “OID”). The Note Holder paid $25,000 consideration on closing of CPN#12 (CPN#12A). The Note Holder may pay additional consideration to the Company in such amounts and at such dates as Note Holder may choose in its sole discretion. The Maturity Date is one year from the effective date of each payment (the “Maturity Date”) and is the date upon which the Principal Sum of the Note, as well as any unpaid interest and other fees, shall be due and payable. The Conversion Price is the lesser of $0.006 or 60% of the average of the two lowest trade prices in the 25 trading days previous to the conversion, but no lower than $0.00005 (in the case that conversion shares are not deliverable by DWAC an additional 10% discount will apply; and if the shares are ineligible for deposit into the DTC system and only eligible for Xclearing deposit an additional 5% discount shall apply; in the case of both an additional cumulative 15% discount shall apply). Unless otherwise agreed in writing by both parties, at no time will the Note Holder convert any amount of the Note into common stock that would result in the Note Holder owning more than 4.99% of the common stock outstanding. The Company may repay the CPN at any time on or before 90 days from the effective date, after which the Company may not make further payments on the CPN prior to the Maturity Date without written approval from Note Holder. If the Company repays the CPN on or before 90 days from the effective date, the Interest Rate shall be zero percent (0%). If the Company does not repay the CPN on or before 90 days from the effective date, a one-time Interest charge of 12% shall be applied to the Principal Sum. Any interest payable is in addition to the OID, and that OID (or prorated OID, if applicable) remains payable regardless of time and manner of payment by Borrower. CPN#12 is structured to be advanced to the Company at the discretion of the Note Holder. The Company has drawn down $25,000 of the $225,000 allowable and is obligated to $2,778 of the OID ($25,000/$225,000 x $25,000 (OID)).

On June 25, 2013, the Company incorporated a wholly owned subsidiary, Xun Oil of Pennsylvania Corporation, in the Commonwealth of Pennsylvania, USA.

On July 1, 2013, the Company requested the withdrawal of the Registration Statement, Form S-1 (Registration No. 333-188906)  because the related reserve equity financing agreement with AGS contained provisions that result in the selling stockholder not being irrevocably bound to purchase the shares that the Company elects to sell under the agreement. No securities were sold pursuant to the Registration Statement.

On July 2, 2013, the Company issued an unsecured 9 month 8% Convertible Promissory Note (CPN#13) due on April 8, 2014 for $32,500. The principal and accrued interest is convertible into shares of common stock at the discretion of the note holder.  The Conversion Price shall be the greater of: (i) the Variable Conversion Price and (ii) the Fixed Conversion Price (subject, in each case, to equitable adjustments for stock splits, stock dividends or rights offerings by the Company relating to the Company’s securities or the securities of any subsidiary of the Company, combinations, recapitalization, reclassifications, extraordinary distributions and similar events). The "Variable Conversion Price" shall mean 55% multiplied by the Market Price (representing a discount rate of 45%). "Market Price" means the average of the lowest three (3) Trading Prices for the Common Stock during the ten (10) Trading Day period ending on the latest complete Trading Day prior to the Conversion Date. "Trading Price" means, for any security as of any date, the closing bid price on the Over-the-Counter Bulletin Board or applicable trading market as reported by a reliable reporting service designated by the note holder. The note holder is limited to owning 4.99% of the Company’s issued and outstanding shares. Default interest is 22% per annum should the Company default on the CPN#13. The Company may prepay CPN#13 at any time for the period beginning on the date of the CPN#13 and ending on the date which is ninety (90) days following the date of the CPN#13, the CPN#13 may be prepaid by the Company upon payment to the note holder of an amount equal to the outstanding principal amount of the CPN#13 multiplied by 125% together with accrued and unpaid interest thereon. At any time during the period beginning on the ninety (91) day from the date of the CPN#13 and ending on the date which is one hundred twenty (120) days following the date of CPN#13, the Company may prepay the CPN#13 to the note holder upon payment of an amount equal to the outstanding principal amount of the CPN#13 multiplied by 135% together with accrued and unpaid interest thereon. At any time during the period beginning on the date which is one hundred twenty one (121) days from the date of the CPN#13 and ending on one hundred eighty (180) days following the date of this CPN#13, the Company may prepay the CPN#13 to the note holder upon payment of an amount equal to the outstanding principal amount of the CPN#13 multiplied by 145% together with accrued and unpaid interest thereon. After the expiration of one hundred eighty (180) days following the date of the CPN#13, the Company shall have no right of prepayment. The floor price of $0.00005.

On July, 8, 2013, the Company was awarded a judgment dismissing, without prejudice, the legal action between Xun Energy, Inc., as Plaintiff and Lea Kennedy, an individual, d/b/a LUXEMBARINGS, as Defendant. The Company filed for a voluntary dismissal without prejudice on the legal action.

F28

On July 11, 2013, the Company entered into a amended and restated reserve equity financing agreement (the “Financing Agreement”) with AGS Capital Group, LLC, (“AGS”). Pursuant to the Financing Agreement, the Company has the right, but not the obligation, to issue $15,000,000 of the Company’s common stock to AGS over the course of 3 years. The Company has full control and discretion over the timing and amount of any shares that they sell to AGS when the Market Price, as defined in the Financing Agreement, is $0.50 or higher per share. For each advance, the Company may issue an amount of stock up to $250,000. Such advance will not exceed more than 200% of the average daily trading volume for the previous 10 trading days. The purchase price of the shares shall be set at ninety percent (90%) of the average of the three (3) lowest closing bid prices of the stock during the ten (10) consecutive weekday trading days (the “Pricing Period”) immediately after the date on which the Company provides an advance notice. The Company, at its option, may select a safety net price for any specified advance which the Company will not sell shares to AGS under that advance when the Purchase Price (Market Price less 10% discount) falls below such safety net price during the Pricing Period. The Company issued 4,081,633 shares of common stock as a commitment fee deposit towards the commitment fee of $40,000 to be deducted from the first advance. Prior to the date of the Agreement, AGS had no material interaction with the Company, other than the negotiation of the Agreement and the negotiation and execution of the original reserve equity financing agreement and registration rights agreement.

On July 11, 2013, the Company also entered into a registration rights agreement with AGS (the “RRA,” and along with the Financing Agreement, the “Agreements”).  According to the RRA, the Company must file a registration statement on Form S-1, registering the shares of common stock which may be issued to AGS pursuant to the Financing Agreement within thirty (30) days of the date of the RRA. Prior to the date of the Agreement, AGS had no material interaction with the Company, other than the negotiation of the Agreement and the negotiation and execution of the original reserve equity financing agreement and registration rights agreement.

On August 1, 2013, the Company issued an unsecured 7 month 8% Convertible Promissory Note (CPN#14) due on March 1, 2014 for $15,000 for value of services rendered. The principal and accrued interest is convertible into shares of common stock at the discretion of the note holder. The note holder may convert all or a portion of the principal amount of CPN#14 into shares of Common Stock at a Conversion Price for each share of Common Stock equal to the higher of (a) $0.0001 subject to adjustment for any future stock splits, reverse stock split, stock dividend, etc., or (b) the Current Market Price multiplied by sixty percent (60%) (the "Conversion Price"). "Current Market Price" means the average of the three lowest closing bid price for the Common Stock as reported by Bloomberg, LP or, if not so reported, as reported on the over-the-counter market, for the five (5) trading days ending on the trading day immediately before the relevant Conversion Date. The Company may prepay CPN#14 without any penalty.

On August 26, 2013, the Company's operator, Vencedor Energy Partners (VEP), completed the drilling, casing and cementing of our first oil well of the 30 well drilling program. Rice oil well number 15 was drilled to the Target Depth of 1,050' on the Rice lease, in Venango County, PA. Samples were taken during the drilling program for analysis. Petroleum odors were emitted at the 720', 745', and 915' levels of the wellbore, indicating oil presence at these depths.  The review of the drill cuttings (samples) from the Rice #15 supported the need for a wire line log to be conducted on the well. VEP's geologist confirmed that the samples taken on August 26, 2013 revealed a well formed zone in the Venango 2 and also potential lenses in the Venango 1 and Red Valley sequence. Oil saturation is estimated at 30-35% for the Venango sequence with a strong show in the Red Valley sequence. The log will provide enough details to determine other key factors in determining whether or not the oil well should be put into production.

On August 29, 2013, the Company issued an unsecured 9 month 8% Convertible Promissory Note (CPN#15) due on June 3, 2014 for $32,500. The principal and accrued interest is convertible into shares of common stock at the discretion of the note holder.  The Conversion Price shall be the greater of: (i) the Variable Conversion Price and (ii) the Fixed Conversion Price (subject, in each case, to equitable adjustments for stock splits, stock dividends or rights offerings by the Company relating to the Company’s securities or the securities of any subsidiary of the Company, combinations, recapitalization, reclassifications, extraordinary distributions and similar events). The "Variable Conversion Price" shall mean 55% multiplied by the Market Price (representing a discount rate of 45%). "Market Price" means the average of the lowest three (3) Trading Prices for the Common Stock during the ten (10) Trading Day period ending on the latest complete Trading Day prior to the Conversion Date. "Trading Price" means, for any security as of any date, the closing bid price on the Over-the-Counter Bulletin Board or applicable trading market as reported by a reliable reporting service designated by the note holder. The note holder is limited to owning 4.99% of the Company’s issued and outstanding shares. Default interest is 22% per annum should the Company default on the CPN#15. The Company may prepay CPN#15 at any time for the period beginning on the date of the CPN#15 and ending on the date which is ninety (90) days following the date of the CPN#15, the CPN#15 may be prepaid by the Company upon payment to the note holder of an amount equal to the outstanding principal amount of the CPN#15 multiplied by 125% together with accrued and unpaid interest thereon. At any time during the period beginning on the ninety (91) day from the date of the CPN#15 and ending on the date which is one hundred twenty (120) days following the date of CPN#15, the Company may prepay the CPN#15 to the note holder upon payment of an amount equal to the outstanding principal amount of the CPN#15 multiplied by 135% together with accrued and unpaid interest thereon. At any time during the period beginning on the date which is one hundred twenty one (121) days from the date of the CPN#15 and ending on one hundred eighty (180) days following the date of this CPN#15, the Company may prepay the CPN#15 to the note holder upon payment of an amount equal to the outstanding principal amount of the CPN#15 multiplied by 145% together with accrued and unpaid interest thereon. After the expiration of one hundred eighty (180) days following the date of the CPN#15, the Company shall have no right of prepayment. The floor price of $0.00005.

F29

On August 31, 2013, the Board of Directors renewed the Board Member Compensation Agreement with Mr. Jerry G. Mikolajczyk as a director of the Company for a term of one (1) year ending August 31, 2014. Mr. Mikolajczyk will receive 5,000 shares per month of the Company’s common stock in consideration for them serving on the Company’s Board of Directors. The common stock will be valued based on the average of the 5 trading day close price prior to each month end. This amount includes all costs related to the engagement Director of the Company except 3^rd party or travel expenses. The terms and conditions will be renegotiated upon the successful consummation of a Business Combination through the acquisition of, or merger or consolidation with, a company that has substantial additional capital and or operating revenues; or the Company is able to finance operating expenses with additional debt or through equity financing of not less than $5 million.

F30

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

 ITEM 13   OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following are our expenses related to our initial public offering:

Securities and Exchange Commission Registration Fee	$	7
Legal Fees	$	18,000
Accounting Fees*	$	3,000
Printing and Engraving*	$	-
Blue Sky Qualification Fees and Expenses*	$	-
Transfer Agent Fee*	$	9,000
Miscellaneous*	$	1,000
TOTAL	$	31,007
* Estimated costs

ITEM 14.   INDEMNIFICATION OF DIRECTORS AND OFFICERS

The Registrant is a Nevada corporation and the provisions of the Nevada Revised Statutes will be applicable to the indemnification the Registrant offers to its officers, directors and agents. In its By-laws the Registrant generally agrees to indemnify each person who is a director or officer of the Registrant, or serves at the request of a director or officer as a director, officer, employee or agent of another company, in accordance with the Registrant's By-laws, to the fullest extent permissible by the Nevada Revised Statutes or other applicable laws. In its By-laws the Registrant indicates that, in connection with any such indemnification, it is within the discretion of the Board of Directors whether to advance any funds in advance of disposition of any action, suit or proceeding.

Under the Articles of Incorporation, the By-laws, and the Nevada Revised Statutes, no director of the Registrant will be personally liable to the Registrant or its stockholders for monetary damages, or expenses in defense of an action, for breach of fiduciary duty as a director or by reason of the fact that he is or was a director, officer, employee or agent of the Registrant, or serving in such capacity for another entity at the request of the Registrant, except for liability (i) for any breach of the director's duty of loyalty to the Registrant or its stockholders, (ii) for acts or omissions not in good faith or there is reasonable cause to believe it was unlawful, or (iii) for any transaction from which the director derived an improper personal benefit. The Registrant has the power to purchase and maintain insurance on behalf of any persons potentially eligible for indemnification. The rights to indemnification are also applicable to those persons entitled to such rights by virtue of the Registrant's consummation of a business combination, including such consummations wherein the Registrant is merged into or reorganized as a new entity.

The foregoing description of available indemnification is a summary only, and is qualified in its entirety by the complete terms and provisions of the Nevada Revised Statutes and also the Registrant's Articles of Incorporation and By-laws, filed herewith as exhibits.

II-1

ITEM 15    RECENT SALES OF UNREGISTERED SECURITIES

Below is a chart of all the shareholders who purchased shares since May 31, 2013. The chart provides detail on the sales price of the common stock of the Company, person purchasing the security, the date and amount of the security.

Cert No	Name	Shares	per share $	Total Paid	Date of Payment	Exemption from Registration
2256	Asher Enterprises, Inc.	5,714,286	0.0021	$12,000.00	12/6/2012	4(2)
2257	Continental Equities, LLC	5,000,000	0.00275	$13,750.00	10/19/2012	4(2)
2259	Asher Enterprises, Inc.	7,380,952	0.0021	$15,500.00	12/6/2012	4(2)
2262	Continental Equities, LLC	4,000,000	0.00115	$4,600.00	10/19/2012	4(2)
2263	Asher Enterprises, Inc.	10,454,545	0.0011	$11,500.00	12/6/2012	4(2)
2265	Continental Equities, LLC	12,195,121	0.00082	$10,000.00	10/19/2012	4(2)
2268	Continental Equities, LLC	14,285,714	0.0007	$10,000.00	10/19/2012	4(2)
2270	DebentureVision Opportunity Fund I, LLC	20,689,655	0.00058	$12,000.00	10/19/2012	4(2)
2271	Continental Equities, LLC	16,949,152	0.00059	$10,000.00	10/19/2012	4(2)
2272	DebentureVision Opportunity Fund I, LLC	33,000,000	0.0005	$16,500.00	10/19/2012	4(2)
2275	Continental Equities, LLC	20,408,163	0.00049	$10,000.00	10/19/2012	4(2)
2276	DebentureVision Opportunity Fund I, LLC	19,186,046	0.00043	$8,250.00	10/19/2012	4(2)

DESCRIBE UNREGISTERED STOCK ISSUES SINCE MAY 31, 2013:

The Company issued 5,714,286 shares on June 13, 2013 for $12,000 pursuant to a Convertible Promissory Note dated December 6, 2012.

The Company issued 5,000,000 shares on June 17, 2013 for $13,750 pursuant to a Convertible Promissory Note dated October 19, 2012.

The Company issued 7,380,952 shares on June 19, 2013 for $15,500 pursuant to a Convertible Promissory Note dated December 6, 2012.

The Company issued 4,000,000 shares on July 8, 2013 for $4,600 pursuant to a Convertible Promissory Note dated October 19, 2012.

The Company issued 10,454,545 shares on July 15, 2013 for $11,500 pursuant to a Convertible Promissory Note dated December 6, 2012.

The Company issued 12,195,121 shares on July 23, 2013 for $10,000 pursuant to a Convertible Promissory Note dated October 19, 2012.

The Company issued 14,285,714 shares on August 9, 2013 for $10,000 pursuant to a Convertible Promissory Note dated October 19, 2012.

The Company issued 20,689,655 shares on August 20, 2013 for $12,000 pursuant to a Convertible Promissory Note dated October 19, 2012.

The Company issued 16,949,152 shares on August 26, 2013 for $10,000 pursuant to a Convertible Promissory Note dated October 19, 2012.

The Company issued 33,000,000 shares on August 27, 2013 for $16,500 pursuant to a Convertible Promissory Note dated October 19, 2012.

The Company issued 20,408,163 shares on September 4, 2013 for $10,000 pursuant to a Convertible Promissory Note dated October 19, 2012.

The Company issued 19,186,046 shares on September 9, 2013 for $8,250 pursuant to a Convertible Promissory Note dated October 19, 2012.

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

II-2

ITEM 16.   EXHIBITS

3.1	Articles of Incorporation for Xun Energy, Inc., as amended
3.2	By-Laws of Xun Energy, Inc., as amended
4.1	Form of Specimen Stock Certificate
5.1	Opinion of Matthew McMurdo, Esq., legal counsel.
10.1 10.2 22.1 23.1	Reserve Equity Financing Agreement, by and between Xun Energy, Inc. and AGS Capital Group, LLC, dated July 11, 2013. Registration Rights Agreement, by and between Xun Energy, Inc. and AGS Capital Group, LLC, dated July 11, 2013. Subsidiaries Consent of Weinberg & Baer LLC,
23.2	Consent of Matthew McMurdo, Esq. (included in Exhibit 5.1)

II-3

ITEM 17.   UNDERTAKINGS 

UNDERTAKINGS

The Registrant undertakes:

1.   Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.

The Registrant is registering securities under Rule 415 of the Securities Act and hereby undertakes:

1.   To file, during any period in which it offers or sells securities, a post-effective amendment to this registration statement to:

(i) Include any prospectus required by Section 10(a)(3) of the Securities Act;

(ii) Reflect in the prospectus any facts or events which, individually or together, represent a fundamental change in the information in the registration statement; and notwithstanding the forgoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospects filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in the volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement.

(iii) Include any additional or changed material information on the plan of distribution.

2.   That, for the purposes of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

3.   To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.

4.   The undersigned Registrant hereby undertakes that:

A.   For determining liability of the undersigned issuer under the Securities Act to any purchaser in the initial distribution of the securities, the undersigned issuer undertakes that in a primary offering of securities of the undersigned issuer pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned issuer will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:

i. Any preliminary prospectus or prospectus of the undersigned issuer relating to the offering required to be filed pursuant to Rule 424;

ii.	Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned issuer or used or referred to by the undersigned issuer;
iii.	The portion of any other free writing prospectus relating to the offering containing material information about the undersigned  issuer or its securities provided by or on behalf of the undersigned issuer; and

iv. Any other communication that is an offer in the offering made by the undersigned issuer to the purchaser.

B. That for the purpose of determining liability under the Securities Act to any purchaser:

Each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.

"Insofar as indemnification for liabilities arising under the Securities Act of 1933 (the "Act") may be permitted to directors, officers and controlling persons of the issuer pursuant to the foregoing provisions, or otherwise, the issuer has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable."

In the event that a claim for indemnification against such liabilities (other than the payment by the issuer of expenses incurred or paid by a director, officer or controlling person of the issuer in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the issuer will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant has duly caused this registration statement to be signed on its behalf by the undersigned, on September 17, 2013.

XUN ENERGY, INC.
By:	/s/ Jerry G. Mikolajczyk
	Jerry G. Mikolajczyk, CEO and President

In accordance with the requirements of the Securities Act of 1933, this registration statement was signed by the following persons in the capacities and on the dates stated.

/s/ Jerry G. Mikolajczyk	Dated: September 17, 2013
Jerry G. Mikolajczyk, President, CEO, CFO and Principal Accounting Officer

/s/ Peter Matousek

            Dated: September 17, 2013

Peter Matousek, Director

/s/ Dr. William D. Spier

            Dated: September 17, 2013

Dr. William D. Spier, Director

EX-3

Exhibit 3.1

ARTICLES OF INCORPORATION

(PURSUANT TO NRS 78)

1.	Name of Corporation:	REAL VALUE ESTATES, INC.
2.	Resident Agent:	Business Filings Incorporated
	Street Address:	5348 Vegas Drive, Las Vegas, Nevada, 89108
3.	Shares:	Common Stock - 100,000,000, Par Value: $0.0001
		Preferred Stock - 50,000,000, Par Value: $0.0001
		Total Authorized: 150,000,000, see attached
4.	Name and address of Directors/Trustees:	1. Marina Karpilovski, 3/11 Trumpeldor St., Holon, Israel, 58271
		2. Michael Zazkis, 25 Tashah St., Zichron Yakov, Israel, 30900
5.	Purpose:	The purpose of this corporation shall be: Any law full business.
6.	Name, address and Signature of Incorporator:	Sheila King                       /s/Sheila King 5348 Vegas Drive, Las Vegas, Nevada, 89108
7.	Certificate of Acceptance of Appointment of Resident Agent:	I hereby accept appointment as Resident Agent for the above named corporation: /s/ Sheila King                      Date: 12/20/07 Authorized Signature of R. A. or On Behalf of R. A. Company

                                   ATTACHMENT

                                       TO

                            ARTICLES OF INCORPORATION

                                       OF

                            REAL VALUE ESTATES, INC.

ARTICLE 3. CAPITAL STOCK

The aggregate number of shares that the Corporation will have authority to issue is One Hundred and Fifty  Million  (150,000,000),  of which One Hundred  Million (100,000,000) shares will be common stock ("Common Stock"),  with a par value of $0.0001 per share,  and Fifty  Million  (50,000,000)  shares  will be  preferred stock, with a par value of $0.0001 per share ("Preferred Stock").

The  Preferred  Stock may be divided  into and  issued in  series.  The Board of Directors of the  Corporation is authorized to divide the  authorized  shares of Preferred Stock into one or more series, each of which shall be so designated as to  distinguish  the  shares  thereof  from the  shares of all other  series and classes.  The Board of Directors of the  Corporation is  authorized,  within any limitations  prescribed  by law  and  this  Article,  to fix and  determine  the designations, rights, qualifications,  preferences, limitations and terms of the shares  of any  series of  Preferred  Stock  including  but not  limited  to the following:

a)

The  rate of  dividend, the time of  payment  of  dividends,  whether dividends are cumulative, and the date from which any dividends shall accrue;

b)

Whether shares may be redeemed, and, if so, the redemption  price and the terms and conditions of redemption;

c)

The amount payable upon shares in the event of voluntary or involuntary liquidation;

d)

Sinking  fund or  other  provisions,  if any,  for the  redemption  or purchase of shares;

e)

The terms and  conditions  on which  shares may be  converted,  if the shares of any series are issued with the privilege of conversion;

f)

Voting powers,  if any, provided that if any of the Preferred Stock or series  thereof  shall have voting  rights,  such  Preferred  Stock or series  shall  vote only on a share for share  basis  with the  Common Stock on any  matter,  including  but not  limited to the  election of directors,  for which such Preferred  Stock or series has such rights; and

g)

Subject to the foregoing, such other terms, qualifications, privileges, limitations, options, restrictions, and special or relative rights and  preferences,  if any, of shares or such series as the Board of Directors of the Corporation  may, at the time so acting lawfully fix and determine under the laws of the State of Nevada.

The Corporation shall not declare,  pay or set apart for payment any dividend or other  distribution  (unless  payable  solely in shares of Common Stock or other class  of  stock  junior  to  the  Preferred  Stock  as  to  dividends  or  upon liquidation)  in respect of Common Stock,  or other class of stock junior to the Preferred  Stock,  nor  shall it  redeem,  purchase  or  otherwise  acquire  for consideration shares of any of the foregoing,  unless dividends, if any, payable to  holders  of  Preferred  Stock  for the  current  period  (and in the case of cumulative  dividends,  if any,  payable to holders of  Preferred  Stock for the current  period and in the case of  cumulative  dividends,  if any, for all past periods) have been paid,  are being paid or have been set aside for payment,  in accordance  with the  terms of the  Preferred  Stock,  as fixed by the  Board of Directors.

In the event of the  liquidation of the  Corporation,  holders of Preferred Stock shall be entitled to receive,  before any payment or  distribution on the Common Stock  or  any  other  class  of  stock  junior  to  the  Preferred  Stock  upon liquidation,  a  distribution  per  share  in  the  amount  of  the liquidation preference,  if any,  fixed or determined  in accordance  with the terms of such Preferred Stock plus, if so provided in such terms, an amount per share equal to accumulated and unpaid  dividends in respect of such Preferred Stock (whether or not earned or  declared)  to the date of such  distribution. Neither the sale, lease or exchange of all or substantially  all of the property and assets of the Corporation, nor any consolidation or merger of the Corporation, shall be deemed to be a liquidation for the purposes of this Article.

ARTICLE 8. BOARD OF DIRECTORS

     (a)  Number of  Directors.  The number of the  directors  constituting  the

          entire  Board will be not less than one (1) nor more than fifteen (15)

          as  fixed  from  time to time by vote of the  majority  of the  entire

          Board,  provided,  however,  that the number of directors  will not be

          reduced  so as to  shorten  the  term of any  director  at the time in

          office.

     (b)  Vacancies. Any vacancies in the Board of Directors for any reason, and

          any  directorships  resulting  from  any  increase  in the  number  of

          directors,  may be  filled  by the  Board of  Directors,  acting  by a

          majority of the directors then in office, although less than a quorum,

          and any  directors so chosen will hold office  during the remainder of

          the term of office of the resigning director.

ARTICLE 9. ACQUISITION OF CONTROLLING INTEREST

The Corporation elects not to be governed by NRS 78.378 to 78.3793, inclusive.

ARTICLE 10. COMBINATIONS WITH INTEREST STOCKHOLDERS

The Corporation elects not to be governed by NRS 78.411 to 78.444, inclusive.

ARTICLE 11. LIABILITY

To the  fullest  extent  permitted  by NRS 78,  a  director  or  officer  of the

Corporation will not be personally liable to the Corporation or its stockholders

for damages for breach of fiduciary duty as a director or officer, provided that

this article will not  eliminate or limit the liability of a director or officer

for:

     (a)  acts or omissions  which involve  intentional  misconduct,  fraud or a

          knowing violation of law; or

     (b)  the payment of distributions in violation of NRS 78.300, as amended.

         Any amendment or repeal of this Section 5 will not adversely affect any

right or protection of a director of the Corporation  existing immediately prior

to such amendment or repeal.

ARTICLE 12. INDEMNIFICATION

     (a)  Right  to  Indemnification.  The  Corporation  will  indemnify  to the

          fullest extent permitted by law any person (the  "Indemnitee") made or

          threatened to be made a party to any threatened,  pending or completed

          action or  proceeding,  whether  civil,  criminal,  administrative  or

          investigative  (whether or not by or in the right of the  Corporation)

          by  reason  of the  fact  that he or she is or was a  director  of the

          Corporation or is or was serving as a director,  officer,  employee or

          agent of  another  entity at the  request  of the  Corporation  or any

          predecessor of the Corporation  against judgments,  fines,  penalties,

          excise  taxes,  amounts  paid in  settlement  and costs,  charges  and

          expenses (including  attorneys' fees and disbursements) that he or she

          incurs in connection with such action or proceeding.

     (b)  Inurement.  The right to indemnification will inure whether or not the

          claim  asserted is based on matters  that predate the adoption of this

          Section 6, will  continue as to an  Indemnitee  who has ceased to hold

          the   position  by  virtue  of  which  he  or  she  was   entitled  to

          indemnification, and will inure to the benefit of his or her heirs and

          personal representatives.

     (c)  Non-exclusivity  of Rights.  The right to  indemnification  and to the

          advancement of expenses  conferred by this Section 6 are not exclusive

          of any other rights that an  Indemnitee  may have or acquire under any

          statute,  bylaw,  agreement,  vote of  stockholders  or  disinterested

          directors, these Articles of Incorporation or otherwise.

     (d)  Other Sources. The Corporation's  obligation,  if any, to indemnify or

          to advance  expenses  to any  Indemnitee  who was or is serving at its

          request  as  a  director,   officer,  employee  or  agent  of  another

          corporation,  partnership,  joint venture,  trust, enterprise or other

          entity  will be reduced by any amount such  Indemnitee  may collect as

          indemnification or advancement of expenses from such other entity.

     (e)  Advancement  of Expenses.  The  Corporation  will,  from time to time,

          reimburse or advance to any Indemnitee the funds necessary for payment

          of expenses, including attorneys' fees and disbursements,  incurred in

          connection  with  defending  any  proceeding  for  which  he or she is

          indemnified by the Corporation, in advance of the final disposition of

          such  proceeding;  provided  that the  Corporation  has  received  the

          undertaking  of such  director  or officer to repay any such amount so

          advanced if it is ultimately  determined  by a final and  unappealable

          judicial  decision  that the director or officer is not entitled to be

          indemnified for such expenses.

ARTICLE 13. OBJECTS.

The nature of the business of the Corporation and the objects or the purposes to be  transacted, promoted,or carried on by it are to  engage  in any  lawful activity.

CERTIFICATE OF AMENDMENT
TO THE CERTIFICATE OF INCORPORATION

REAL VALUE ESTATES, INC.

ARTICLE 1 of the Certificate of Incorporation is hereby amended as follows:

The Name of the Corporation is:  Xun Energy, Inc.

ARTICLE 3 of the Certificate of Incorporation is hereby amended as follows:

The aggregate number of shares of common stock that the Corporation will have authority to issue is Five  Billion,  (5,000,000,000) par value $0.0001 par value (“Common Shares”) and Fifty Million (50,000,000) shares will be preferred stock, with a par value of $0.0001 per share ("Preferred Stock").

Effective upon filing of this Certificate of Amendment to the Certificate of Incorporation, each one (1) outstanding share of Common Stock shall be forward split into 80 shares of Common Stock.   

The Preferred Stock may be divided into and issued in series.  The Board of Directors of the  Corporation is authorized to divide the  authorized  shares of Preferred Stock into one or more series, each of which shall be so designated as to  distinguish  the  shares  thereof  from the  shares of all other  series and classes.  The Board of Directors of the  Corporation is  authorized,  within any limitations  prescribed  by law  and  this  Article,  to fix and  determine  the designations, rights, qualifications,  preferences, limitations and terms of the shares  of any  series of  Preferred  Stock  including  but not  limited  to the following.

The rate of dividend, the time of payment of dividends, whether dividends are cumulative, and the date from which any dividends shall accrue;

(a)

Whether shares may be redeemed, and, if so, the redemption price and the terms and conditions of redemption;

(b)

The amount   payable upon shares in the event of voluntary or involuntary liquidation;

(c)

Sinking fund or other provisions, if any, for the redemption or purchase of shares;

(d)

The terms and conditions on which shares may be converted, if the shares of any series are issued with the privilege of conversion;

(e)

Voting powers,  if any, provided that if any of the Preferred Stock or series  thereof  shall have voting  rights,  such  Preferred  Stock or series  shall  vote only on a share for share  basis  with the  Common Stock on any  matter,  including  but not  limited to the  election of directors,  for which such Preferred  Stock or series has such rights;  and

(f)

Subject  to  the   foregoing,   such  other   terms,   qualifications, privileges,   limitations,   options,  restrictions,  and  special  or  relative rights and  preferences,  if any, of shares or such series as the Board of Directors of the Corporation  may, at the time so acting, awfully fix and determine under the laws of the State of Nevada.

The Corporation shall not declare, pay or set apart for payment any dividend or other  distribution  (unless  payable  solely in shares of Common Stock or other class  of  stock  junior  to  the  Preferred  Stock  as  to  dividends  or  upon liquidation)  in respect of Common Stock, or other class of stock junior to the Preferred  Stock, nor shall it  redeem, purchase or otherwise  acquire  for consideration shares of any of the foregoing, unless dividends, if any, payable to holders of Preferred Stock for the  current period (and in the case of cumulative dividends,  if any, payable to holders of  Preferred Stock for the current  period and in the case of cumulative dividends, if any, for all past periods) have been paid, are being paid or have been set aside for payment,  in accordance with the terms of the Preferred Stock, as fixed by the Board of Directors.

In the event of the  liquidation of the  Corporation,  holders of Preferred Stock shall be entitled to receive,  before any payment or  distribution on the Common Stock  or  any  other  class  of  stock  junior  to  the  Preferred  Stock  upon liquidation,  a  distribution  per  share  in  the  amount  of  the  liquidation preference,  if any,  fixed or determined  in accordance  with the terms of such Preferred Stock plus, if so provided in such terms, an amount per share equal to accumulated and unpaid dividends in respect of such Preferred Stock (whether or not earned or declared) to the date of such distribution. Neither the sale, lease or exchange of all or substantially all of the property and assets of the Corporation, nor any consolidation or merger of the Corporation, shall be deemed to be liquidation for the purposes of this Article.

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

The number of votes cast in favor of the amendment was sufficient for approval.

This Certificate of amendment is dated the 20th day of July, 2010

/s/ Dennis T. Kushner, President

EX-3

Exhibit 3.2                                                                     

                                     BY-LAWS

                                       OF

   XUN ENERGY, INC.

(formerly REAL VALUE ESTATES, INC.)

 (the "Corporation")

                              * * * * * * * * * * *

                                    ARTICLE I

                                     Offices

     The Corporation may have offices at such other places, both within and without the State of Nevada, as the Board of Directors may determine and designate from time to time or the business of the Corporation requires.

                                   ARTICLE II

                                      Books

     The books and records of the Corporation may be kept (except as otherwise Provided by the laws of the State of Nevada) outside of the State of Nevada and At such place or places as may be designated by the Board of Directors.

                                   ARTICLE III

                                  Stockholders

     Section 1. Place of Meetings, etc.  Except as otherwise provided in these Bylaws, all meetings of the stockholders shall be held at such dates, times and places, within or without the State of Nevada, as shall be determined by the Board of Directors or the President of the Corporation and as shall be stated in the notice of the meeting or in waivers of notice thereof.  If the place of any meeting is not so fixed, it shall be held at the registered office of the Corporation in the State of Nevada.

     Section 2.  Annual Meetings. The Annual Meeting of stockholders of the Corporation for the election of Directors and the transaction of such other business as may properly come before said meeting shall be held at the principal business office of the Corporation or at such other place or places either within or without the State of Nevada as may be designated by the Board of Directors and stated in the notice of the meeting, on a date not later than 120 days following the close of the fiscal year of the Corporation as designated by the Board of Directors.

     Section 3. Special Meetings.  Special meetings of the stockholders of the Corporation shall be held whenever called in the manner required by the laws of the State of Nevada for purposes as to which there are special statutory provisions, and for other purposes whenever called by resolution of the Board of Directors, or by  the  President,  or by  the  holders  of a  majority  of  the outstanding  shares of capital stock of the Corporation the holders of which are entitled to vote on matters  that are to be voted on at such  meeting.  Any such Special Meetings of stockholders may be held at the principal business office of the Corporation or at such other place or places, either within or without the State of Nevada, as may be specified in the notice thereof. Business transacted at any Special Meeting of stockholders of the Corporation shall be limited to the purposes stated in the notice thereof. The notice shall state the date, time, place and purpose or purposes of the proposed meeting.

     Section 4. Notice of Meetings. Except as otherwise required or permitted by

law, whenever the stockholders of the Corporation are required or permitted to take any action at a meeting, written notice thereof shall be given, stating the place, date and time of the meeting and, unless it is the annual meeting,  by or at whose direction it is being issued. The notice also shall designate the place where the stockholders’ list is available for examination, unless the list is kept at the place where the meeting is to be held. Notice of a Special Meeting also shall state the purpose or purposes for which the meeting is called. A copy of the notice of any meeting  shall be delivered  personally or shall be mailed, not less than ten (10) nor more than  sixty  (60)  days  before  the date of the meeting,  to each  stockholder  of record  entitled to vote at the  meeting. If mailed,  the notice  shall be given when  deposited  in the United  States mail, postage prepaid and shall be directed to each  stockholder at his or her address as it appears on the record of  stockholders,  unless he or she shall have filed with the Secretary of the  Corporation a written  request that notices to him or her be mailed to some other  address,  in which case it shall be directed to him or her at the other address.  Notice of any meeting of stockholders shall not be required to be given to any stockholder who shall attend the meeting, except for the express purpose of objecting at the beginning  thereof to the transaction of any  business  because the meeting is not lawfully  called or  convened,  or who shall  submit,  either  before or after the meeting,  a signed waiver of notice. Unless the Board of Directors, after the adjournment of such meeting, shall fix a new record date for an adjourned meeting or unless the adjournment is for more than thirty (30) days, notice of an adjourned meeting need not be given if the place, date and time to which the meeting shall be adjourned is announced at the meeting at which the adjournment is taken.

     Section 5. List of Stockholders.  The officer of the Corporation who shall have charge of the stock ledger of the Corporation shall prepare and make, at least ten (10) days before every meeting of stockholders, a complete list of the stockholders entitled to vote at said meeting, arranged in alphabetical order and showing the address and the number of shares registered in the name of each stockholder.  Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours for a period of at least ten (10) days prior to the meeting, either at a place specified in the notice of the meeting or at the place where the meeting is to be held.  The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder present at the meeting.

     Section 6. Quorum.  Except as otherwise expressly provided by the laws of the State of Nevada, or by the Certificate of Incorporation of the Corporation, or by  these  Bylaws,  at  any  and  all  meetings  of the  stockholders  of the Corporation there must be present, either in person or by proxy, stockholders owning a majority of the issued and outstanding shares of the capital stock of the Corporation entitled to vote at said meeting. At any meeting of stockholders at which a quorum is not present, the holders of, or proxies for, a majority of the stock, which is represented at such meeting, may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented. At such adjourned meeting at which a quorum shall be present or represented any business may be transacted which might have been transacted at the meeting as originally noticed. If the adjournment is for more than thirty (30) days, or if after adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the Meeting.

     Section 7. Organization.  The President shall call to order meetings of the stockholders and shall act as Chairman of such meetings.  The Board of Directors or the stockholders may appoint any stockholder or any Director or officer of the  Corporation  to act  as  Chairman  at any  meeting  in the  absence  of the President.  The Secretary of the Corporation shall act as secretary of all meetings of the stockholders, but in the absence of the Secretary, the presiding officer may appoint any other person to act as secretary of the meeting.

     Section 8.  Voting.  Except as otherwise provided by the Certificate  of Incorporation of the Corporation or these Bylaws, at any meeting of the stockholders each stockholder of record of the Corporation having the right to vote  thereat  shall  be  entitled  to one (1)  vote  for  each  share  of stock outstanding in his or her name on the books of the Corporation as of the record date and entitling him or her to so vote. A stockholder may vote in person or by proxy.  Except as otherwise provided by the law of the State of Nevada or by the Certificate of Incorporation of the Corporation, any corporate action to be taken by a vote of the stockholders, other than the election of directors, shall be authorized by not less than a majority of the votes cast at a meeting by the stockholders  present  in  person  or by proxy  and  entitled  to vote  thereon. Directors shall be elected as provided in Section 1 of Article IV of these Bylaws.  Written ballots shall not be required for voting on any matter unless ordered by the Chairman of the meeting.

     Section  9.  Proxies.  Every proxy shall be executed in writing by the stockholder or by his or her attorney-in-fact.

     Section 10. Consent of Stockholders in Lieu of Meeting.  Unless otherwise provided in the Certificate of Incorporation of the Corporation, whenever the vote of the stockholders at a meeting thereof is required or permitted to be taken in connection with any corporate action by any provisions of the laws of the state of Nevada or of the Certificate of Incorporation, such corporate action may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed, in person or by proxy, by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted in person or by proxy. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing, but who were entitled to vote on the matter.

                                   ARTICLE IV

                                    Directors

     Section 1. Number, Election and Term of Office. The business and affairs of the Corporation shall be managed by the Board of Directors. The number of Directors which shall constitute the whole Board shall be not less than one (1) nor more than fifteen (15). Within such limits, the number of Directors may be fixed from time to time by vote of the stockholders or of the Board of Directors, at any regular or special meeting, subject to the provisions of the Certificate of Incorporation. The initial board shall consist of two (2) Directors. Directors need not be stockholders. Directors shall be elected at the Annual Meeting of the stockholders of the Corporation, except as provided in Section 2 of this Article IV, to serve until their respective successors are duly elected and qualified. When used in these Bylaws, the phrase "entire Board" means the total number of directors which the Corporation would have if there were no vacancies.

     Section 2. Vacancies and Newly Created Directorships. Except as hereinafter provided, any vacancy in the office of a Director occurring for any reason other than the removal of a Director pursuant to Section 3 of this Article, and any newly created Directorship resulting from any increase in the authorized number of Directors, may be filled by a majority of the Directors then in office.  In the event that any vacancy in the office of a Director occurs as a result of the removal of a Director pursuant to Section 3 of this Article, or in the event those vacancies occur contemporaneously in the offices of all of the Directors, such vacancy or vacancies shall be filled by the stockholders of the Corporation at a meeting of stockholders called for that purpose.  Directors chosen or elected as aforesaid shall hold office until their respective successors are duly elected and qualified.

     Section 3.  Removals.  At any meeting of stockholders of the Corporation called for that purpose, the holders of a majority of the shares of capital stock of the Corporation entitled to vote at such meeting may remove from office any or all of the Directors, with or without cause.

     Section  4.  Resignations.  Any director may resign at any time by giving written notice of his or her resignation to the Corporation. A resignation shall take effect at the time specified therein or, if the time when it shall become effective shall not be specified therein, immediately upon its receipt, and, unless otherwise specified therein, the acceptance of a resignation shall not be

necessary to make it effective.

     Section 5. Place of Meetings. Except as otherwise provided in these Bylaws, all meetings of the Board of Directors shall be held at the principal business office of the Corporation or at such other place, within or without the State of Nevada, as the Board determines from time to time.

     Section 6. Annual Meetings.  The annual meeting of the Board of Directors shall be held either (a) without notice immediately after the annual meeting of stockholders and in the same place, or (b) as soon as practicable after the annual meeting of stockholders on such date and at such time and place as the Board determines.

     Section 7.  Regular Meetings. Regular meetings of the Board of Directors shall  be  held  on such  dates  and at the  principal  business  office  of the Corporation or at such other place, either within or without the State of Nevada, as the Board determines. Notice of regular meetings need not be given, except as otherwise required by law.

     Section 8. Special Meetings. Special meetings of the Board of Directors may be  called  by the  President  or any two  Directors  on  notice  given  to each Director, and such meetings shall be held at the principal business office of the Corporation or at such other place, either within or without the State of Nevada, as shall be specified in the notices thereof. The request shall state the date, time, place and purpose or purposes of the proposed meeting.

Section 9. Notice of Meetings. Notice of each special meeting of the Board of Directors (and of each annual meeting held pursuant to subdivision (b)of Section 6 of this Article IV) shall be given, not later than 7 days before the meeting is scheduled to commence, by the  President or the Secretary and shall state the place, date and time of the meeting. Notice of each meeting may be delivered to a Director by hand or given to a director orally whether  by telephone or in person)or mailed or telegraphed to a Director at his or her residence or usual place of business, provided, however, that if notice of less than 72 hours is given it may not be mailed. If mailed, the notice shall be deemed to have been given when deposited in the United States mail, postage prepaid, and if telegraphed, the notice shall be deemed to have been given when the contents of the telegram are transmitted to the telegraph service with instructions that the telegram immediately be dispatched. Notice of any meeting need not be given to any Director who shall submit, either before or after the meeting, a signed waiver of notice or who shall attend the meeting, except if such Director shall attend for the express purpose of objecting at the beginning thereof to the transaction of any business because the meeting is not lawfully called or convened. Notice of any adjourned meeting, including the place, date and time of the new meeting, shall be given to all Directors not present at the time of the adjournment, as well as to the other Directors unless the place, date and time of the new meeting is announced at the adjourned meeting. Emergency Meetings, less than 24 hour notice, require unanimous consent of the Board of Directors to waive the required 7 day notice period.

Section 10. Quorum. Except as otherwise provided by the laws of the State of Nevada or in these Bylaws, at all meetings of the Board of Directors of the Corporation a majority of the entire Board shall constitute a quorum for the transaction of business, and the vote of a majority of the Directors present at a  meeting  at  which a  quorum  is  present  shall  be the act of the  Board of Directors. A majority of the Directors present, whether or not a quorum is present, may adjourn any meeting to another place, date and time.

     Section 11. Conduct of Meetings. At each meeting of the Board of Directors of the Corporation, the President or, in his or her absence, a Director chosen by a majority of the Directors present shall act as Chairman of the meeting. The Secretary or, in his or her absence, any person appointed by the Chairman of the meeting shall act as Secretary of the meeting and keep the minutes thereof. The order of business at all meetings of the Board shall be as determined by the Chairman of the meeting.

     Section 12. Committees of the Board. The Board of Directors, by resolution adopted by a majority of the entire Board of Directors, may designate an executive committee and other committees, each consisting of one (1) or more Directors. Each committee (including the members thereof) shall serve at the pleasure of the Board of Directors and shall keep minutes of its meetings and report the same to the Board of Directors. The Board of Directors may designate one or more Directors as alternate members of any committee. Alternate members may replace any absent or disqualified member or members at any meeting of a committee. In  addition,  in the absence or  disqualification  of a member of a committee, if no alternate member has been designated by the Board of Directors, the members present at any meeting and not disqualified from voting,  whether or not they  constitute a quorum,  may  unanimously  appoint  another member of the Board  of  Directors  to act at  the  meeting  in the  place  of the  absent  or disqualified member.

     Except as limited by the laws of the State of Nevada, each committee, to the extent provided in the resolution establishing it, shall have, and may exercise all the powers and authority of the Board of Directors with respect to all matters.

     Section 13. Operation of Committees. A majority of all the members of a committee shall constitute a quorum for the transaction of business, and the vote of a majority of all the members of a committee present at a meeting at which a quorum is present shall be the act of the committee. Each committee shall adopt whatever other rules of procedure it determines for the conduct of its activities.

     Section 14. Consent to Action. Any action required or permitted to be taken at any  meeting  of the  Board of  Directors  or of any  committee  may be taken without a meeting if all members of the Board of Directors or committee,  as the case may be, consent  thereto in writing,  and the writing or writings are filed with the minutes of proceedings of the Board of Directors or committee.

     Section 15. Meetings Held Other Than in Person. Unless otherwise restricted by the Certificate of Incorporation or these Bylaws, members of the Board of Directors  or any  committee  may  participate  in a  meeting  of the  Board  of Directors or committee,  as the case may be, by means of conference telephone or similar communications  equipment by means of which all persons participating in the  meeting  can hear  each  other,  and such  participation  shall  constitute presence in person at the meeting.

     Section  16. Compensation of Directors. Directors, as such, shall not receive any stated salary for their services, but, by resolution of the Board, a fixed sum and expenses of attendance, if any, may be allowed for the attendance at each  regular  or  special  meeting  of the  Board;  however  nothing  herein contained  shall  be  construed  to  preclude  any  Director  from  serving  the Corporation in any other capacity and receiving compensation therefore.

                                    ARTICLE V

                                    Officers

     Section 1. Number, Election and Term of Office. The officers of the Corporation shall be a President, a Secretary, and a Treasurer, and may at the discretion of the Board of Directors include a Chief Executive Officer, a Chief

Financial Officer, Chairman of the Board and one or more Vice Presidents, Director of Corporate Development,   General Managers, Assistant Financial Officers and Assistant Secretaries. The officers of the Corporation shall be elected annually by the Board of Directors at its meeting held immediately after the Annual Meeting of the stockholders, and shall hold their respective offices until  their  successors  are duly  elected and  qualified. Any two (2) or more offices may be held by the same person. The Board of Directors may from time to time appoint such other officers and agents as the interests of the Corporation may require and may fix their duties and terms of office. Any officer may devote less than one hundred percent (100%) of his or her working time to his or her activities as such.

     Section 2. The President. The President shall be the chief executive and operating officer of the Corporation, and shall preside at all meetings of the stockholders and of the Board of Directors. The President shall have general and active management of the business and affairs of the Corporation, subject to the control of the Board, shall see that all orders and resolutions of the Board are effectuated, and shall have such other powers and duties as the Board assigns to him. He shall ensure that the books, reports, statements, certificates and other records of the Corporation are kept, made or filed in accordance with the laws of the State of Nevada. He shall cause to be called regular and special meetings of the stockholders and of the Board of Directors in accordance with these Bylaws. He may sign, execute, and deliver in the name of the Corporation all deeds, mortgages, bonds, contracts or other instruments authorized by the Board of Directors, except in cases where the signing, execution or delivery thereof shall be expressly delegated by the Board of Directors or by these Bylaws to some other officer or agent of the Corporation or where required by law to be otherwise signed, executed or delivered. He  may  sign,  jointly  with  the Secretary,  an Assistant  Secretary,  the Treasurer,  or an Assistant  Financial Officer,  certificates of stock of the Corporation. He shall appoint and remove, employ  and  discharge,  and  fix  the  compensation  of all  servants,  agents, employees and clerks of the Corporation other than the duly elected or appointed officers,  subject to the approval of the Board of Directors. In addition to the powers and duties expressly conferred upon him by these Bylaws, he shall, except as otherwise specifically provided by the laws of the State of Nevada, have such other  powers and duties as shall  from time to time be  assigned  to him by the Board of Directors.

     Section 3. The Vice President. There may be such Vice Presidents as the Board of Directors shall determine from time to time, with duties determined by the Board of Directors. If there is only one Vice President appointed by the Board, he shall perform, in the absence or disability of the President, the duties and exercise the powers of the President and shall have such other powers in addition, duties as the Board or the President assigns to him.

     Section 4. The Secretary. The Secretary may sign all certificates of stock

of the Corporation jointly with the President. He shall record all the proceedings of the meetings of the stockholders and the Board of Directors of the Corporation in the books to be kept for that purpose. He shall have safe custody of the seal of the Corporation and, when authorized by the Board, he shall affix the same to any corporate instrument, and when so affixed he may attest the same by his signature. He shall keep the transfer books, in which all transfers of the capital stock of the Corporation shall be registered, and the stock books, which shall contain the names and addresses of all holders of the capital stock of the Corporation and the number of shares held by each. He shall keep the stock and transfer books available during business hours for inspection by any stockholder and for the transfer of stock. He shall notify the Directors and stockholders of the respective meetings as required by law or by these Bylaws of the Corporation. He shall have and perform such other powers and duties as may be required by law or the Bylaws of the Corporation, or which the Board or the President may assign to him from time to time.

     Section 5. Assistant Secretaries. The Assistant Secretaries shall, during the absence or incapacity of the Secretary, assume and perform all functions and duties which the Secretary might lawfully do if present and not under any incapacity.

     Section 6. The Treasurer. Subject to the control of the Board, the Treasurer shall have the care and custody of the corporate funds and the books relating thereto. He shall perform all other duties incident to the office of the Treasurer. He shall have such other powers and duties as the Board or the President assigns to him from time to time. He shall keep full and accurate accounts of all receipts and disbursements of the Corporation in books belonging to the Corporation and shall deposit all monies and other valuable effects in the name and to the credit of the Corporation in such depositories as may be designated by the Board of Directors. He shall disburse the funds of the Corporation as may be ordered by the Board, and shall render to the President or the Directors, whenever they may require it, an account of all his transactions as Treasurer and an account of the business and financial position of the Corporation.

     Section 7. Assistant Financial Officers. The Assistant Financial Officers shall, during the absence or incapacity of the Treasurer, assume and perform all functions and duties which the Treasurer might lawfully do if present and not under any incapacity.

     Section 8. Transfer of Duties. The Board of Directors may transfer the power and duties, in whole or in part, of any officer to any other officer, or other persons, notwithstanding the provisions of these Bylaws, except as otherwise provided by the laws of the State of Nevada.

     Section 9. Removals. Subject to his or her earlier death, resignation or removal as hereinafter provided, each officer shall hold his or her office until his or her successor shall have been duly elected and shall have qualified. Any officer or agent of the Corporation may be removed from office at any time, with or without cause, by the affirmative vote of a majority of the entire Board, at a meeting of the Board of Directors called for that purpose.

     Section  10. Resignations. Any officer or agent of the Corporation may resign at any time by giving written notice of his or her resignation to the Board of Directors or to the President or Secretary of the Corporation. Any such resignation shall take effect at the time specified therein or, if the time when it shall become effective shall not be specified therein, immediately upon its receipt,   and, unless otherwise specified therein, the acceptance of a Resignation shall not be necessary to make it effective.

     Section 11. Vacancies. If the office of President, Secretary or Treasurer becomes vacant for any reason, the Board of Directors shall choose a successor to hold such office for the unexpired term. If any other officer or agent becomes vacant for any reason, the Board of Directors may fill the vacancy, and each  officer  so  elected   shall  serve  for  the  remainder  of  his  or  her

Predecessor’s term.

     Section 12. Compensation  of  Officers. The officers shall receive such the Board of Directors may determine salary or compensation as.

                                    ARTICLE V

                           Contracts, Checks and Notes

     Section 1. Contracts. Unless the Board of Directors shall otherwise specifically direct, all contracts of the Corporation shall be executed in the Name of the corporation by the President or a Vice President.

     Section 2. Checks and Notes. All negotiable instruments of the Corporation shall  be  signed  by such  officers  or  agents  of the  Corporation  as may be designated by the Board of Directors.

                                   ARTICLE VI

                          Provisions Relating to Stock

                          Certificates and Stockholders

     Section 1. Certificates of Stock. Certificates for the Corporation’s capital stock shall be in such form as required by law and as approved by the Board. Each  certificate  shall be signed in the name of the Corporation by the President  or any Vice  President  and by the  Secretary,  the  Treasurer or any Assistant  Secretary or any Assistant  Financial Officer and shall bear the seal of the Corporation or a facsimile  thereof. If any certificate is countersigned by a transfer agent or registered by a registrar,  other than the Corporation or its  employees,  the  signature  of  any  officer  of the  Corporation  may be a facsimile signature. In case any officer,  transfer agent or registrar who shall have signed or whose  facsimile  signature was placed on any  certificate  shall have  ceased  to be  such  officer,  transfer  agent  or  registrar  before  the certificate  shall be issued,  it may  nevertheless be issued by the Corporation with the  same  effect  as if he or she were  such  officer,  transfer  agent or registrar at the date of issue.

     Section 2. Lost Certificates, etc. The Corporation may issue a new certificate for shares in place of any  certificate  theretofore  issued by it, alleged to have been lost,  mutilated,  stolen or  destroyed,  and the Board may require the owner of the lost, mutilated,  stolen or destroyed  certificate,  or his legal  representatives,  to make an  affidavit of that fact and to give the Corporation  a bond in such sum as it may direct as indemnity against any claim that may be made  against the Corporation on account of the  alleged  loss, mutilation,  theft or  destruction of the certificate or the issuance of a new certificate.

     Section 3. Transfer of Stock. Upon surrender to the Corporation or the transfer agent of the  Corporation of a certificate  for shares duly endorsed or accompanied  by proper  evidence  of  succession,  assignment  or  authority  to transfer,  the Corporation  shall issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books.

     Section 4. Record Date. For the purpose of determining the stockholders entitled  to  notice  of or to  vote  at  any  meeting  of  stockholders  or any adjournment thereof, or to express consent to or dissent from any  proposal without a meeting,  or for the purpose of determining  stockholders  entitled to receive  payment of any dividend or other  distribution  or the allotment of any rights, or for the purpose of any other action,  the Board may fix in advance, a record date, which shall be not more than sixty (60) nor less than ten (10) days before the date of any such meeting, nor more than sixty (60) days prior to any other action.

     Section 5. Registered Stockholders. The Corporation shall be entitled to treat the holder of record of any share or shares of stock as the holder in fact thereof and, accordingly, shall not be bound to recognize any equitable or other claim to, or interest in, such share or shares by any other person, whether or not it shall have notice thereof, except as expressly provided by the laws of the State of Nevada.

                                   ARTICLE VII

                               General Provisions

     Section 1. Dividends. To the extent permitted by law, the Board shall have full power and  discretion,  subject to the  provisions  of the  Certificate  of Incorporation  of the Corporation and the terms of any other corporate  document or instrument binding upon the Corporation, to determine what, if any, dividends or  distributions  shall be declared and paid or made. Dividends may be paid in cash, in property, or in shares of capital stock, subject to the provisions of the Certificate of Incorporation. Before payment of any dividend, there may be set aside out of any funds of the Corporation available for dividends such sums as the Directors think proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Corporation, or for such other purpose as the Directors think conducive to the interests of the Corporation. The Directors may modify or abolish any such reserve in the manner in which it was created.

     Section 2. Seal. The corporate seal of the Corporation shall have inscribed thereon the name of the Corporation, the year of its organization and the words "Corporate Seal, Nevada."

     Section 3. Fiscal Year. The fiscal year of the Corporation shall be end on May 31.

     Section 4. Voting Shares in Other Corporations. Unless otherwise directed by the Board,  shares in other  corporations  which are held by the  Corporation shall be  represented  and voted only by the  President or by a proxy or proxies appointed by him or her.

     Section 5. Indemnification.

     (a) The Corporation shall indemnify any person who was, or is threatened to be made, a party to a proceeding (as hereinafter  defined) by reason of the fact that he or she (i) is or was a  director,  officer,  employee  or  agent  of the Corporation,  or (ii)  while a  director,  officer,  employee  or  agent  of the Corporation,  is or was serving at the request of the Corporation as a director, officer,   employee,  agent  or  similar  functionary  of  another  corporation, partnership,  joint venture,  trust or other  enterprise,  to the fullest extent permitted under the Revised Statutes of the State of Nevada,  as the same exists or may  hereafter be amended.  Such right shall be a contract  right and as such shall run to the  benefit of any  director or officer who is elected and accepts the position of director or officer of the  Corporation or elects to continue to serve as a director or officer of the  Corporation  while this Article VII is in effect. The rights conferred above shall not be exclusive of any other right which any  person  may have or  hereafter  acquire  under any  statute, bylaw, resolution of stockholders or directors, agreement or otherwise.

     (b) As used herein, the term "proceeding" means any threatened, pending, or completed action, suit or proceeding, whether civil, criminal, administrative, or investigative, any appeal in such an action, suit or proceeding and any inquiry or investigation that could lead to such an action, suit or proceeding.

     (c) A director or officer of the Corporation shall not be personally liable to the  Corporation  or its  stockholders for monetary  damages  for breach of fiduciary  duty as a director or officer,  except for  liability (i) for acts or omissions which involve intentional misconduct, fraud or a knowing violation of law;  or (ii) for the  payment of  distributions in violation  of the  Revised Statutes of the State of Nevada. Any repeal or amendment of this Article VII by the  shareholders  of the Corporation shall be prospective only, and shall not adversely  affect any  limitation  on the  personal  liability  of a director or officer of the  Corporation  arising from an act or omission occurring prior to the time of such repeal or amendment. In addition to the circumstances in which a director or officer of the  Corporation is not personally liable as set forth in the foregoing provisions of this Article VII, a director or officer shall not be liable to the  Corporation  or its  stockholders to such further extent as permitted by any law  hereafter  enacted,  including,  without  limitation,  any subsequent amendment to the Revised Statutes of the State of Nevada.

                                  ARTICLE VIII

                                   Amendments

     These Bylaws may be adopted, altered, amended or repealed or new Bylaws may be adopted by the stockholders,  or by the Board of Directors by the Certificate or Incorporation,  at any regular meeting of the stockholders or of the Board of Directors  or at any  special  meeting  of the  stockholders  or of the Board of Directors  if notice of such  alteration,  amendment,  repeal or adoption of new Bylaws be  contained  in the  notice of such  special  meeting. If the power to adopt, amend or repeal Bylaws is conferred upon the Board of Directors by the Certificate of Incorporation it shall not divest or limit the power of the stockholders to adopt, amend, or repeal Bylaws.

EX-4

Exhibit 4.1

EX-5

Exhibit 5.1

September 17, 2013

Xun Energy, Inc.

12759 NE Whitaker Way, #C453

Portland, OR 97230

Re:   Registration Statement on Form S-1 

Ladies and Gentlemen:

I am counsel for Xun Energy, Inc., a Nevada corporation (the “Company”), in connection with the proposed offering by AGS Capital Group, LLC (the “Selling Shareholder”), under the Securities Act of 1933, as amended, of up to 79,081,633 shares of the Company’s common stock, including 4,081,633 commitment shares (the “Commitment Shares”), $0.0001 par value per share (“Common Stock”) through a Registration Statement on Form S-1 (the “Registration Statement”) as to which this opinion is a part, to be filed with the Securities and Exchange Commission.

In connection with rendering my opinion as set forth below, I have reviewed and examined originals or copies identified to my satisfaction of the following:

(1)   Articles of Incorporation, of the Company as filed with the Secretary of State of Nevada;

(2)  By-laws of the Company;

(3)   Corporate minutes containing the written resolutions of the Board of Directors of the Company;

(4)   The Registration Statement and the prospectus contained within the Registration Statement; and

(5)   The other exhibits of the Registration Statement.

I have examined such other documents and records, instruments and certificates of public officials, officers and representatives of the Company, and have made such other investigations as I have deemed necessary or appropriate under the circumstances.

In my examination, I have assumed the genuineness of all signatures, the legal capacity of all natural persons, the authenticity of all documents submitted to me as original documents and the conformity to original documents of all documents submitted to me as certified, conformed, facsimile, electronic or photo static copies. I have relied upon the statements contained in the Registration Statement and certificates of officers of the Company, and I have made no independent investigation with regard thereto.

Based upon the foregoing and in reliance thereon, it is my opinion that (i) the 75,000,000 shares of Common Stock of the Company being offered by the Selling Shareholder under the Registration Statement, not including the Commitment Shares, when sold, will be legally issued, fully paid and non-assessable pursuant to the laws of the State of Nevada and the laws of the United States of America and (ii) the Commitment Shares are legally issued, fully paid and non-assessable pursuant to the laws of the State of Nevada and the laws of the United States of America.

I hereby consent to this opinion being included as an exhibit to the Registration Statement and to the use of my name under the caption “EXPERTS” in the prospectus constituting a part thereof. 

EX-10

Exhibit 10.1

AMENDED AND RESTATED RESERVE EQUITY FINANCING AGREEMENT

THIS AGREEMENT dated as of the 11^th day of July 2013 (the “Agreement”) between AGS Capital Group, LLC (the “Investor”), and Xun Energy, Inc. (the “Company”) amends and restates the prior agreement signed on  May 7^th, 2013 which amended and restated the original agreement on April 30, 2013.

WHEREAS, the parties desire that, upon the terms and subject to the conditions contained herein, the Company shall issue and sell to the Investor, from time to time as provided herein, and the Investor shall purchase from the Company up to Fifteen Million Dollars ($15,000,000) of the Company’s fully registered, freely tradable common stock (the “Common Stock”),; and

WHEREAS, such investments will be made in reliance upon the provisions of the Securities Act of 1933, as amended, and the regulations promulgated thereunder (the “Securities Act”), and or upon such other exemption from the registration requirements of the Securities Act as may be available with respect to any or all of the investments to be made hereunder.

NOW, THEREFORE, the parties hereto agree as follows:

ARTICLE I.Certain Definitions

Section 1.1. “Advance” shall mean the portion of the Commitment Amount requested by the Company in the Advance Notice.

Section 1.2. “Advance Date” shall mean the fifth Trading Day after expiration of the applicable Pricing Period for each Advance.

Section 1.3. “Advance Notice” shall mean a written notice in the form of Exhibit A attached hereto to the Investor executed by an officer of the Company and setting forth the Advance amount that the Company requests from the Investor. An Advance Notice cannot be sent if a prior Advance has not yet been completed. No Advance Notice can be delivered by the Company on a day which is not a Trading Day.

Section 1.4. “Advance Notice Date” shall mean each date the Investor receives (in accordance with Section 2.2(b) of this Agreement) an Advance Notice. Company shall notify Investor of its intent to deliver an Advance Notice five days before sending it. This five day notice may be waived in writing by both parties.

Section 1.5. “Advance Shares” shall mean the shares of Common Stock issued and sold to the Investor pursuant to an Advance Notice under the terms and conditions hereof.

 Section 1.6. “Average Daily Trading Volume” means the average trading volume of the ten Trading Days prior to the date of delivery of the Advance Notice that results from excluding any irregular trading, pre-arranged special crossings, off market transfers, Block Trades or abnormal trades which the Investor had no opportunity to participate and (ii) the four highest trading volume days and four lowest trading volume day such ten Trading Day period.

Section 1.7 “Block Trades” shall mean (A) block trades that exceed a number of shares valued at $100,000.

Section 1.8. “Closing Bid Price” means, as related to the Common Stock as of any date, the last closing bid price for such security during Normal Trading on the O.T.C. Bulletin Board, or, if the O.T.C. Bulletin Board is not the principal securities exchange or trading market for such security, the last closing bid price during normal trading of such security on the principal securities exchange or trading market where such security is listed or traded as reported by such principal securities exchange or trading market, or if the foregoing do not apply, the last closing bid price during normal trading of such security in the over-the-counter market on the electronic bulletin board for such security, or, if no closing bid price is reported for such security, the average of the bid prices of any market makers for such security as reported in the "pink sheets" by the Pink OTC Markets, Inc. If the Closing Bid Price cannot be calculated for such security on such date on any of the foregoing bases, the Closing Bid Price of such security on such date shall be the fair market value as mutually determined by the Company and the Investor.  If the Company and the Investor are unable to agree upon the fair market value of the Common Stock, then such dispute shall be resolved by an investment banking firm mutually acceptable to the Company and the Investor in this offering and any fees and costs associated therewith shall be paid by the Company.

 Section 1.9. “Closing” shall mean one of the closings of a purchase and sale of Common Stock pursuant to Section 2.3.

Section 1.10. “Commitment Amount” shall mean the aggregate amount of Fifteen Million Dollars ($15,000,000) which the Investor has agreed to provide to the Company in order to purchase the Company’s Common Stock pursuant to the terms and conditions of this Agreement.

Section 1.11. “Commitment Period” shall mean the period commencing on the Effective Date, and expiring upon the termination of this Agreement in accordance with Section 10.2.

Section 1.12. “Common Stock” shall mean the Company’s freely tradable, fully registered and unencumbered common stock.

Section 1.13. “Condition Satisfaction Date” shall have the meaning set forth in Section 7.2.

Section 1.14. “Damages” shall mean any loss, claim, damage, liability, costs and expenses (including, without limitation, reasonable attorney’s fees and disbursements and costs and expenses of expert witnesses and investigation).

Section 1.15. “Effective Date” shall mean the date on which the SEC first declares effective a Registration Statement registering the resale of the Registrable Securities as set forth in Section 7.2(a).

Section 1.16. “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

Section 1.17. Extra Investor Costs. For extra costs that the Investor incurs, including but not limited to: costs for depositing share certificates, brokerage fees, selling costs of the stock, etc., the Investor will provide an accounting of the costs and documentation to the Company.  These costs will be deducted from the 10% holdback of the Advance and the Investor will wire transfer the remaining funds to the Company. For the sake of clarity, 10% of the Purchase Price shall be held back until the Extra Investor Costs are accounted for. In the case that the costs exceed the 10% holdback, the Company will immediately wire transfer the deficiency to the Investor.  

Section 1.18. “Environmental Laws” shall have the meaning set forth in Section 4.10.

Section 1.19. “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

Section 1.20. “Evaluation Date” shall have the meaning set forth in Section 4.26.

Section 1.21. “Event of Default” shall have the meaning set forth in Section 7.2.

Section 1.22. “Indemnified Liabilities” shall have the meaning set forth in Section 5.1(a).

Section 1.23. “Indemnified Party” and “Indemnifying Party” shall have the meaning set forth in Section 5.2.

Section 1.24. “Investor Indemnities” shall have the meaning set forth in Section 5.1(a).

Section 1.25  . “Losses” shall have the meaning set forth in Section 5.1(b).

Section 1.26. “Material Adverse Effect” shall mean any condition, circumstance, or situation that may result in, or reasonably be expected to result in (i) a material adverse effect on the legality, validity or enforceability of the Agreement, including on the legal status of the Advance Shares as free trading, (ii) a material adverse effect on the results of operations, assets, business or condition (financial or otherwise) of the Company, taken as a whole, (iii) a material adverse effect on the Company’s ability to perform its obligations hereunder in any material respect on a timely basis its obligations under the Agreement (iv) shares of the Company cease to be listed or trading of the Common Stock is suspended continuously for more than five (5) trading days.

Section 1.27. “Market Price” shall mean the average of the 3 lowest Closing Bid Prices of the Company’s Common Stock during the Pricing Period.

Section 1.28. “Maximum Advance Amount” The dollar amount of Common Stock sold to the Investor in each Advance may be up to $250,000, provided that the number of Advance Shares sold in each Advance shall not exceed 200% of the Average Daily Trading Volume. The Maximum Advance Amount may be increased upon mutual written consent of the Company and the Investor. The value of stock issued in each Advance must exceed $3,000 if the stock is not DWAC eligible and cannot be sent electronically in order for the Advance to be accepted by the Investor.

Section 1.29. “Maximum Common Stock Issuance” shall have the meaning set forth in Section 2.8.

Section 1.30. “Ownership Limitation” shall have the meaning set forth in Section 2.2.

         Section 1.31. “Person” shall mean an individual, a corporation, a partnership, an association, a trust or other entity or organization, including a government or political subdivision or an agency or instrumentality thereof.

Section 1.32. “Pricing Period” shall mean the ten (10) consecutive Trading Days after the Advance Notice Date.

Section 1.33. “Principal Market” shall mean the Nasdaq Global Select Market, the Nasdaq Global Market, the Nasdaq Capital Market, the American Stock Exchange, the OTC Bulletin Board, or the New York Stock Exchange, whichever is at the time the principal trading exchange or market for the Common Stock.

Section 1.34. “Purchase Price” shall mean ninety percent (90%) of the Market Price during the Pricing Period.

Section 1.35. “Registration Limitation” shall have the meaning set forth in Section 2.2.

Section 1.36. “Regulation D” shall have the meaning set forth in the recitals of this Agreement.

Section 1.37. “Related Party” shall have the meaning set forth in Section 6.15.

Section 1.38. “Rule 144” shall mean Rule 144 (or any similar provision then in force) promulgated under the Securities Act.

Section 1.39  “Safety Net Price” The Company, at its option, may select a Safety Net Price for any specified Advance which the      Company will not sell shares to the Investor under that Advance when the Purchase Price (Market Price less 10% discount) falls below such      Safety Net Price during the Pricing Period.

Section 1.40. “SEC” shall mean the United States Securities and Exchange Commission.

Section 1.41. “Securities Act” shall have the meaning set forth in the recitals.

Section 1.42. “Third Party Claim” shall have the meaning set forth in Section 5.2(b).

Section 1.43. “Trading Day” shall mean any day during which the New York Stock Exchange shall be open for business.

Section 1.44. “Valuation Event” shall have the meaning set forth in Section 2.9.

Section 1.45. “VWAP” means, as of any date, the daily dollar volume-weighted average price for such security as reported by Bloomberg, LP through its “Historical Price Table Screen (HP)” with Market: Weighted Ave function selected (or comparable financial news service (U.S market only), or, if no dollar volume-weighted average price is reported for such security by Bloomberg, LP (or comparable financial news service (U.S market only), the average of the highest Closing Bid Price and the lowest closing ask price of any of the market makers for such security as reported on OTC Markets.

Section 1.46. “Registrable Securities” shall mean the Advance Shares to be issued hereunder (i) in respect of which a Registration Statement has not been declared effective by the SEC, (ii) which have not been sold under circumstances meeting all of the applicable conditions of Rule 144 or (iii) which have not been otherwise transferred to a holder who may trade such Advance Shares without restriction under the Securities Act, and the Company has delivered a new certificate or other evidence of ownership for such securities not bearing a restrictive legend.

Section 1.47. “Registration Rights Agreement” shall mean the Registration Rights Agreement dated the date hereof, regarding the filing of the Registration Statement for the resale of the Registrable Securities, entered into between the Company and the Investor.

Section 1.48. “Registration Statement” shall mean a registration statement on Form S-1 or Form S-3 (if use of such form is then available to the Company pursuant to the rules of the SEC and, if not, on such other form promulgated by the SEC for which the Company then qualifies and which counsel for the Company shall deem appropriate, and which form shall be available for the resale of the Registrable Securities to be registered thereunder in accordance with the provisions of this Agreement and the Registration Rights Agreement, and in accordance with the intended method of distribution of such securities), for the registration of the resale by the Investor of the Registrable Securities under the Securities Act.

Section 1.49. “Regulation D” shall have the meaning set forth in the recitals of this Agreement.

Section 1.50. “SEC” shall mean the United States Securities and Exchange Commission.

Section 1.51. “Securities Act” shall have the meaning set forth in the recitals of this Agreement.

 Section 1.52 “Trading Cushion” Unless the parties agree in writing otherwise, there shall be a minimum of three (3) Trading Days between the expiration of any Pricing Period and the beginning of the next succeeding Pricing Period.

Section 1.53. “Trading Day” shall mean any day during which the New York Stock Exchange shall be open for business.

ARTICLE II.Advances

Section 2.1. Advances”

Subject to the terms and conditions of this Agreement (including, without limitation, the provisions of Article VII hereof), the Company, at its sole and exclusive option, may issue and sell to the Investor, and the Investor shall purchase from the Company, Advance Shares, by the delivery, in the Company’s sole discretion, of Advance Notices when the Market Price, as defined in Section 1.27, is $.50 or higher. The aggregate maximum amount of all Advances that the Investor shall be obligated to make under this Agreement shall not exceed the Commitment Amount.  Once an Advance Notice is received by the Investor, it shall not be terminated, withdrawn or otherwise revoked by the Company except as set forth in this Agreement.

Section 2.2. Mechanics.   

(a)   Advance Notice. At any time during the Commitment Period, the Company may require the Investor to purchase Advance Shares by delivering an Advance Notice to the Investor, subject to the conditions set forth in Article VII; provided, however, that (i) the amount for each Advance as designated by the Company in the applicable Advance Notice shall not be more than the Maximum Advance Amount, (ii) the aggregate amount of the Advances pursuant to this Agreement shall not exceed the Commitment Amount, (iii) in no event shall the number of Advance Shares issuable to the Investor pursuant to an Advance cause the aggregate number of shares of Common Stock beneficially owned by the Investor and its affiliates to meet or exceed five (5%) percent of the then outstanding Common Stock (the “Ownership Limitation”) (as of the date of this Agreement, Investor and its affiliates held zero (0%) percent of the outstanding Common Stock), (iv) under no circumstances shall the aggregate offering price or number of Advance Shares, as the case may be, exceed the aggregate offering price or number of shares of Common Stock available for issuance under a Registration Statement (the “Registration Limitation”), (v) the Common Stock must be DWAC eligible and sent to the Investor in electronic form, instead of certificate form, and (vi) the Commitment Shares shall have been received and cleared by the Investor’s brokerage account so they are of a status where they can currently be sold by the Investor. In the event that the Investor sends written acceptance of accepting a physical certificate, all fees and expenses for this certificate will be paid by the Company.

(b)    Date of Delivery of Advance Notice. An Advance Notice shall be deemed delivered on (i) the Trading Day it is received by email (to the address set forth in Section 11.1 herein) by the Investor if such notice is received prior to 5:00 pm Eastern Time, or (ii) the immediately succeeding Trading Day if it is received by email after 5:00 pm Eastern Time on a Trading Day or at any time on a day which is not a Trading Day. No Advance Notice may be deemed delivered on a day that is not a Trading Day. The Company acknowledges and agrees that the Investor shall be entitled to treat any email it receives from officers whose email addresses are identified by the Company purporting to be an Advance Notice as a duly executed and authorized Advance Notice from the Company.

Section 2.3. Closings.

 (a)  On the Advance Date, the Company shall deliver to the Investor’s brokerage account in electronic form, such number of Advance Shares of the DWAC eligible Common Stock registered in the name of the Investor in accordance with the Advance Notice and pursuant to this Agreement.  Once such Advance Shares have been accepted by the Investor, the Investor shall immediately deliver to the Company the amount of the Advance by wire transfer of immediately available funds as determined by the Purchase Price, less 10% holdback for Extra Investor Costs, as defined in Section 1.17. On or prior to the Advance Date, each of the Company and the Investor shall deliver to the other all documents, instruments and writings required to be delivered by either of them pursuant to Section 2.3(b) below in order to implement and effect the transactions contemplated herein. To the extent the Company has not paid the fees, expenses, and disbursements of the Investor in accordance with Section 12.4, the amount of such fees, expenses, and disbursements may be deducted by the Investor (and shall be paid to the relevant party) directly out of the proceeds of the Advance with no reduction in the number of Advance Shares to be delivered on such Advance Date.

(b)    Obligations Upon Closing. The Investor agrees to advance the amount corresponding to the Advance Notice to the Company upon completion of each of the following conditions:

(i) The Company shall have delivered via electronic delivery to the Investor the Advance Shares applicable to the Advance in accordance with Section 2.3(a).

(ii) A Registration Statement filed pursuant to the Registration Rights Agreement shall be effective and available for the resale of all applicable Advance Shares to be issued in connection with the Advance and any certificates evidencing such shares shall be free of restrictive legends.

(iii) the Company shall have obtained all material permits and qualifications required by any applicable state for the offer and sale of the Registrable Securities, or shall have the availability of exemptions therefrom. The sale and issuance of the Registrable Securities shall be legally permitted by all laws and regulations to which the Company is subject;

(iv) the Company shall have filed with the SEC in a timely manner all reports, notices and other documents required of a “reporting company” under the Exchange Act and applicable SEC regulations;

(v) The Company shall have paid any unpaid fees and the Commitment Shares as set forth in Section 12.4 below or withheld such amounts as provided in Section 2.3(a);

(vi) the Company’s transfer agent shall be DWAC eligible.

(vii) The conditions in Section 7.2 below are satisfied and provided the Company is in compliance with its obligations in this Section 2.3, the Investor shall wire to the Company the amount of funds pursuant to the Advance Notice and this Agreement.

(c)

Obligations of Investor - 10% Holdback

          (i) Investor will deduct 10% from each Advance for Extra Investor Costs as defined in Section 1.17.

(ii) Investor will provide an accounting of the costs during the month that was incurred at cost by the Investor for  Extra Investor Costs as defined in Section 1.17

(iii) Investor will maintain accounting ledger with a running balance of the 10% holdback and Extra Investor Costs incurred.

(iv) Investor will not retain more than 10% holdback of the last Advance.

(v) Investor will pay to the Company the residual or unused portion of the 10% holdback from the prior Advance in conjunction with the payment of the next Advance, less 10% Holdback. If the Extra Investor Costs exceed the payment made by the Investor to the Company, the Company shall wire to the Investor the necessary amount to make the Investor whole upon 3 days of receiving such notice from Investor.

Section 2.4. Lock Up Period. On the date hereof, the Company shall obtain from each officer and director a lock-up agreement, as defined below, in the form annexed hereto as Schedule 2.4. The Company shall cause its officers and directors to refrain from selling Common Stock during each Pricing Period.

Section 2.5. Hardship. In the event the Investor sells shares of the Advance Shares after receipt of an Advance Notice and the Company fails to perform its obligations as mandated in Section 2.3, the Company agrees that in addition to and in no way limiting the rights and obligations set forth in Article V hereto and in addition to any other remedy to which the Investor is entitled at law or in equity, including, without limitation, specific performance, it will hold the Investor harmless against any loss, claim, damage, or expense (including reasonable legal fees and expenses), as incurred, arising out of or in connection with such default by the Company and acknowledges that irreparable damage would occur in the event of any such default.  It is accordingly agreed that the Investor shall be entitled to an injunction or injunctions to prevent such breaches of this Agreement and to specifically enforce, without the posting of a bond or other security, the terms and provisions of this Agreement.  

Section 2.6. Removal of Restricted Legends. If the Company is fully reporting six months after the issuance of any restricted stock to Investor, and rejects the Investors request to direct the Company’s transfer agent to remove the restricted legend from the Investor’s stock certificate three days after the Investor’s request to remove such restricted legend, then the Company shall pay the Investor USD1,000.00 for each day the company fails to remove such restricted legend.  Company covenants that there shall be no justifiable reason not to remove the restricted legend from the stock certificates and in the event that Company attempts to offer such justification, the Company shall pay the Investor USD$2,000.00 for each day the company fails to remove such restricted legend.

Section 2.7      Intentionally Omitted.

Section 2.8     Reimbursement.    If (I) the Investor becomes involved in any capacity in any action, proceeding or investigation brought by any shareholder of the Company, in connection with or as a result of the consummation of the transactions contemplated by the Reserve Equity Financing, or if the Investor is impleaded in any such action, proceeding or investigation by any person (other than as a result of a breach of the Investor’s representations and warranties set forth in this Agreement); or (II) the Investor becomes involved in any capacity in any action, proceeding or investigation brought by the SEC against or involving the Company or in connection with or as a result of the consummation of the transactions contemplated by the Reserve Equity Financing (other than as a result of a breach of the Investor’s representations and warranties set forth in this Agreement), or if this Investor is impleaded in any such action, proceeding or investigation by any person, then in any such case, the Company will reimburse the Investor for its reasonable legal and other expenses (including the cost of any investigation and preparation) incurred in connection therewith, as such expenses are incurred. In addition, other than with respect to any matter in which the Investor is a named party, the Company will pay to the Investor the charges, as reasonably determined by the Investor, for the time of any officers or employees of the Investor devoted to appearing and preparing to appear as witnesses, assisting in preparation for hearings, trials or pretrial matters, or otherwise with respect to inquiries, hearing, trials, and other proceedings relating to the subject matter of this Agreement. The reimbursement obligations of the Company under this section shall be in addition to any liability which the Company may otherwise have, shall extend upon the same terms and conditions to any affiliates of the Investor that are actually named in such action, proceeding or investigation, and partners, directors, agents, employees, attorneys, accountants, auditors and controlling persons (if any), as the case may be, of Investor and any such affiliate, and shall be binding upon and inure to the benefit of any successors of the Company, the Investor and any such affiliate and any such person.  Any and all costs that Investor pays for relating to clearing and processing stock certificates shall be deducted from any payment the Company receives from Investor.

Section 2.9 Overall Limit on Issuable Common Stock. Notwithstanding anything contained herein to the contrary, if during the Commitment Period the Company becomes listed on an exchange that limits the number of shares of Common Stock that may be issued without shareholder approval, then the total number of Advance Shares issuable by the Company and purchasable by the Investor pursuant to this

Agreement shall not exceed that number of shares of Common Stock that may be issuable without shareholder approval (the “Maximum Common Stock Issuance”).  If such issuance of Advance Shares could cause a delisting on the Principal Market, then the Maximum Common Stock Issuance shall first be approved by the Company's shareholders in accordance with applicable law and the By-laws and Amended and Restated Articles of Incorporation of the Company. The parties understand and agree that the Company's failure to seek or obtain such shareholder approval shall in no way adversely affect the validity and due authorization of the issuance and sale of Advance Shares in accordance with the terms and conditions hereof to the Investor or the Investor's obligation in accordance with the terms and conditions hereof to purchase a number of Advance Shares in the aggregate up to the Maximum Common Stock Issuance limitation, and that such approval pertains only to the applicability of the Maximum Common Stock Issuance limitation provided in this Section 2.8.

Section 2.10.    Valuation Event.  The Company agrees that it shall not take any action that would result in a Valuation Event occurring during a Pricing Period. Valuation Event shall mean an event in which the Company at any time during a Pricing Period takes any of the following actions: (i) subdivides or combines its Common Stock, (ii) pays a dividend in Ordinary Shares or makes any other purchase of its Ordinary Shares, (iii) issues any options or other rights to subscribe for or purchase Common Stock and the price per share for which the Common Stock may at any time thereafter be issuable pursuant to such options or other rights shall be less than the Purchase Price for each of the two (2) immediately prior Pricing Periods, (iv) issues any securities convertible into or exchangeable for Common Stock and the consideration per share for which shares of Common Stock may at any time thereafter be issuable pursuant to the terms of such convertible or exchangeable securities shall be less than the Subscription Price for each of the two (2) immediately prior Pricing Periods, or (v) issues shares of Common Stock otherwise than as provided in the foregoing subsections (i) thorough (iv), at a price per share less, or for other consideration lower, than the Purchase Price for each of the two (2) immediately prior Pricing Periods, or without consideration.

ARTICLE III.Representations of Investor

Investor hereby represents and warrants to, and agrees with, the Company that the following are true and correct as of the date hereof and as of each Advance Date:

Section 3.1. Organization and Authorization. The Investor is duly incorporated or organized and validly existing in the jurisdiction of its incorporation or organization and has all requisite power and authority to purchase and hold the securities issuable hereunder. The decision to invest and the execution and delivery of this Agreement by such Investor, the performance by such Investor of its obligations hereunder and the consummation by such Investor of the transactions contemplated hereby have been duly authorized and requires no other proceedings on the part of the Investor. The undersigned has the right, power and authority to execute and deliver this Agreement and all other instruments (including, without limitations, the Registration Rights Agreement), on behalf of the Investor. This Agreement has been duly executed and delivered by the Investor and, assuming the execution and delivery hereof and acceptance thereof by the Company, will constitute the legal, valid and binding obligations of the Investor, enforceable against the Investor in accordance with its terms.

Section 3.2. Evaluation of Risks. The Investor has such knowledge and experience in financial, tax and business matters as to be capable of evaluating the merits and risks of, and bearing the economic risks entailed by, an investment in the Company and of protecting its interests in connection with this transaction. It recognizes that its investment in the Company involves a high degree of risk.

Section 3.3. No Legal Advice From the Company. The Investor acknowledges that it had the opportunity to review this Agreement and the transactions contemplated by this Agreement with his or its own legal counsel and investment and tax advisors. The Investor is relying solely on such counsel and advisors and not on any statements or representations of the Company or any of its representatives or agents for legal, tax or investment advice with respect to this investment, the transactions contemplated by this Agreement or the securities laws of any jurisdiction.  

Section 3.4. Information. The Investor and its advisors (and its counsel), if any, have been furnished with all materials relating to the business, finances and operations of the Company and information it deemed material to making an informed investment decision. The Investor and its advisors, if any, have been afforded the opportunity to ask questions of the Company and its management. Neither such inquiries nor any other due diligence investigations conducted by such Investor or its advisors, if any, or its representatives shall modify, amend or affect the Investor’s right to rely on the Company’s representations and warranties contained in this Agreement. The Investor understands that its investment involves a high degree of risk. The Investor is in a position regarding the Company, which, based upon employment, family relationship or economic bargaining power, enabled and enables such Investor to obtain information from the Company in order to evaluate the merits and risks of this investment.

Section 3.5. Receipt of Documents. The Investor and its counsel have received and read in their entirety: (i) this Agreement and the Exhibits annexed hereto; (ii) all due diligence and other information necessary to verify the accuracy and completeness of such representations, warranties and covenants; and (iii) answers to all questions the Investor submitted to the Company regarding an investment in the Company; and the Investor has relied on the information contained therein and has not been furnished any other documents, literature, memorandum or prospectus.

Section 3.6. Not an Affiliate. The Investor is not an officer, director or a person that directly, or indirectly through one or more intermediaries, controls or is controlled by, or is under common control with the Company or any “Affiliate” of the Company (as that term is defined in Rule 405 of the Securities Act).

Section 3.7. Trading Activities. The Investor’s trading activities with respect to the Common Stock shall be in compliance with all applicable securities laws, rules and regulations and the rules and regulations of the Principal Market on which the Common Stock is listed or traded.  Investor makes no representations or covenants that it will not engage in trading in the securities of the Company, other than the

Investor will not engage in any short sales of the Common Stock at any time during the Agreement. The Company acknowledges, without exception, that the Investor has the right to sell Common Stock at any and all times during the Commitment Period. Nothing contained in this Agreement shall be deemed a representation or warrant by the Investor to hold any Stock for any period of time. The Company acknowledges and agrees that transactions in its securities by the Investor may impact the market price of the Stock, including during periods when the prices at which the Company may be required to issue Investor’s Stock are determined.

ARTICLE IV.

Representations and Warranties of the Company

Except as stated below, on the disclosure schedules attached hereto the Company hereby represents and warrants to, and covenants with, the Investor that the following are true and correct as of the date hereof:

Section 4.1. Organization and Qualification. The Company is duly incorporated or organized and validly existing in the jurisdiction of its incorporation or organization and has all requisite corporate power to own its properties and to carry on its business as now being conducted. Each of the Company and its subsidiaries is duly qualified as a foreign corporation to do business and is in good standing in every jurisdiction in which the nature of the business conducted by it makes such qualification necessary, except to the extent that the failure to be so qualified or be in good standing would not have a Material Adverse Effect on the Company and its subsidiaries taken as a whole.

Section 4.2. Authorization, Enforcement, Compliance with Other Instruments. (i) The Company has the requisite corporate power and authority to enter into and perform this Agreement, the Registration Rights Agreement and any related agreements, in accordance with the terms hereof and thereof, (ii) the execution and delivery of this Agreement, the Registration Rights Agreement and any related agreements by the Company and the consummation by it of the transactions contemplated hereby and thereby, have been duly authorized by the Company’s Board of Directors and no further consent or authorization is required by the Company, its Board of Directors or its stockholders, (iii) this Agreement, the Registration Rights Agreement and any related agreements have been duly executed and delivered by the Company, (iv) this Agreement, the Registration Rights Agreement and assuming the execution and delivery thereof and acceptance by the Investor and any related agreements constitute the valid and binding obligations of the Company enforceable against the Company in accordance with their terms, except as such enforceability may be limited by general principles of equity or applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally, the enforcement of creditors’ rights and remedies.

Section 4.3. Capitalization. The authorized capital stock of the Company consists of five billion shares of Common Stock, of which 363,553,415  shares of Common Stock as of April 16, 2013, are issued and outstanding, and 50,000,000 shares of authorized Preferred Stock, of which no shares are issued and outstanding  All of such outstanding shares have been validly issued and are fully paid and nonassessable. No shares of Common Stock are subject to preemptive rights or any other similar rights or any liens or encumbrances suffered or permitted by the Company. Except as disclosed on Schedule 4.3, as of the date hereof, (i) there are no outstanding options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, any shares of capital stock of the Company, except as detailed in our February 28, 2013 quarterly filing with the SEC,  or any of its subsidiaries, or contracts, commitments, understandings or arrangements by which the Company or any of its subsidiaries is or may become bound to issue additional shares of capital stock of the Company or any of its subsidiaries or options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, any shares of capital stock of the Company or any of its subsidiaries, (ii) there are no outstanding debt securities (iii) there are no outstanding registration statements; and (iv) there are no agreements or arrangements under which the Company or any of its subsidiaries is obligated to register the sale of any of their securities under the Securities Act (except pursuant to the Registration Rights Agreement), except pursuant to the terms of an agreement between the Company and the Investor. There are no securities or instruments containing anti-dilution or similar provisions that will be triggered by this Agreement or any related agreement or the consummation of the transactions described herein or therein. The Company has furnished to the Investor true and correct copies of the Company’s Certificate of Incorporation, as amended and as in effect on the date hereof (the “Certificate of Incorporation”), and the Company’s By-laws, as in effect on the date hereof (the “By-laws”), and the terms of all securities convertible into or exercisable for Common Stock and the material rights of the holders thereof in respect thereto.

Section 4.4. No Conflict. The execution, delivery and performance of this Agreement by the Company and the consummation by the Company of the transactions contemplated hereby will not (i) result in a violation of the Certificate of Incorporation, any certificate of designations of any outstanding series of preferred stock of the Company or By-laws or (ii) conflict with or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which the Company or any of its subsidiaries is a party, or result in a violation of any law, rule, regulation, order, judgment or decree (including federal and state securities laws and regulations and the rules and regulations of the Principal Market on which the Common Stock is quoted) applicable to the Company or any of its subsidiaries or by which any material property or asset of the Company or any of its subsidiaries is bound or affected and which would cause a Material Adverse Effect. Neither the Company nor its subsidiaries is in violation of any term of or in default under its Articles of Incorporation or By-laws or their organizational charter or by-laws, respectively, or any material contract, agreement, mortgage, indebtedness, indenture, instrument, judgment, decree or order or any statute, rule or regulation applicable to the Company or its subsidiaries. The business of the Company and its subsidiaries is not being conducted in violation of any material law, ordinance, and regulation of any governmental entity. Except as specifically contemplated by this Agreement and as required under the Securities Act and any applicable state securities laws, the Company is not required to obtain any consent, authorization or order of, or make any filing or registration with, any court or governmental agency in order for it to execute, deliver or perform any of its obligations under or contemplated by this Agreement or the Registration Rights Agreement in accordance with the terms hereof or thereof. All consents, authorizations, orders, filings and registrations which the Company is required to obtain pursuant to the preceding sentence have been obtained or effected on or prior to the date hereof. The Company and its subsidiaries are unaware of any fact or circumstance which might give rise to any of the foregoing.

Section 4.5. SEC Documents; Financial Statements. The Company has filed all reports, schedules, forms, statements and other documents required to be filed by it with the SEC under the Securities Exchange Act for the two years preceding the date hereof (or such shorter period as the Company was required by law or regulation to file such material) (all of the foregoing filed prior to the date hereof or amended after the date hereof and all exhibits include therein and financial statements and schedules thereto and documents incorporated by reference therein, being hereinafter referred to as the “SEC Documents”) on timely basis or has received a valid extension of such time of filing and has filed any such SEC Document prior to the expiration of any such extension. The Company has delivered to the Investor or its representatives, or made available through the SEC’s website at http://www.sec.gov., true and complete copies of the SEC Documents. As of their respective dates, the SEC Documents complied in all material respects with the requirements of the Exchange Act and the rules and regulations of the SEC promulgated thereunder applicable to the SEC Documents, and none of the SEC Documents, at the time they were filed with the SEC, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. As of their respective dates, the financial statements of the Company included in the SEC Documents complied as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto. Such financial statements have been prepared in accordance with generally accepted accounting principles, consistently applied, during the periods involved (except (i) as may be otherwise indicated in such financial statements or the notes thereto, or (ii) in the case of unaudited interim statements, to the extent they may exclude footnotes or may be condensed or summary statements) and fairly present in all material respects the financial position of the Company as of the dates thereof and the results of its operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments). Such financial statements have been prepared in accordance with generally accepted accounting principles. No other information provided by or on behalf of the Company to the Buyers which is not included in the SEC Documents contains any untrue statement of a material fact or omits to state any material fact necessary in order to make the statements therein, in the light of the circumstance under which they are or were made and not misleading.

Section 4.6. No Misstatement or Omission.  Each part of the Registration Statement, when such part became or becomes effective, and the Prospectus, on the date of filing thereof with the SEC and at each Advance Notice Date and Closing Date, conformed or will conform in all material respects with the requirements of the Securities Act and the rules and regulations promulgated thereunder; each part of the Registration Statement, when such part became or becomes effective, did not or will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading; and the Prospectus, on the date of filing thereof with the SEC and at each Advance Notice Date and Share Issuance Date, did not or will not include an untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; except that the foregoing shall not apply to statements or omissions in any such document made in reliance on information furnished in writing to the Company by the Investor expressly stating that such information is intended for use in the Registration Statement, the Prospectus, or any amendment or supplement thereto.

Section 4.7. No Default. The Company is not in default in the performance or observance of any material obligation, agreement, covenant or condition contained in any indenture, mortgage, deed of trust or other material instrument or agreement to which it is a party or by which it is or its property is bound and neither the execution, nor the delivery by the Company, nor the performance by the Company of its obligations under this Agreement or any of the exhibits or attachments hereto will conflict with or result in the breach or violation of any of the terms or provisions of, or constitute a default or result in the creation or imposition of any lien or charge on any assets or properties of the Company under its Certificate of Incorporation, By-Laws, any material indenture, mortgage, deed of trust or other material agreement applicable to the Company or instrument to which the Company is a party or by which it is bound, or any statute, or any decree, judgment, order, rules or regulation of any court or governmental agency or body having jurisdiction over the Company or its properties, in each case which default, lien or charge is likely to cause a Material Adverse Effect on the Company’s business or financial condition.

Section 4.8. Absence of Events of Default. No Event of Default, as defined in the respective agreement to which the Company is a party, and no event which, with the giving of notice or the passage of time or both, would become an Event of Default (as so defined), has occurred and is continuing, which would have a Material Adverse Effect on the Company’s business, properties, prospects, financial condition or results of operations. The Company shall notify the Investor immediately upon any Event of Default, or anything that is likely to detrimentally affect the ability of the Company to perform its obligations under this Agreement, occurring, or becoming, to the Company’s knowledge, likely to occur, and include the specifics of such Event of Default or other event in its notice. At the Investor’s request, the Company shall provide the Investor with a certificate signed by two (2) of its directors or its Chief Executive Officer, which shall state whether an Event of Default has occurred or is continuing.

Section 4.9. Intellectual Property Rights. The Company and its subsidiaries own or possess adequate rights or licenses to use all material trademarks, trade names, service marks, service mark registrations, service names, patents, patent rights, copyrights, inventions, licenses, approvals, governmental authorizations, trade secrets and rights necessary to conduct their respective businesses as now conducted. The Company and its subsidiaries do not have any knowledge of any infringement by the Company or its subsidiaries of trademark, trade name rights, patents, patent rights, copyrights, inventions, licenses, service names, service marks, service mark registrations, trade secret or other similar rights of others, and, to the knowledge of the Company, there is no claim, action or proceeding being made or brought against, or to the Company’s knowledge, being threatened against, the Company or its subsidiaries regarding trademark, trade name, patents, patent rights, invention, copyright, license, service names, service marks, service mark registrations, trade secret or other infringement; and the Company and its subsidiaries are unaware of any facts or circumstances which might give rise to any of the foregoing.

Section 4.10. Employee Relations. Neither the Company nor any of its subsidiaries is involved in any labor dispute nor, to the knowledge of the Company or any of its subsidiaries, is any such dispute threatened. None of the Company’s or its subsidiaries’ employees is a member of a union and the Company and its subsidiaries believe that their relations with their employees are good.

Section 4.11. Environmental Laws. The Company and its subsidiaries are (i) in compliance with any and all applicable material foreign, federal, state and local laws and regulations relating to the protection of human health and safety, the environment or hazardous or toxic substances or wastes, pollutants or contaminants (“Environmental Laws”), (ii) have received all permits, licenses or other approvals required of them under applicable Environmental Laws to conduct their respective businesses and (iii) are in compliance with all terms and conditions of any such permit, license or approval.

Section 4.12. Title. The Company has good and marketable title to its properties and material assets owned by it, free and clear of any pledge, lien, security interest, encumbrance, claim or equitable interest other than such as are not material to the business of the Company. Any real property and facilities held under lease by the Company and its subsidiaries are held by them under valid, subsisting and enforceable leases with such exceptions as are not material and do not interfere with the use made and proposed to be made of such property and buildings by the Company and its subsidiaries.

 Section 4.13. Insurance. Upon the Company generating revenue, the Company and each of its subsidiaries will become insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as management of the Company believes to be prudent and customary in the businesses in which the Company and its subsidiaries are engaged. Neither the Company nor any such subsidiary has    been refused any insurance coverage sought or applied for and neither the Company nor any such subsidiary has any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business at a cost that would not materially and adversely affect the condition, financial or otherwise, or the earnings, business or operations of the Company and its subsidiaries, taken as a whole.

Section 4.14. Regulatory Permits. The Company and its subsidiaries possess all material certificates, authorizations and permits issued by the appropriate federal, state or foreign regulatory authorities necessary to conduct their respective businesses and neither the Company nor any such subsidiary has received any notice of proceedings relating to the revocation or modification of any such certificate, authorization or permit.

Section 4.15. Internal Accounting Controls. The Company and each of its subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and the rules and regulations as promulgated by the SEC to maintain asset accountability, (iii) access to assets is permitted only in accordance with management’s general or specific authorization and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences.

Section 4.16. No Material Adverse Breaches, etc. Neither the Company nor any of its subsidiaries is subject to any charter, corporate or other legal restriction, or any judgment, decree, order, rule or regulation which in the judgment of the Company’s officers has or is expected in the future to have a Material Adverse Effect on the business, properties, operations, financial condition, results of operations or prospects of the Company or its subsidiaries. Except as set forth in the SEC Documents, neither the Company nor any of its subsidiaries is in breach of any contract or agreement which breach, in the judgment of the Company’s officers, has or is expected to have a Material Adverse Effect on the business, properties, operations, financial condition, results of operations or prospects of the Company or its subsidiaries.

Section 4.17. Absence of Litigation. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending against or affecting the Company, the Common Stock or any of the Company’s subsidiaries, wherein an unfavorable decision, ruling or finding would (i) have a Material Adverse Effect on the transactions contemplated hereby (ii) adversely affect the validity or enforceability of, or the authority or ability of the Company to perform its obligations under, this Agreement or any of the documents contemplated herein, or (iii) have a Material Adverse Effect on the business, operations, properties, financial condition or results of operation of the Company and its subsidiaries taken as a whole.

Section 4.18. Reserved.

Section 4.19. Tax Status. The Company and each of its subsidiaries has made or filed all federal and state income and all other tax returns, reports and declarations required by any jurisdiction to which it is subject and (unless and only to the extent that the Company and each of its subsidiaries has set aside on its books provisions reasonably adequate for the payment of all unpaid and unreported taxes) has paid all taxes and other governmental assessments and charges that are material in amount, shown or determined to be due on such returns, reports and declarations, except those being contested in good faith and has set aside on its books provision reasonably adequate for the payment of all taxes for periods subsequent to the periods to which such returns, reports or declarations apply. There are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers of the Company know of no basis for any such claim.

Section 4.20. Certain Transactions. None of the officers, directors, or employees of the Company is presently a party to any transaction with the Company (other than for services as employees, officers and directors), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any officer, director or such employee or, to the knowledge of the Company, any corporation, partnership, trust or other entity in which any officer, director, or any such employee has a substantial interest or is an officer, director, trustee or partner.

Section 4.21. Rights of First Refusal. The Company is not obligated to offer the securities offered hereunder on a right of first refusal basis or otherwise to any third parties including, but not limited to, current or former shareholders of the Company, underwriters, brokers, agents or other third parties.

Section 4.22. Use of Proceeds. The Company shall use the net proceeds from this offering for working capital and other general corporate purposes including paying relevant fees and commissions incurred from this transaction.  The Company will not provide any funding to or purchase an interest in any person listed by the United States Department of the Treasury’s Office of Foreign Assets Control as a Specially Designated National and Blocked Person.

Section 4.23. Maintenance of Listing or Quotation on Principal Market. For so long as any securities issuable hereunder held by the Investor remain outstanding, the Company acknowledges, represents, warrants and agrees that it will /maintain the listing or quotation, as applicable, of its Common Stock on the Principal Market.

Section 4.24. Opinion of Counsel. Investor shall receive an opinion letter from counsel to the Company on the date hereof in the form attached hereto as Exhibit C.

Section 4.25. Opinion of Counsel. The Company will obtain for the Investor, at the Company’s expense, any and all opinions of counsel which may be reasonably required in order to sell the securities issuable hereunder without restriction.

Section 4.26. Dilutive Effect. The Company understands and acknowledges that the number of Advance Shares issuable upon purchases pursuant to this Agreement will increase in certain circumstances including, but not necessarily limited to, the circumstance wherein the trading price of the Common Stock declines during the Pricing Period. The Company's executive officers and directors have studied and fully understand the nature of the transactions contemplated by this Agreement and recognize that they have a potential dilutive effect on the shareholders of the Company. The Board of Directors of the Company has concluded, in its good faith business judgment, and with full understanding of the implications, that such issuance is in the best interests of the Company. The Company specifically acknowledges that, subject to such limitations as are expressly set forth in the Agreement, its obligation to issue Advance Shares upon purchases pursuant to this Agreement is absolute and unconditional regardless of the dilutive effect that such issuance may have on the ownership interests of other shareholders of the Company.

Section 4.27. Acknowledgment Regarding Investor’s Purchase of Shares. The Company acknowledges and agrees that the Investor is acting solely in the capacity of an arm’s length investor with respect to this Agreement and the transactions contemplated hereunder. The Company further acknowledges that the Investor is not acting as a financial advisor, partner or fiduciary of the Company or any of its affiliates or subsidiaries (or in any similar capacity) with respect to this Agreement and the transactions contemplated hereunder and any advice given by the Investor or any of its representatives or agents in connection with this Agreement and the transactions contemplated hereunder is merely incidental to the Investor’s purchase of the Common Stock hereunder. The Company is aware and acknowledges that it may not be able to request Advances under this Agreement if it cannot obtain an effective Registration Statement or if any issuances of Common Stock pursuant to any Advances would violate any rules of the Principal Market. The Company further is aware and acknowledges that any fees paid pursuant to Section 12.4 hereunder or Commitment Shares issued pursuant to Section 12.4(b) hereunder shall be earned on the date hereof and not refundable or returnable under any circumstances.

Section 4.28. No Advice From the Investor. The Company acknowledges that it has reviewed this Agreement and the transactions contemplated by this Agreement with his or its own legal counsel and investment and tax advisors. The Company is relying solely on such counsel and advisors and not on any statements or representations of the Investor or any of its representatives or agents for legal, tax or investment advice with respect to this investment, the transactions contemplated by this Agreement or the securities laws of any jurisdiction.  The Company is not relying on any representation except for the representations of the Investor contained in this Agreement.  

       Section 4.29.  No Similar Transactions. The Company has not entered into any transaction similar in nature to the one described in this Agreement.

Section 4.30.  Sarbanes-Oxley; Internal Accounting Controls. The Company is in material compliance with all provisions of the Sarbanes-Oxley Act of 2002 which are applicable to it as of the date hereof. The Company and its subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset accountability, (iii) access to assets is permitted only in accordance with management’s general or specific authorization, and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. The Company has established disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and designed such disclosure controls and procedures to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. The Company’s certifying officers have evaluated the effectiveness of the Company’s disclosure controls and procedures as of the end of the period covered by the Company’s most recently filed periodic report under the Exchange Act (such date, the “Evaluation Date”). The Company presented in its most recently filed periodic report under the Exchange Act the conclusions of the certifying officers about the effectiveness of the disclosure controls and procedures based on their evaluations as of the Evaluation Date. Since the Evaluation Date, there have been no changes in the Company’s internal control over financial reporting (as such term is defined in the Exchange Act) that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

  Section 4.31 Other Transactions.  During the Term of the Reserve Equity Financing, the Company will be prohibited from effecting or entering into (i) an agreement to effect any financing involving the sale of debt or equity securities that are convertible into, exchangeable or exercisable for, or include the right to receive additional shares of Ordinary Shares at a price that is based upon and/or varies with the trading prices of Company’s Ordinary Shares at any time after the initial issuance of such securities or is subject to reset upon the occurrence of specified or contingent events and (ii) any agreement, including but not limited to an Equity Line of Credit, whereby the Issuer may sell

securities at a future determined price. The Company confirms that it has not entered into any an agreement with any other fund or entity to effect any financing involving the sale of debt or equity securities that are convertible into, exchangeable or exercisable for, or include the right to receive additional shares of Ordinary Shares at a price that is based upon and/or varies with the trading prices of Company’s Ordinary Shares at any time after the initial issuance of such securities or is subject to reset upon the occurrence of specified or contingent events and (ii) any agreement, including but not limited to an Equity Line of Credit, whereby the Issuer may sell securities at a future determined price.  If the Company has entered into any such agreement listed in this Section 4.32 it shall disclose such agreement and terminate it prior to signing this Agreement.

Section 4.32 The Shares.  The Shares have been duly authorized and, when issued, delivered and paid for pursuant to this Agreement, will be validly issued and fully paid and non-assessable, free and clear of all encumbrances and will be issued in compliance with all applicable United States federal and state securities laws; the capital stock of the Company, including the Common Stock, conforms in all material respects to the description thereof contained in the Registration Statement and the Common Stock, including the Shares, will conform to the description thereof contained in the Prospectus as amended or supplemented.  Neither the stockholders of the Company, nor any other Person have any preemptive rights or rights of first refusal with respect to the Shares or other rights to purchase or receive any of the Shares or any other securities or assets of the Company, and no Person has the right, contractual or otherwise, to cause the Company to issue to it, or register pursuant to the Securities Act, any shares of capital stock or other securities or assets of the Company upon the issuance or sale of the Shares.  The Company is not obligated to offer the Shares on a right of first refusal basis or otherwise to any third parties including, but not limited to, current or former shareholders of the Company, underwriters, brokers, agents or other third parties.

Section 4.33 Deleted.

Section 4.34 Blue Sky. The Company shall, at its sole cost and expense, on or before each of the Closing Dates, take such action as the Company shall reasonably determine is necessary to qualify the Securities for, or obtain exemption for the Securities for, sale to the Investor at each of the Closings pursuant to this Agreement under applicable securities or "Blue Sky" laws of such states of the United States, as reasonably specified by the Investor, and shall provide evidence of any such action so taken to the Investor on or prior to the Closing Date.

Section 4.35 Reservation of Shares. The Company shall reserve fifty million (50,000,000) shares of Stock for the issuance of the Securities to the Investor as required hereunder. In the event that the Company determines that it does not have a sufficient number of authorized shares of Common Stock to reserve and keep available for issuance as described in this Section 5(F), the Company shall use all commercially reasonable efforts to increase the number of authorized shares of Common Stock by seeking shareholder approval for the authorization of such additional shares.

Section 4.36 Payment Set Aside. To the extent that the Company makes a payment or payments to the Investor hereunder or under the Registration Rights Agreement or the Investor enforces or exercises its rights hereunder or thereunder, and such payment or payments or the proceeds of such enforcement or exercise or any part thereof are subsequently invalidated, declared to be invalid or preferential, set aside, recovered from, disgorged by or are required to be refunded, repaid or otherwise restored to the Company, a trustee, receiver or any other person under any law (including, without limitation, any bankruptcy law, state or federal law, common law or equitable cause of action), then to the extent of any such restoration the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such enforcement or setoff had not occurred.

Section 4.37 Share Capital.  There are no securities or instruments containing anti-dilution of similar provision that will be triggered by the issuance of shares of Common Stock pursuant to this Agreement. The Company does not have any stock appreciation rights or “phantom stock” plans or agreements or any similar plan or agreement and there is no dispute as to the class of any shares of the Company.

Section 4.38 Acknowledgement of Terms.  The Company acknowledges that: (i) it is voluntarily entering into this Agreement of its own freewill, (ii) it is not entering this Agreement under economic duress, (iii) the terms of this Agreement are reasonable and fair to the Company, and (iv) the Company has had independent legal counsel of its own choosing review this Agreement, advise the Company with respect to this Agreement, and represent the Company in connection with this Agreement.

ARTICLE V.

Indemnification

The Investor and the Company represent to the other the following with respect to itself:

Section 5.1. Indemnification.

(a)  In consideration of the Investor’s execution and delivery of this Agreement, and in addition to all of the Company’s other obligations under this Agreement, the Company shall defend, protect, indemnify and hold harmless the Investor, and all of its officers, directors, partners,

employees and agents (including, without limitation, those retained in connection with the transactions contemplated by this Agreement) (collectively, the “Investor Indemnitees”) from and against any and all actions, causes of action, suits, claims, losses, costs, penalties, fees, liabilities and damages, and expenses in connection therewith (irrespective of whether any such Investor Indemnitee is a party to the action for which indemnification hereunder is sought), and including reasonable attorneys’ fees and disbursements (the “Indemnified Liabilities”), incurred by the Investor Indemnitees or any of them as a result of, or arising out of, or relating to (a) any misrepresentation or breach of any representation or warranty made by the Company in this Agreement or the Registration Rights Agreement or any other certificate, instrument or document contemplated hereby or thereby, (b) any breach of any covenant, agreement or obligation of the Company contained in this Agreement or the Registration Rights Agreement or any other certificate, instrument or document contemplated hereby or thereby, or (c) any cause of action, suit or claim brought or made against such Investor Indemnitee not arising out of any action or inaction of an Investor Indemnitee, and arising out of or resulting from the execution, delivery, performance or enforcement of this Agreement or any other instrument, document or agreement executed pursuant hereto by any of the Investor Indemnitees. To the extent that the foregoing undertaking by the Company may be unenforceable for any reason, the Company shall make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities, which is permissible under applicable law.

 (b)  Contribution.  In the event that the indemnity provided in Section 5.1 is unavailable to or insufficient to hold harmless an indemnified party for any reason, the Company severally agrees to contribute to the aggregate losses, claims, damages and liabilities (including legal or other expenses reasonably incurred in connection with investigating or defending the same) (collectively “Losses”) to which the Company may be subject in such proportion as is appropriate to reflect the relative benefits received by the Company on the one hand from transactions contemplated by this Agreement. If the allocation provided by the immediately preceding sentence is unavailable for any reason, the Company and the Investor severally shall contribute in such proportion as is appropriate to reflect not only such relative benefits but also the relative fault of the Company on the one hand and of the Investor on the other in connection with the statements or omissions which resulted in such Losses as well as any other relevant equitable considerations.  Benefits received by the Company shall be deemed to be equal to the total proceeds from the offering (net of underwriting discounts and commissions but before deducting expenses) received by it, and benefits received by the Investor shall be deemed to be equal to the total discounts received by the Investor.  Relative fault shall be determined by reference to, among other things, whether any untrue or any alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information provided by the Company on the one hand or the Investor on the other, the intent of the parties and their relative knowledge, access to information and opportunity to correct or prevent such untrue statement or omission.  The Company and the Investor agree that it would not be just and equitable if contribution were determined by pro rata allocation or any other method of allocation which does not take account of the equitable considerations referred to above.  The aggregate amount of losses, liabilities, claims, damages and expenses incurred by an indemnified party and referred to above in this section shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in investigating, preparing or defending against any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue or alleged untrue statement or omission or alleged omission.  Notwithstanding the provisions of this section the Investor shall not be required to contribute any amount in excess of the amount by which the Purchase Price for Shares actually purchased pursuant to this Agreement exceeds the amount of any damages which the Investor has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission.  For purposes of this Article V, each person who controls the Investor within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act and each director, officer, employee and agent of the Investor shall have the same rights to contribution as the Investor, and each person who controls the Company within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, each officer of the Company who shall have signed the Registration Statement and each director of the Company shall have the same rights to contribution as the Company, subject in each case to the applicable terms and conditions of this section.

(c)  The remedies provided for in this Article V are not exclusive and shall not limit any rights or remedies which may otherwise be available to any indemnified person at law or in equity.  The obligations of the parties to indemnify or make contribution under this Article V shall survive termination.

Section 5.2  Notification of Claims for Indemnification. Each party entitled to indemnification under this Article V (an “Indemnified Party”) shall, promptly after the receipt of notice of the commencement of any claim against such Indemnified Party in respect of which indemnity may be sought from the party obligated to indemnify such Indemnified Party under this Article V (the “Indemnifying Party”), notify the Indemnifying Party in writing of the commencement thereof. Any such notice shall describe the claim in reasonable detail. The failure of any Indemnified Party to so notify the Indemnifying Party of any such action shall not relieve the Indemnifying Party from any liability which it may have to such Indemnified Party (a) other than pursuant to this Article V or (b) under this Article V unless, and only to the extent that, such failure results in the Indemnifying Party’s forfeiture of substantive rights or defenses or the Indemnifying Party is prejudiced by such delay. The procedures listed below shall govern the procedures for the handling of indemnification claims.

(a)   Any claim for indemnification for Indemnified Liabilities that do not result from a Third Party Claim as defined in the following paragraph, shall be asserted by written notice given by the Indemnified Party to the Indemnifying Party. Such Indemnifying Party shall have a period of thirty (30) days after the receipt of such notice within which to respond thereto. If such Indemnifying Party does not respond within such thirty (30) day period, such Indemnifying Party shall be deemed to have refused to accept responsibility to make payment as set forth in Section 5.1. If such Indemnifying Party does not respond within such thirty (30) day period or rejects such claim in whole or in part, the Indemnified Party shall be free to pursue such remedies as specified in this Agreement.

(b)   If an Indemnified Party shall receive notice or otherwise learn of the assertion by a person or entity not a party to this Agreement of any threatened legal action or claim (collectively a “Third Party Claim”), with respect to which an Indemnifying Party may be obligated to provide indemnification, the Indemnified Party shall give such Indemnifying Party written notice thereof within twenty (20) days after becoming aware of such Third Party Claim.

(c)   An Indemnifying Party may elect to defend (and, unless the Indemnifying Party has specified any reservations or exceptions, to seek to settle or compromise) at such Indemnifying Party’s own expense and by such Indemnifying Party’s own counsel, any Third Party Claim. Within thirty (30) days after the receipt of notice from an Indemnified Party (or sooner if the nature of such Third Party Claim so requires), the Indemnifying Party shall notify the Indemnified Party whether the Indemnifying Party will assume responsibility for defending such Third Party Claim, which election shall specify any reservations or exceptions. If such Indemnifying Party does not respond within such thirty (30) day period or rejects such claim in whole or in part, the Indemnified Party shall be free to pursue such remedies as specified in this Agreement. In case any such Third Party Claim shall be brought against any Indemnified Party, and it shall notify the Indemnifying Party of the commencement thereof, the Indemnifying Party shall be entitled to assume the defense thereof at its own expense, with counsel satisfactory to such Indemnified Party in its reasonable judgment; provided, however, that any Indemnified Party may, at its own expense, retain separate counsel to participate in such defense at its own expense. Notwithstanding the foregoing, in any Third Party Claim in which both the Indemnifying Party, on the one hand, and an Indemnified Party, on the other hand, are, or are reasonably likely to become, a party, such Indemnified Party shall have the right to employ separate counsel and to control its own defense of such claim if, in the reasonable opinion of counsel to such Indemnified Party, either (x) one or more significant defenses are available to the Indemnified Party that are not available to the Indemnifying Party or (y) a conflict or potential conflict exists between the Indemnifying Party, on the one hand, and such Indemnified Party, on the other hand, that would make such separate representation advisable; provided, however, that in such circumstances the Indemnifying Party (i) shall not be liable for the fees and expenses of more than one counsel to all Indemnified Parties and (ii) shall reimburse the Indemnified Parties for such reasonable fees and expenses of such counsel incurred in any such Third Party Claim, as such expenses are incurred, provided that the Indemnified Parties agree to repay such amounts if it is ultimately determined that the Indemnifying Party was not obligated to provide indemnification under this Article IX. The Indemnifying Party agrees that it shall not, without the prior written consent of the Indemnified Party, settle, compromise or consent to the entry of any judgment in any pending or threatened claim relating to the matters contemplated hereby (if any Indemnified Party is a party thereto or has been actually threatened to be made a party thereto) unless such settlement, compromise or consent includes an unconditional release of such Indemnified Party from all liability arising or that may arise out of such claim. The Indemnifying Party shall not be liable for any settlement of any claim effected against an Indemnified Party without the Indemnifying Party’s written consent, which consent shall not be unreasonably withheld, conditioned or delayed. The rights accorded to an Indemnified Party hereunder shall be in addition to any rights that any Indemnified Party may have at common law, by separate agreement or otherwise; provided, however, that notwithstanding the foregoing or anything to the contrary contained in this Agreement, nothing in this Article V shall restrict or limit any rights that any Indemnified Party may have to seek equitable relief.

ARTICLE VI.Covenants of the Company

Section 6.1. Registration Rights. The Company shall cause the Registration Rights Agreement to remain in full force and effect and the Company shall comply in all material respects with the terms thereof. During the Commitment Period, the Company shall notify the Investor promptly if (i) the Registration Statement shall cease to be effective under the Securities Act, (ii) the Common Stock shall cease to be authorized for listing on the Principal Market, (iii) the Common Stock ceases to be registered under Section 12(g) of the Exchange Act or (iv) the Company fails to file in a timely manner all reports and other documents required of it as a reporting company under the Exchange Act.

Section 6.2. Quotation of Common Stock. The Company shall maintain the Common Stock’s authorization for quotation on the Principal Market and use its best efforts to file within any mandatory timeframe all reports required to be filed by the Company.

Section 6.3. Exchange Act Registration. The Company will cause its Common Stock to continue to be registered under Section 12(g) of the Exchange Act, will file in a timely manner all reports and other documents required of it as a reporting company under the Exchange Act and will not take any action or file any document (whether or not permitted by Exchange Act or the rules thereunder) to terminate or suspend such registration or to terminate or suspend its reporting and filing obligations under said Exchange Act.

Section 6.4. Transfer Agent Instructions. On the Advance Notice Date, the Company shall deliver instructions to its transfer agent to issue shares of Common Stock to the Investor free of restrictive legends on the Advance Notice Date .

Section 6.5. Corporate Existence. The Company will take all steps necessary to preserve and continue the corporate existence of the Company.

Section 6.6. Notice of Certain Events Affecting Registration; Suspension of Right to Make an Advance. The Company will immediately notify the Investor upon its becoming aware of the occurrence of any of the following events in respect of a registration statement or related prospectus relating to an offering of Registrable Securities: (i) receipt of any request for additional information by the SEC or any other Federal or state governmental authority during the period of effectiveness of the Registration Statement for amendments or supplements to the registration statement or related prospectus; (ii) the issuance by the SEC or any other Federal or state governmental authority of any stop order suspending the effectiveness of the Registration Statement or the initiation of any proceedings for that purpose; (iii) receipt of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Registrable Securities for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose; (iv) the happening of any event that makes any statement made in the Registration Statement or related prospectus of any document incorporated or deemed to be incorporated therein by reference untrue in any material respect or that requires the making of any changes in the Registration Statement, related prospectus or documents so that, in the case of the Registration Statement, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, and that in the case of the related prospectus, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; and (v) the Company’s reasonable determination that a post-effective amendment to the Registration Statement would be appropriate; and the Company will promptly make available to the Investor any

such supplement or amendment to the related prospectus. The Company shall not deliver to the Investor any Advance Notice during the continuation of any of the foregoing events.

Section 6.7. Prohibited Transactions. During the term of this Agreement, the Company shall not enter into any Prohibited Transaction without the prior written consent of the Investor, which consent may be withheld at the sole discretion of the Investor. For the purposes of this Agreement, the term “Prohibited Transaction” shall refer to the issuance by the Company of any “future priced securities,” which shall mean the issuance of shares of Common Stock or securities of any type whatsoever that are, or may become, convertible or exchangeable into shares of Common Stock where the purchase, conversion or exchange price for such Common Stock is determined using any floating discount or other post-issuance adjustable discount to the market price of Common Stock, including, without limitation, pursuant to any equity line financing, stand-by equity distribution agreements, at the market transactions or convertible securities and loans that are substantially similar to the financing provided for under this Agreement, provided that any future issuance by the Company of (i) a convertible security (“Convertible Security”) that (A) contains provisions that adjust the conversion price of such Convertible Security in the event of stock splits, dividends, distributions, reclassifications or similar events or pursuant to anti-dilution provisions or (B) is issued in connection with the Company obtaining debt financing for research and development purposes where the issuance of Convertible Securities is conditioned upon the Company meeting certain defined clinical milestones, (ii) securities in a registered direct public offering or an unregistered private placement where the price per share of such securities is fixed concurrently with the execution of definitive documentation relating to the offering or placement, as applicable and (iii) securities issued in connection with a secured debt financing, shall not be a Prohibited Transaction.

   Section 6.8. Consolidation; Merger; Subdivision of Stock. The Company shall not, at any time after the delivery of an Advance Notice and before the Advance Date applicable to such Advance Notice, effect any merger or consolidation of the Company with or into, or a transfer of all or substantially all the assets of the Company to another entity (a “Consolidation Event”) unless the resulting successor or acquiring entity (if not the Company) assumes by written instrument the obligation to deliver to the Investor such shares of stock and/or securities as the Investor is entitled to receive pursuant to this Agreement. In the event the outstanding shares of the Company’s Common Stock shall be decreased by reverse stock split, combination, consolidation, or other similar transaction occurring after the date hereof into a lesser number of shares of Common Stock (“Stock Reduction”), the Company shall issue to the Investor such additional shares to the Commitment Share amount such that the Investor has the same number of Commitment Shares after such Stock Reduction as Investor was issued prior to the Stock Reduction.

 Section 6.9. Issuance of the Company’s Common Stock. The sale of Advance Shares shall be made in accordance with the provisions and requirements of Regulation D and any applicable state securities law.

Section 6.10. Review of Public Disclosures. All SEC filings (including, without limitation, all filings required under the Exchange Act, which include Forms 10-Q, 10-K, 8-K, etc.) and other public disclosures made by the Company, including, without limitation, all press releases, Investor relations materials, and scripts of analysts meetings and calls, shall be reviewed and approved for release by the Company’s attorneys and, if containing financial information, the Company’s independent certified public accountants.  All press releases and SEC filings referencing the Investor shall first be approved by Investor prior to release or being filed with the SEC.

Section 6.11. Listing of Shares.  The Company will use commercially reasonable efforts to cause the Shares to be listed on the Principal Market and to qualify the Shares for sale under the securities laws of such jurisdictions as the Investor designates; provided that the Company shall not be required in connection therewith to qualify as a foreign corporation or to file a general consent to service of process in any jurisdiction.

        Section 6.12.  Comfort Letters.  At the reasonable request of the Investor the Company will request that its independent accountants furnish to the Investor a letter containing statements and information of the type ordinarily included in accountants’ “comfort letters” to underwriters with respect to the financial statements of the Company dated the date of and provided within a reasonable period of time after (i) the date hereof, (ii) the date the Registration Statement or the Prospectus shall be amended (other than (1) in connection with the filing of a prospectus supplement that contains solely the information required (2) in connection with the filing of any report or other document under Section 13, 14 or 15(d) of the Exchange Act by the Company or (3) by a prospectus supplement relating to the offering of other securities (including, without limitation, other shares of Common Stock)) and (iii) the date of filing or amending each Annual Report on Form 10-K and Quarterly Report on Form 10-Q for a period in which an Advance was delivered pursuant to this Agreement and which are incorporated by reference in the Registration Statement.

Section 6.13.  No General Solicitation. Neither the Company, nor any of its affiliates, nor any person acting on its behalf, has engaged in any form of general solicitation or general advertising (within the meaning of Regulation D) in connection with the offer or sale of the Common Stock to be offered as set forth in this Agreement.

Section 6.14. Deleted.

Section 6.15.  Transactions With Affiliates. The Company shall not, and shall cause each of its Subsidiaries not to, enter into, amend, modify or supplement, or permit any Subsidiary to enter into, amend, modify or supplement, any agreement, transaction, commitment or arrangement with any of its or any Subsidiary's officers, directors, persons who were officers or directors at any time during the previous two (2) years, shareholders who beneficially own 5% or more of the Common Stock, or Affiliates or with any individual related by blood, marriage or adoption to any such individual or with any entity in which any such entity or individual owns a 5% or more beneficial interest (each a "Related Party"), except for (I) customary employment arrangements and benefit programs on reasonable terms, (II) any agreement, transaction,

commitment or arrangement on an arms-length basis on terms no less favorable than terms which would have been obtainable from a disinterested third party other than such Related Party, or (III) any agreement, transaction, commitment or arrangement which is approved by a majority of the disinterested directors of the Company. For purposes hereof, any director who is also an officer of the Company or any Subsidiary of the Company shall not be a disinterested director with respect to any such agreement, transaction, commitment or arrangement. "Affiliate" for purposes hereof means, with respect to any person or entity, another person or entity that, directly or indirectly, (I) has a 5% or more equity interest in that person or entity, (II) has 5% or more common ownership with that person or entity, (III) controls that person or entity, or (IV) is under common control with that person or entity. "Control" or "Controls" for purposes hereof means that a person or entity has the power, directly or indirectly, to conduct or govern the policies of another person or entity.

Section 6.16.  Filing of Form 8-K. On or before the date which is four (4) Trading Days after the Execution Date, the Company shall file a Current Report on Form 8-K with the SEC describing the terms of the transaction contemplated by the Equity Line Transaction Documents in the form required by the 1934 Act, if such filing is required.

Section 6.17.  Acknowledgement of Terms.  The Company hereby represents and warrants to the Investor that: (i) it is voluntarily entering into this Agreement of its own freewill, (ii) it is not entering this Agreement under economic duress, (iii) the terms of this Agreement are reasonable and fair to the Company, and (iv) the Company has had independent legal counsel of its own choosing review this Agreement, advise the Company with respect to this Agreement, and represent the Company in connection with this Agreement.

Section 6.18.  Stamp Duties.  Without limiting anything else in this Agreement, the Company shall indemnify the Investor against any claim, action, damage, loss liability, cost charge, expense outgoing or payment, including ay penalty, fine or interest, which the Investor pays, suffers, incurs, or is liable for, in connection with (including any administration costs of the Investor in connection in the matters referred to in the preceding pat of this sentence, any legal costs and expenses and any professional consultants’ fees for any of the above on a full indemnity basis:

(a)  the stamping of, or any stamp duty payable on, any of the following: (i) this Agreement; (ii) any contemplated transaction or Advance under this Agreement;

(b)  any inquiry by a governmental authority or regulatory body in connection with the assessment for stamp duty of the documents referred to in this clause involving the Investor;

(c)  any future, or any change in any present or future, stamp duty law or regulation or stamp duty or state or territory revenue office practice (with which, if not having the force of law, compliance is in accordance with the practice or responsible bankers and financial institutions in the jurisdiction concerned; and/or

(d)  any litigation or administrative proceedings (including any objection made to a stamp duty or state or territory revenue office) taken against  or involving the Investor in connection with the assessment for stamp duty of the documents or transactions referred to in this Agreement.

Section 6.19.  Conduct of Business. The Company shall, and shall cause all of its subsidiaries to carry on  and conduct its business and the business of each subsidiary in a proper and efficient manner in accordance with good commercial practice, and ensure that while the Investor holds any of the Stock, that the voting any other rights attached to the Stock are not altered in a manner which, in the opinion of the Investor, is materially prejudicial to the Investor.

Section 6.20.  Miscellaneous Covenants. The  Company shall not, and shall cause all of its subsidiaries not to, directly or indirectly, without the Investor’s written approval: (a) dispose, in a single transaction, or in a series of transactions, of all or any part of its assets unless such disposal is (i) in the ordinary course of business; (ii) for fair market value; and (iii) approved by the board of directors of the Company; (b) reduce its used share capital or any uncalled liability in respect of its issued capital, except by means of a purchase or redemption of the share capital that is permitted under law; (c) undertake any consolidation of its share capital; (d) change the nature of its business or the nature of the business of any subsidiary; (e) transfer the jurisdiction of incorporation of the Company or any of its Subsidiaries; (f) enter into any agreement with respect to any of the matters referred to in this section.

Section 6.21.  Withholding Gross-Up. If the Company is required by law to withhold or deduct an amount from any amount payable to the Investor: (a) the Company shall pay the amount required to be withheld or deducted to the relevant revenue or collection authority within the time allowed for such payment; and (b) the Company shall pay such additional amounts as are necessary to ensure that after making the deduction or withholding, the Investor receives the full amount required to be paid before giving effect to such deduction.

Section 6.22.  Taxes.

(a)    Without limiting anything else in this Agreement, if the Investor is required to pay any tax to any foreign government (Ex United States of America), in respect of any payment it receives from the Company; (i) the Company shall indemnify the Investor against that tax; and (ii) the Company shall pay to the Investor the additional amount which the Investor reasonably determines to be necessary to ensure that the Investor receives, when due, a net amount (after payment of any tax in respect of each additional amount, and taking into account any tax credit that the Investor would receive in connection with such tax in the United States of America) that is equal to the full amount it would have received if a deduction or withholding or payment of that tax had not been made.

(b)   Without limiting anything else in this Agreement the Company shall: (i) ay an tax required to be paid to any governmental authority which is payable in respect of this Agreement or any transaction under this agreement; (ii) pay any fine, penalty or other cost in respect of a failure to pay any tax as required under this clause; and (iii) indemnify Investor against any amount payable by it under this clause.

(c)   Without limiting anything else in this Agreement, at all times on and from the date of this Agreement, the Company shall comply in all material respects with all applicable laws relating to tax and promptly file, or cause to be filed, all tax returns, business activity statements, and other tax filings as applicable under applicable tax law.

Section 6.23.  Illegality and Impossibility. Without limiting the generality of the Investor’s rights set out elsewhere in this Agreement, if at any time there exists a law which an official interpretation of which, makes it, or may make it illegal or impossible in practice of the Investor to undertake any of the Advances, or render any of the contemplated Advances unenforceable, void or voidable, the Investor may, by giving a notice to the Company suspend or cancel some or all of its obligations under this Agreement, or terminate this Agreement.

ARTICLE VII.Conditions for Advance and Conditions to Closing

Section 7.1. Conditions Precedent to the Obligations of the Company. The obligation hereunder of the Company to issue and sell Advance Shares to the Investor incident to each Closing is subject to the satisfaction, or waiver by the Investor in writing, at or before each such Closing, of each of the conditions set forth below.

(a)   Accuracy of the Investor’s Representations and Warranties. The representations and warranties of the Investor shall be true and correct in all material respects.

(b)  Performance by the Investor. The Investor shall have performed, satisfied and complied in all respects with all covenants, agreements and conditions required by this Agreement and the Registration Rights Agreement to be performed, satisfied or complied with by the Investor at or prior to such Closing.

Section 7.2. Conditions Precedent to the Right of the Company to Deliver an Advance Notice. The right of the Company to deliver an Advance Notice is subject to the fulfillment by the Company, on such Advance Notice Date (a “Condition Satisfaction Date”), of each of the following conditions:

(a)  Advance Shares to be issued with respect to the applicable Advance Notice will be freely trading.

(b)  Authority. The Company shall have obtained all permits and qualifications required by any applicable state in accordance with the Registration Rights Agreement for the offer and sale of Advance Shares, or shall have the availability of exemptions there-from. The sale and issuance of Advance Shares shall be legally permitted by all laws and regulations to which the Company is subject.

(c)  Fundamental Changes. There shall not exist any fundamental changes to the information set forth in a Registration Statement which would require the Company to file a post-effective amendment to a Registration Statement.

(d)  Performance by the Company. The Company shall have performed, satisfied and complied in all material respects with all covenants, agreements and conditions required by this Agreement and the Registration Rights Agreement to be performed, satisfied or complied with by the Company at or prior to each Condition Satisfaction Date.

(e)  No Injunction. No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction that prohibits or directly and adversely affects any of the transactions contemplated by this Agreement, and no proceeding shall have been commenced that may have the effect of prohibiting or adversely affecting any of the transactions contemplated by this Agreement.

(f)  No Suspension of Trading in or Delisting of Common Stock. The Common Stock is trading on the Principal Market. The trading of Common Stock is not suspended by any government or the Principal Market. The issuance of Advance Shares with respect to the applicable Advance Notice will not violate the shareholder approval requirements of the Principal Market. The Company shall not have received any notice threatening the continued quotation of the Common Stock on the Principal Market and the Company shall have no knowledge of any event which would be more likely than not to have the effect of causing the Common Stock to not be trading or quoted on the Principal Market.

(g)  Maximum Advance Amount. The amount of an Advance corresponding to the Advance Notice shall not exceed the Maximum Advance Amount. For each day: (i) the Company’s Common Stock is suspended for any reason during trading hours on the Principal Market on any Trading Day during a Pricing Period or (ii) there is a public holiday or no trading volume in the Company’s Common Stock on the Principal Market on any Trading Day during a Pricing Period or (iii) ninety percent of the VWAP on a given Trading Day is less than the Safety Net Price set by the Company in the Advance Notice, then the final adjusted Advance Amount for each such day during the Pricing Period shall be reduced by one tenth. The Investor shall have the option to purchase, and the Company shall sell to the Investor, up to such amount of additional shares that have been reduced for the Safety Net Price. In no event shall the Company be obligated to issue such additional shares if such issuance may result in non-compliance with any securities laws. If any of the Company’s representations in this Agreement are false or if the Common Stock’s bid price is less than fifty cents, then no Advances shall be permitted. Any portion of an Advance that would cause the Investor to exceed the Ownership Limitation shall automatically be withdrawn.

(h)  No Knowledge. The Company has no knowledge of any event which would be more likely than not to have the effect of causing the Advance Shares with respect to the applicable Advance Notice not to be freely tradable.

(i)  Executed Advance Notice. The Investor shall have received the Advance Notice executed by an officer of the Company and the representations contained in such Advance Notice shall be true and correct as of each Condition Satisfaction Date.

(j)  Failure to Deliver Shares. Company understands that a delay in the issuance of Common Stock could result in economic damage to the Investor.  If the Company fails to cause the delivery of the Shares when due, the Company shall pay to the Investor on demand in cash by wire transfer of immediately available funds to an account designated by the Investor as liquidated damages for such failure and not as a penalty, an amount equal to five percent (5%) of the payment required to be paid by the Investor on such Settlement Date (i.e., the Advance Amount) for the initial 30 days following such date until the Shares have been delivered, and an additional 5% for each additional 30-day period thereafter until the Shares have been delivered.

(k) Fees Paid.  The Company has paid to investor all fees, expenses and Commitment Shares due under this Agreement.

(l) No Material Notices. None of the following events shall have occurred and be continuing:  (i) receipt by the Company of any request for additional information from any federal or state governmental, administrative or self-regulatory authority during the Commitment Period, the response to which would require any amendments or supplements to any filings; (ii) receipt by the Company of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Shares for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose.

(m) No person is entitled or purports to be entitled, to any right of first refusal, pre-emptive right, right of participation, or any similar right, to participate in the transaction or otherwise with respect to any securities of the Company.

(n) The Company has not granted security with respected to any indebtedness or other equity of the Company.

(o) The issuance and sale of any of the Investor’s Stock will not obligate the Company to issue Stock or other securities to any other persona and will not result in the adjustment of the exercise, conversion, exchange, or reset price of any outstanding security.

(p) there are no voting, buy-sell , outstanding or authorized stock appreciation, right of first purchase, phantom stock, profit participation or equity based compensation agreements, options or arrangement, or like rights relating to the securities of the Company or agreements of any kind among the Company and any person,

(q) (Valid Issuance) When issued pursuant to this Agreement, all Investor’s Stocks will be validly issued and fully paid, and will be free and clear of any and all liens and restrictions, except for restrictions on transfer imposed by applicable laws.

(r) (Regulatory Issues) No stop order, trading halt, suspension of trading, cessation of quotation, or removal of the company of the Stock from any exchange has been requested by the Company or imposed by any governmental authority or regulatory body. There is no fact or circumstance that may cause the Company to request, or any governmental authority or regulatory body to impose any stop order, trading halt, suspension of trading, cessation of quotation or removal of the Company or the Stock from any exchange.

(s) (No Additional Material Adverse Effect) There has been no event or condition that has had or may have a Material Adverse Effect. Since the date of the Company’s latest audited financial statements:

(i) the Company has not incurred any liabilities (contingent or otherwise) other than: (a) trade payables and accrued expenses incurred in the ordinary course of business consistent with past practice; and (b) liabilities not required to be reflected in the Company’s financial statements pursuant to the financial standards pursuant to which such financial statements are prepared, or required to be disclosed in the Company’s public filings;

(ii) the Company has not altered its method of accounting; and

(iii) the Company has not declared or made any dividend or distribution of cash or other property to its shareholders, or purchased, redeemed or made any agreements to purchase or redeem any shares of its capital stock.

(t) No Conflict, Breach, Violation or Default. The execution and delivery of, and the performance of the terms of, the Agreement or any Advance Notice or Advance will not: (i) result in the creation of any lien in respect of any property of the Company or any of its subsidiaries; or (ii) violate, conflict with, result in a breach of an provision of, require any notice or consent under, constitutes a default under, resulting in the termination of, or in a right of termination or cancellation of, accelerate the performance required by, result in the triggering of any payment or other material obligations pursuant to, ay of the terms, conditions or provisions of: (a) the Company’s constitution as in effect on the date of this Agreement; or (b) any law , governmental authorization, or order of any court, domestic or foreign, having jurisdiction over the Company, any subsidiary, or any of their respective assets or properties; or (c) any material agreement or instrument to which the Company or any subsidiary is a party or by which the Company or a subsidiary is bound or to which any their respective assets or properties is subject (or render any such agreement or instrument voidable or without further effect).

(u) Litigation. (i) There are no pending actions, suits or proceedings against or affecting the Company, its subsidiaries or any of its or their properties, and to the Company’s knowledge, no such actions, suits or proceedings are threatened or contemplated; (ii) Neither the Company nor any subsidiary, nor any director or officer is or has been the subject of any action, suit, proceeding, or investigation involving a claim of violation of or liability under securities laws or a claim of breach of fiduciary duty; (iii) There has not been, and to the knowledge of the Company there is no, pending or contemplated investigation by a governmental authority involving the Company or any current or former director or officer of the Company; and (iv) No regulatory body has issued any stop order or other order suspending the effectiveness of a Registration Statement or any related prospectus filed or lodged by the Company.

(v) Compliance. Neither the Company nor any subsidiary: (i) is in material default under, or in material violation of  (and no event has occurred that has not been waived that, with notice or lapse of time or both, would result in a default by the Company or any subsidiary under), nor has the Company or any subsidiary received notice of a claim that is in default under or that is in violation of, any indenture, loan or credit agreement or any other agreement or instrument to which it is a party or by which it or any of its properties is bound (whether or not such default or violation has been waived); (ii) is in violation of nay order of any court, arbitrator or governmental authority or regulatory body; (iii) is or has been in violation of any law; (iv) Neither the Company nor to is knowledge, any persona acting on its behalf, has conducted any general solicitation or general advertising (as those terms are used in Regulation D under the United States Securities Act of 1933, as amended (the Securities Act)), in connection with the offering of the Securities to the Investor; (v) Neither the Company nor any of its affiliates, nor any person action on its or their behalf has, directly or indirectly, sold, offered for sale or solicited offers to buy or otherwise negotiated in respect of any security, in a manner, or under circumstances, that: (a) would adversely affect reliance by the Company on the provisions of Rule 506 of Regulation D under the Securities Act for the exemption from registration for the sale and offer of the Securities to the Investor; (b) would require registration of the sale of the Securities under the Securities Act; or (c) would cause such offer or solicitation to be deemed integrated with the offering of the Securities. (iii) The offer and sale of the Securities to the Investor, as contemplated by this Agreement, is exempt from: (a) the registration requirements of the Securities Act by virtue of Rule 506 of Regulation D under the Securities Act; and (b) the registration and/ or qualification provisions of all applicable U.S state securities laws.

(w) Tax Returns. Without limiting anything else in this Agreement, the Company has filed, or caused to be filed, in a timely manner, all tax returns, business activity statements and other tax filings which were required to be filed by the execution date under applicable tax law, and has paid all taxes that became due and payable by it on or before the execution date when those taxes became due and payable. No claims have been, or are reasonably likely to be, asserted against it with respect to those filings or payment of taxes, that, if adversely determined, would have the potential to have a Material Adverse Effect.

(x) Disclosures.

(i) The materials delivered, and statements made, by the Company and its representatives to the Investor in connection with the contemplated Advances do not: (a) contain any untrue statement of a material fact or misleading statement; or (b) omit to state a material fact necessary in order to make the statements contained in those materials, in light of the circumstances under which they were made, not misleading.

(ii) The company had disclosed to the Investor in writing all facts relating to the Company, its business, the documents, the contemplated transactions and Advances, and all other matters which are material to the assessment of the nature and amount of the risk inherent in an investment in the Company.

(iii) Neither the Company nor any of its subsidiaries has made any agreement, offer, tender or quotation which remains outstanding and currently capable of acceptance relating to the purchase or sale of any business or assets of the Company or any of its subsidiaries.

(y) Solvency.

(i) The Company and each of its subsidiaries is able, and is not aware of anything which would render the Company or any of its subsidiaries unable, to pay all its debts as and when they become due and payable.

(ii) No judicial order has been made or obtained against the Company or any of its subsidiaries which is unpaid or unsatisfied.

(iii) No attachment in in the process of being levied or enforced against any asset of the Company or its subsidiaries.

(iv) No administrator, liquidator, provisional liquidator, controller or receiver of, or in connection with, the Company or any of its subsidiaries has been appointed, and the Company is not aware of such appointment pending, threatened, or being likely.

(v) No person has entered into, proposed, sanctioned, approved, or commenced, legal action relating to a scheme of arrangement of the affairs of the Company or any of its subsidiaries, or between any of those people and any of its shareholders or creditors.

(vi) Neither the Company nor any of its subsidiaries is in default under any security interest over, or in relation to, any asset.

(vii) The Company did not receive a qualified opinion from its auditors with respect to its most recent fiscal year end and, after giving effect to the contemplated transactions and Advances, does not anticipate or know of any basis upon which its auditors might issue a qualified opinion in respect of its current fiscal year.

(z) Intellectual Property.

(i) The Company and its subsidiaries own or possess adequate rights or licenses to use all material trademarks, trade names, service marks, service mark registrations, service names, patents, patent rights, copyrights, inventions, licenses, approvals, governmental authorizations, trade secrets and rights necessary to conduct their respective businesses and now conducted.

(ii) The Company has no knowledge of any infringement by the Company or its subsidiaries of trademarks, trade name rights, patents, patent rights, copyrights, inventions, licenses, service names, service marks, service mark registrations, trade secrets or other similar rights of others.

(iii) To the knowledge of the Company, there is no claim, action or proceeding made, brought, or threatened, against the Company or its subsidiaries regarding trademark, trade name, patents, patent rights, invention, copyright, license, service names, service marks, service

mark registrations, trade secret or other infringement, and the Company and its subsidiaries are unaware of any facts or circumstances which might give rise to a claim, action or proceeding.

(aa) Non-public information. Neither the Company nor any person acting on its behalf has provided the Investor or its agents, representative or counsel with any information that constitutes inside information or material non-public information, and to the Company’s knowledge, the Investor does not possess any inside information or material non-public information.

(bb) Prohibited Transactions. The Company has not entered or agreed to enter into a Prohibited Transaction.

(cc) Default. Neither the Company or any subsidiary is in default under a document or agreement binding on it or its assets which relates to financial indebtedness or it otherwise material.

(dd) Absence of Events of Default. No Event of Default and no event which, with notice, lapse of time or both, would constitute an Event of Default, has occurred and is continuing.

(ee) Brokers and finders. No person will have, as a result of the contemplated transactions and Advances, any valid right, interest or claim against or upon the Company, any subsidiary or an Investor for any commission, fee or other compensation pursuant to any agreement, arrangement or understanding entered into by or on behalf of the Company.

(ff) No Event of Default. (i) no Event of Default has occurred, (ii) no Remediable Event of Default has occurred and is continuing and no Event of Default would result from an Advance being effected. Any of the following shall constitute an Event of Default:

(i) A reasonable third party or court of competent jurisdiction determines that any of the representations, warranties, or covenants made by the Company or any of its agents,  officers, directors, employees or representatives in an document, materials or public filing are inaccurate, false or misleading in any material respect, as of the date as of which it is made or deemed to be made, or any certificate or financial  or other written statements furnished by or on behalf of the Company to the Investor, any of its representatives, or the company’s shareholders, is inaccurate, false or misleading, in any material respect, as of the date as of which it is made or deemed to be made, or on any Advance Date or Advance Notice Date.

(ii) The Company or any subsidiary of the Company is or becomes insolvent.

(iii) An administrator is appointed over all or any of the assets or undertaking of the Company or any subsidiary or any step preliminary to the appointment to an administrator has been taken.

(iv) A controller or similar officer is appointed to all or any of the assets or undertaking of the Company or any subsidiary.

(v) An application or order is made, a proceeding is commenced, a resolution is passed or proposed, or an application to a court or other steps are taken for the winding up or dissolution of the Company or any subsidiary , or for the Company or any subsidiary to enter an arrangement, compromise or composition with, or assignment for the benefit of, its creditors, a class of them, or any of them.

(vi) The Company or any of its subsidiaries ceases, suspends or threatens to cease or suspend, the conduct of all or a substantial part of its business, or dispose of, or threaten to dispose of, a substantial part of its assets or to reduce its capital.

(vii) There exists a fact or circumstance that may cause the Company to request, or the Principal Market or any other governmental authority or regulatory body to impose a stop order, trading halt, suspension of trading, cessation of quotation, or removal of the Company or the Common Stock for the Principal Market.

(viii) Any of the following has occurred: (i) trading in securities have been suspended or limited, (ii) minimum prices have been established on the securities, (iii) a banking moratorium has been declared by the authorities in New York or the jurisdiction where the Company is incorporated or where the Common Stock is trading, (iv) a material outbreak or escalation of hostilities or another national or international calamity of such magnitude in its effect on, or adverse change in the markets in the United States or the market where the Common Stock trades, makes it impracticable or inadvisable for the Investor to close on an Advance or accept an Advance Notice.

(ix) Any agreement entered into by the Company or contemplated transaction by the Company is claimed (other than in a frivolous proceeding) by any person that is not the Investor or its affiliate to be, wholly or partly void, voidable or unenforceable.

(x) Any person has commenced any action, claim, proceeding, suit, or action against any other person or otherwise asserted any claim before any governmental authority, which seeks to restrain, challenge, deny, enjoin, limit, modify, delay, or dispute, the right of the Investor or the Company to enter into this Agreement or contemplated transactions under this Agreement.

(xi) The Company challenges, disputes or denies the right of the Investor to receive any shares of the Common Stock, or otherwise dishonors or rejects any action taken, or document delivered, in furtherance of the Investor’s rights to receive any Common Stock.

(xii) A stop order, trading halt, suspension of trading, cessation of quotation, or removal of the Company or the Stock from an exchange has been requested by the Company or imposed on the Company.

(xiii)A Material Adverse Effect, or an event, development or condition which, in the reasonable judgment of the Investor would be likely to have a Material Adverse Effect occurs.

(xiv)There exists a law which, or an official or reasonable interpretation of which, in the Investor’s reasonable opinion, makes it, or is more likely than not to make it, illegal or impossible for the Investor or the Company to undertake any of the Advances in accordance with this Agreement, or renders, or is more likely than not to render, consummation of any of the Advances in accordance with this Agreement unenforceable, void, voidable or unlawful, or contrary to or inconsistent with any law.

(xv) If: (i) a change in an interpretation or administration of a law or a proposed law introduced or proposed to be introduced to any governing body of law; (ii) compliance by the Investor or any of its Affiliates with a law or an interpretation or administration of a law, has, or is more likely than not to have, in the reasonable opinion of the Investor, directly or indirectly, the effect of (iv) varying the duties, obligation or liabilities of the Company or the Investor in connection with this Agreement or any Advance so that the Investor’s rights, powers, benefits, remedies or economic burden (including any tax treatment in the hands of the Investor) are adversely affected (including by way of delay or postponement); (v) otherwise adversely affecting rights, powers, benefits, remedies or the economic burden of the Investor (including by way of delay or postponement);

(xvi) A securities registrar or similar entity refuses to comply with a direction to issue, or record an issuance of securities to the Investor.

(xvii) Any consent, permit, approval, registration or waiver necessary or appropriate for the consummation of an Advance that remains to be consummated at the applicable time, has not been issued or received, or does not remain in full force or effect.

(xviii) The Investor has not received all those items required to be delivered to it in connection with an Advance in accordance with this Agreement.

(xix) The Company fails to perform, comply with, or observe any other term, covenant, undertaking, obligation or agreement under this Agreement.

(xx) A default judgment of an amount of USD500,000 or greater is entered against the Company or any of its subsidiaries.

(xxi) Any present or future liabilities, including contingent liabilities, of the Company or any of its subsidiaries for an amount or amounts totaling more than USD500,000 have not been satisfied on time, or have become prematurely payable.

Section 7.3 Investor Right to Investigate an Event of Default

If in the Investor’s reasonable opinion, an Event of Default has occurred, or is or may be continuing: (a) the Investor may investigate such purported Event of Default; (b) the Company shall co-operate with the Investor in such investigation; (c) the Company shall comply with all reasonable requests made by the Investor of the Company in connection with any investigation by the Investor; and (d) the Company shall pay all reasonable costs in connection with any investigation by the Investor.

Section 7. 4 Rights of the Investor Upon Default

(a) Upon the occurrence of existence of any Default whose existence will be determined by a reasonable third party, third party law firm or court of competent jurisdiction at any time during the continuance of such Event of Default, the Investor may: (i) declare, by notice to the Company, effective immediately, all outstanding and future obligations by the Company to the Investor under the Agreement to be immediately due and payable in immediately available funds or Stock (including, without limitation, the immediate refund of any amount repaid for Advance shares which have not been issued as at the time of the Event of Default and any Commitment Shares), without presentment, demand, protest or any other notice of any kind, all of which are expressly waived by the Company, anything to the contrary contained in this Agreement; (ii) terminate this Agreement by notice to the Company, effective as of the date set out in the Investor’s notice.

(b) Where an Event of Default has occurred, the Investor shall have: (i) no obligation to accept an Advance Notice or to consummate a closing under this Agreement; and (ii) the right to postpone the Advance accordingly.

(c) In addition to the remedies set out elsewhere, upon the occurrence or existence of any Event of Default, the Investor may exercise any other right, power or remedy granted to it by the Agreement or otherwise permitted by law, including any suit in equity and/or by action at law.

ARTICLE VIII.Due Diligence Review; Non-Disclosure of Non-Public Information

Section 8.1. Non-Disclosure of Non-Public Information.

 (a)  Subject to Section 6.6 and except as otherwise provided in this Agreement or the Registration Rights Agreement, the Company covenants and agrees that it has not in the past and will refrain in the future from disclosing, and shall cause its officers, directors, employees and agents to refrain from disclosing, any material non-public information to the Investor without also disseminating such information to the public at the same time.

(b) Nothing herein shall require the Company to disclose material, non-public information to the Investor or its advisors or representatives, and the Company represents that it does not disseminate material, non-public information to any Investors who purchase stock in the Company in a public offering, to money managers or to securities analysts in violation of Regulation FD of the Exchange Act, provided, however, that notwithstanding anything herein to the contrary, the Company will, as hereinabove provided and subject to compliance with Regulation FD, immediately notify the advisors and representatives of the Investor and, if any, underwriters, of any event or the existence of any circumstance (without any obligation to disclose the specific event or circumstance) of which it becomes aware, constituting material, non-

public information (whether or not requested of the Company specifically or generally during the course of due diligence by such persons or entities), which, if not disclosed in the prospectus included in the Registration Statement would cause such prospectus to include a material misstatement or to omit a material fact required to be stated therein in order to make the statements, therein, in light of the circumstances in which they were made, not misleading. Nothing contained in this Section 8.1 shall be construed to mean that such persons or entities other than the Investor (without the written consent of the Investor prior to disclosure of such information) may not obtain material, non-public information in the course of conducting due diligence in accordance with the terms of this Agreement and nothing herein shall prevent any such persons or entities from notifying the Company of their opinion that based on such due diligence by such persons or entities, that the Registration Statement contains an untrue statement of material fact or omits a material fact required to be stated in the Registration Statement or necessary to make the statements contained therein, in light of the circumstances in which they were made, not misleading.

ARTICLE IX.Choice of Law/Jurisdiction

Section 9.  Governing Law. This Agreement shall be governed by and interpreted solely in accordance with the laws of the State of Florida without regard to the principles of conflict of laws. Any dispute arising out of or in connection with this Agreement or otherwise relating to the parties relationship shall be settled only by litigation and exclusively in the State of Florida, City of Miami. The Company and the Investor further agree that no demand for punitive or exemplary damages shall be made. The parties hereby waive a trial by jury in any action, proceeding or counterclaim brought by either of the parties hereto against the other in respect of any matter arising out of or in connection with this Agreement. The parties agree that in the event of any action, litigation or proceeding between the parties arising out of or in relation to this Agreement, the prevailing party in a final judgment after the appeal period has passed shall be awarded, in addition to any damages, injunctions or other relief, such party’s costs and expenses, including but not limited to all related costs and reasonable attorneys’, accountants’ and experts’ fees incurred in bringing such action, litigation or proceeding and/or enforcing any judgment or order granted therein. No party to this Agreement will challenge the jurisdiction or venue provisions as provided in this section.  The section shall survive termination of the Agreement.

ARTICLE X.Assignment; Termination

Section 10.1. Assignment. Neither this Agreement nor any rights or obligations of the Company or the Investor hereunder may be assigned to any other Person.

Section 10.2. Termination.

 (a) Unless earlier terminated as provided hereunder, this Agreement shall terminate automatically on the earliest of (i) the first day of the month next following the 36-month anniversary of the Effective Date, or (ii) the date on which the Investor shall have made payment of Advances pursuant to this Agreement in the aggregate amount of the Commitment Amount.

(b) The Company may terminate this Agreement before its expiration, effective upon 30 Trading Days’ prior written notice to the Investor; provided that (i) there are no Advances outstanding, (ii) the Company has paid all amounts owed to the Investor pursuant to this Agreement and (iii) the Company has paid the Investor or its designee or nominee a cancellation fee of USD$25,000 in immediately available funds within three calendar days of such notice. If $7,500,000 of the Commitment Amount has been issued by the Company to the Investor, then the cancellation fee is zero. This Agreement may be terminated at any time by the mutual written consent of the parties, effective as of the date of such mutual written consent unless otherwise provided in such written consent. In the event of any termination of this Agreement by the Company hereunder, so long as the Investor owns any shares of Common Stock issued hereunder, the Company shall not cancel the common stock issued to Investor or suspend or voluntarily delist the Common Stock from, the Principal Market without listing the Common Stock on another Principal Market.  The Commitment shares are fully earned as of the date of this Agreement regardless of whether any Advance Notices are issued by the Company or settled hereunder. The Commitment Shares are issued as consideration for entering into this Agreement and are also intended to reimburse the Investor for its costs in providing this financing facility and the contemplated Advances. Except as discussed in this Section 10.2(b) below, the Commitment Shares are non-refundable and shall survive termination of this Agreement and shall not be cancelled by the Company. The Company shall have the right, at any time during such period, to redeem any Commitment Shares then in the Investor’s possession for an amount payable by the Company to Investor in cash equal to Forty Thousand Dollars ($40,000), less any net cash proceeds received by the Investor from any previous sales of Commitment Shares.  Upon Investor’s receipt of such cash payment, the Investor shall return any then remaining Commitment Shares in its possession back to the Company.  If the Company fails to issue the Commitment Shares, cancels the Commitment Shares, places a stop order with their transfer agent, or prevents the Investor from selling the Commitment Shares in any other manner, the Company shall be subject, at the sole discretion of the Investor to either (i) a daily fee of five thousand dollars, not as a penalty, until the Investor receives the Commitment Shares or is allowed to sell the Commitment Shares.  This fee is to compensate the Investor for the loss incurred for not receiving the Commitment Shares in time and the cost of not being able to sell the shares at higher share prices and better liquidity, or (ii) or, any profits gained through issuance of stock to third parties other than the Investor, not remitted to the Investor, shall be immediately remitted to the Investor as liquidated damages. In the event the Investor receives net proceeds from the sale of Commitment Shares equal to the Forty Thousand Dollars ($40,000), and the Investor still has Commitment Shares remaining to be sold, the Investor shall return all such remaining Commitment Shares to the Company.

(c) The obligation of the Investor to make an Advance to the Company pursuant to this Agreement shall terminate permanently (including with respect to an Advance Date that has not yet occurred) in the event that (i) there shall occur any stop order or suspension of the effectiveness of the Registration Statement for an aggregate of fifty (50) Trading Days, during the Commitment Period, or (ii) the Company shall at any time fail materially to comply with the requirements of Article VI and such failure is not cured within thirty (30) days after receipt of written notice from the Investor, provided, however, that this paragraph (c) shall not apply to any period commencing upon the filing of a post-effective

amendment to such Registration Statement and ending upon the date on which such post effective amendment is declared effective by the SEC. The Investor may terminate this Agreement by sending email notice to the Company declaring a Material Adverse Effect.

(d) Nothing in this Section 10.2 shall be deemed to release the Company or the Investor from any liability for any breach under this Agreement, or to impair the rights of the Company and the Investor to compel specific performance by the other party of its obligations under this Agreement. The indemnification provisions contained in Sections 5.1 and 5.2 shall survive termination hereunder.

ARTICLE XI.Notices

Section 11.1. Notices. Any notices, consents, waivers, or other communications required or permitted to be given under the terms of this Agreement must be in writing and will be deemed to have been delivered upon being sent to the following email addresses:

If to the Company: jerrygmik@xunenergy.com

If to the Investor: asilberstein@agscapitalgroup.com

Each party shall provide five (5) days’ prior written notice to the other party of any change in email address.

ARTICLE XII.

Miscellaneous

Section 12.1. Counterparts. This Agreement may be executed in two or more identical counterparts, all of which shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party.

Section 12.2 Entire Agreement; Amendments. This Agreement supersedes all other prior agreements, negotiations or discussions both oral or written between the Investor, the Company, their affiliates and persons acting on their behalf with respect to the matters discussed herein, and this Agreement and the instruments referenced herein and therein contain the entire understanding of the parties with respect to the matters covered herein and therein and, except as specifically set forth herein or therein, neither the Company nor the Investor makes any representation, warranty, covenant or undertaking with respect to such matters. No provision of this Agreement may be waived or amended other than by an instrument in writing signed by the party to be charged with enforcement.  The provisions of this Agreement shall be construed in favor of the Investor. Except as specifically set out in this Agreement, neither the Company nor the Investor makes any representation, warranty, covenant or undertaking with respect to any subject matter regarding this Agreement or otherwise.

Section 12.3. Reporting Entity for the Common Stock. The reporting entity relied upon for the determination of the trading price or trading volume of the Common Stock on any given Trading Day for the purposes of this Agreement shall be Bloomberg, L.P. or any successor thereto. The written mutual consent of the Investor and the Company shall be required to employ any other reporting entity.

Section 12.4. Fees and Expenses. Except as stated in section 1.34 of this Agreement, each of the parties shall pay its own fees and expenses (including the fees of any attorneys, accountants, appraisers or others engaged by such party) in connection with this Agreement and the transactions contemplated hereby, except that the Company shall pay a non-refundable Structuring & Due Diligence Fee of Ten Thousand Dollars to Investor. In consideration for entering into this agreement, the Company is required to issue an Initial Commitment Fee in the amount of Forty Thousand Dollars ($40,000) in shares of common stock valued at the closing VWAP price as of the close one business day immediately prior to the signing of the final documents to Investor. This condition was fulfilled by the Company after signing the original Reserve Equity Financing Agreement on April 30, 2013. It is the intention of the Company and Investor that by a date that is nine (9) months after the issuance of the shares that the Investor shall have generated net proceeds equal to Forty Thousand ($40,000) Dollars.  If not, then the Company shall immediately take all required action necessary or required in order to cause the issuance of additional shares of Common Stock to the Investor in an amount sufficient such that, when sold and the net proceeds thereof are added to the net proceeds from the sale of any of the previously issued and sold Commitment Shares, the Investor shall have received total net funds equal to Forty Thousand Dollars ($40,000).  Such additional issuances shall continue until the Investor has received net proceeds from the sale of such Common Stock equal to this amount. In the event the Investor receives net proceeds from the sale of Commitment Shares equal to the Forty Thousand Dollars ($40,000), and the Investor still has Commitment Shares remaining to be sold, the Investor shall return all such remaining Commitment Shares to the Company. The Company shall have the right, at any time during such period, to redeem any Commitment Shares then in the Investor’s possession for an amount payable by the Company to Investor in cash equal to Forty Thousand Dollars ($40,000), less any net cash proceeds received by the Investor from any previous sales of Commitment Shares.  Upon Investor’s receipt of such cash payment, the Investor shall return any then remaining Commitment Shares in its possession back to the Company.

Section 12.5. Confidentiality. Each of the parties hereto shall keep confidential the terms of this Agreement and any and all transactions and dealings under this Agreement as well as any information obtained from any other party. The Company and the Investor agree that in addition to and in no way limiting the rights and obligations set forth in Section 12.5 hereto and in addition to any other remedy to which the Investor or Company is entitled at law or in equity, including, without limitation, specific performance, it will hold the other party harmless against any loss, claim, damage, or expense (including reasonable legal fees and expenses), as incurred, arising out of or in connection with such breach of confidentiality and acknowledges that irreparable damage would occur in the event of any such breach.  It is accordingly agreed that both the Investor and Company shall be entitled to an injunction or injunctions to prevent such breaches of this Agreement and to specifically enforce, without the posting of a bond or other security, the confidentiality, terms and provisions of this Agreement.  

Section 12.6 Publicity. Prior to issuing any public statements, the Company shall send to the Investor for approval any press releases or public statement with respect to the transactions contemplated hereby and no party shall issue any such press release or otherwise make any such public statement without the prior written consent of the other party. Notwithstanding the foregoing, the Company shall not publicly disclose the name of the Investor unless the Investor provides written approval to do so.  The Company also agrees that it shall not issue a press

release regarding the funding set forth in this Agreement until three (3) business days following the date the company issues the Commitment Shares.

Section 12.7 Placement Agent. If so required by the SEC, the Company agrees to pay a registered broker dealer, to act as placement agent, a percentage of the Put Amount on each draw toward the fee.  The Investor shall have no obligation with respect to any fees or with respect to any claims made by or on behalf of other persons or entities for fees of a type contemplated in this Section that may be due in connection with the transactions contemplated by the Reserve Equity Financing Documents. The Company shall indemnify and hold harmless the Investor, their employees, officers, directors, agents, and partners, and their respective affiliates, from and against all claims, losses, damages, costs (including the costs of preparation and attorney's fees) and expenses incurred in respect of any such claimed or existing fees, as such fees and expenses are incurred.

Section 12.8 No Third Party Beneficiaries.

Notwithstanding anything contained in this Agreement to the contrary, nothing in this Agreement, expressed or implied, is intended to confer on any Person other than the parties hereto any rights, remedies, obligations or liabilities under or by reason of this Agreement, and no Person that is not a party to this Agreement (including without limitation any partner, member, shareholder, director, officer, employee or other beneficial owner of any party hereto, in its own capacity as such or in bringing a derivative action on behalf of a party hereto) shall have any standing as third party beneficiary with respect to this Agreement or the transactions contemplated hereby.

Section 12.9 No Personal Liability of Directors, Officers, Owners, Etc.

No director, officer, employee, incorporator, shareholder, managing member, member, general partner, limited partner, principal or other agent of any of the Investor or the Company shall have any liability for any obligations of the Investor or the Company under this Agreement or for any claim based on, in respect of, or by reason of, the respective obligations of the Investor or the Company hereunder.  Each party hereto hereby waives and releases all such liability.  This waiver and release is a material inducement to each party’s entry into this Agreement.

Section 12.10. Delay.  The Investor shall not be obligated to perform and shall not be deemed to be in default hereunder, if the performance of an obligation required hereunder is prevented by the occurrence of any of the following, acts of God, strikes, lock-outs, other industrial disturbances, acts of a public enemy, war or war-like action (whether actual, impending or expected and whether de jure or de facto), acts of terrorists, arrest or other restraint of government (civil or military), blockades, insurrections, riots, epidemics, landslides, lightning, earthquakes, fires, hurricanes, storms, floods, washouts, sink holes, civil disturbances, explosions, breakage or accident to equipment or machinery, confiscation or seizure by any government or public authority, nuclear reaction or radiation, radioactive contamination or other causes, whether of the kind herein enumerated or otherwise, that are not reasonably within the control of the party claiming the right to delay performance on account of such occurrence.

IN WITNESS WHEREOF, the parties hereto have caused this Reserve Equity Financing Agreement to be executed by the undersigned, thereunto duly authorized, as of the date first set forth above.

COMPANY:
Xun Energy, Inc.
By:	/s/ Jerry G. Mikolajczyk
Name: Jerry G. Mikolajczyk
Title: President and Chief Executive Officer
INVESTOR:
AGS Capital Group, LLC
By:	/s/ Allen Silberstein
Name: Allen Silberstein
Title: Chief Executive Officer

EXHIBIT A

ADVANCE NOTICE

    Xun Energy, Inc.  (the “Company”)

The undersigned, __________________________hereby certifies, with respect to the sale of shares of Common Stock of the Company issuable in connection with this Advance Notice, delivered pursuant to the Reserve Equity Financing Agreement (the “Agreement”), as follows:

1. The undersigned is the duly elected Officer of the Company, its Chief Executive, President or Chief Financial Officer.

2. There are no fundamental changes to (a) the covenants in Article IV of the Reserve Equity Financing Agreement and (b) the information set forth in the Registration Statement which would require the Company to file a post effective amendment to the Registration Statement.

3. The Company has performed in all material respects all covenants and agreements to be performed by the Company and has complied in all material respects with all obligations and conditions contained in the Agreement on or prior to the Advance Notice Date, and shall continue to perform in all material respects all covenants and agreements to be performed by the Company through the applicable Advance Date. All conditions to the delivery of this Advance Notice are satisfied as of the date hereof.

4. The undersigned hereby represents, warrants and covenants that it has made all filings (“SEC Filings”) required to be made by it pursuant to applicable securities laws (including, without limitation, all filings required under the Securities Exchange Act of 1934, which include Forms 10-Q or, 10-K or, 8-K, etc.). All SEC Filings and other public disclosures made by the Company, including, without limitation, all press releases, analysts meetings and calls, etc. (collectively, the “Public Disclosures”), have been reviewed and approved for release by the Company’s attorneys and, if containing financial information, the Company’s independent certified public accountants. None of the Company’s Public Disclosures contain, as of their respective dates, any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading.

5. The Advance requested is  ________________shares.

6. The Safety Net Price is _______________________.

7.  There are currently  _______________________ amount of shares outstanding on a fully diluted basis.

The undersigned has executed this Certificate this  _____  day of  _____.

____________________________
By:
	Name:
	Title:

Please email this Advance Notice to: asilberstein@agscapitalgroup.com

SCHEDULE 2.4

                Xun Energy, Inc.

The undersigned hereby agrees that for a period commencing on ________ 2013 and expiring upon the termination of the Reserve Equity Financing Agreement dated ________ 2013 between the Company and the Investor (the “Lock-up Period”), he, she or it will not, directly or indirectly, without the prior written consent of the Investor, issue, offer, agree or offer to sell, sell, grant an option for the purchase or sale of, transfer, pledge, assign, hypothecate, distribute or otherwise encumber or dispose of any securities of the Company, including common stock or options, rights, warrants or other securities underlying, convertible into, exchangeable or exercisable for or evidencing any right to purchase or subscribe for any common stock (whether or not beneficially owned by the undersigned), or any beneficial interest therein (collectively, the “Securities”) except in accordance with the volume limitations set forth in Rule 144(e) of the General Rules and Regulations under the Securities Act of 1933, as amended. Notwithstanding the forgoing, nothing herein shall prevent the undersigned from disposing of Securities (i) if the recipient of the Securities agrees to be bound by the terms of this Lock-up, or (ii) in connection with a merger where the Company is not the surviving entity.

In order to enable the aforesaid covenants to be enforced, the undersigned hereby consents to the placing of legends and/or stop-transfer orders with the transfer agent of the Company’s securities with respect to any of the Securities registered in the name of the undersigned or beneficially owned by the undersigned, and the undersigned hereby confirms the undersigned’s investment in the Company.

Dated: ___________________, 2013

Signature

Name:

Address:

City, State, Zip Code:

 _____________________________________________________________

Print Social Security Number

or Taxpayer I.D. Number

EXHIBIT C

FORM OF OPINION

1.         The Company is a corporation validly existing and in good standing under the laws of the State of __________, with corporate power and authority to own, lease and operate its properties and to conduct its business as described in the Company’s latest Form 10-K or 10-Q filed by the Company under the Securities Exchange Act of 1934, as amended, (the “Exchange Act”) and the rules and regulations of the Commission thereunder (the “Public Filings”) and to enter into and perform its obligations under the Reserve Equity Financing.

2.        The Company has the requisite corporate power and authority to enter into and perform its obligations under the Reserve Equity Financing Agreement and to issue the Common Shares in accordance with their terms.  The execution and delivery of the Reserve Equity Financing Agreement by the Company and the consummation by it of the transactions contemplated thereby have been duly authorized by all necessary corporate action, and no further consent or authorization of the Company or its Board of Directors or stockholders is required.  The Reserve Equity Financing Agreement has been duly executed and delivered and the Reserve Equity Financing Agreement constitutes a valid and binding obligation of the Company enforceable against the Company in accordance with its respective terms, except as my be limited by general principles of equity or applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally, the enforcement of creditors’ rights and remedies.

3.         The Common Shares are duly authorized and, upon issuance in accordance with the terms of the Reserve Equity Financing Agreement, will be duly and validly issued, fully paid and nonassessable, free of any liens, encumbrances and preemptive or similar rights contained, to our knowledge, in any agreement filed by the Company as an exhibit to the Company’s Public Filings.

4.         The execution, delivery and performance of the Reserve Equity Financing Agreement by the Company (other than performance by the Company of its obligations under the indemnification sections of such agreements, as to which no opinion need be rendered) will not (i) result in a violation of the Company’s Articles of Incorporation or By-Laws; (ii) conflict with, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement or, indenture filed by the Company as an exhibit to the Company’s Public Filings; or (iii) to our knowledge, result in a violation of any federal or state law, rule or regulation, order, judgment or decree applicable to the Company.

                   5.         To our knowledge without independent investigation and other then as set forth in the Public Filings, there are no legal or governmental proceedings pending to which the Company is a party or of which any property or assets of the Company is subject which is required to be disclosed in any Public Filings.

EX-10

Exhibit 10.2

REGISTRATION RIGHTS AGREEMENT

THIS REGISTRATION RIGHTS AGREEMENT (this “ Agreement ”), dated as of the 11^th day of July 2013 (the “Agreement”) between AGS Capital Group, LLC (the “Investor”), and Xun Energy, Inc. (the “Company”).

WHEREAS:

A. In connection with the Reserve Equity Financing Agreement by and between the parties hereto of even date herewith (the “ Reserve Equity Financing Agreement ”), the Company has agreed, upon the terms and subject to the conditions of the Reserve Equity Financing Agreement, to issue and sell to the Investor shares of the Company’s common stock (the “ Common Stock ”), which can be purchased pursuant to the terms of the Reserve Equity Financing Agreement. Capitalized terms not defined herein shall have the meaning ascribed to them in the Reserve Equity Financing Agreement.

B. To induce the Investor to execute and deliver the Reserve Equity Financing Agreement, the Company has agreed to provide certain registration rights under the Securities Act of 1933, as amended, and the rules and regulations thereunder, or any similar successor statute (collectively, the “ Securities Act ”), and applicable state securities laws.

NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and the Investor hereby agree as follows:

1. DEFINITIONS .

As used in this Agreement, the following terms shall have the following meanings:

a. “ Person ” means a corporation, a limited liability company, an association, a partnership, an organization, a business, an individual, a governmental or political subdivision thereof or a governmental agency.

b. “ Register ,” “ registered ,” and “ registration ” refer to a registration effected by preparing and filing one or more Registration Statements (as defined below) in compliance with the Securities Act and pursuant to Rule 415 under the Securities Act or any successor rule providing for offering securities on a continuous or delayed basis (“ Rule 415 ”), and the declaration or ordering of effectiveness of such Registration Statement(s) by the United States Securities and Exchange Commission (the “ SEC ”).

c. “ Registrable Securities ” means the Investor’s Shares, as defined in the Reserve Equity Financing Agreement, the Commitment Shares and shares of Common Stock issuable to Investors pursuant to the Reserve Equity Financing Agreement.

d. “ Registration Statement ” means a registration statement under the Securities Act which covers the Registrable Securities.

2. REGISTRATION .

a.  Filing of a Registration Statement . The Company shall prepare and file with the SEC a Registration Statement on Form S-1 or on such other form as is available within thirty (30) days of signing this Agreement. The Company shall cause such Registration Statement to be declared effective by the SEC prior to the first sale to the Investor of the Company’s Common Stock pursuant to the Reserve Equity Financing Agreement. After a Registration Statement is declared effective, the Company shall insure that the Registration Statement and any subsequent Registration Statements remain in effect until all of the Registrable Securities have been sold, or may be sold without restriction pursuant to Rule 144.

b.  Sufficient Number of Shares Registered . In the event the number of shares available under a Registration Statement filed pursuant to Section 2(a) is insufficient to cover all of the Registrable Securities the Company shall amend the Registration Statement, or file a new Registration Statement, or both, so as to cover all of such Registrable Securities as soon as practicable, but in any event not later than fifteen (15) days after the necessity therefore arises. The Company shall use it best efforts to cause such amendment and/or new Registration Statement to become effective as soon as practicable following the filing thereof. For purposes of the foregoing provision, the number of shares available under a Registration Statement shall be deemed “insufficient to cover all of the Registrable Securities” if at any time the number of Registrable Securities issuable on an Advance Notice Date is greater than the number of shares available for resale under such Registration Statement.

3. RELATED OBLIGATIONS .

a. The Company shall prepare and file with the SEC such amendments (including post-effective amendments) and supplements to a Registration Statement and the prospectus used in connection with such Registration Statement, which prospectus is to be filed pursuant to Rule 424 promulgated under the Securities Act, as may be necessary to keep such Registration Statement effective at all times during the Registration Period, and, during such period, comply with the provisions of the Securities Act with respect to the disposition of all Registrable Securities of the Company covered by such Registration Statement until such time as all of such Registrable Securities shall have been disposed of in accordance with the intended methods of disposition by the seller or sellers thereof as set forth in such Registration Statement. In the case of amendments and supplements to a Registration Statement which are required to be filed pursuant to this Agreement (including pursuant to this Section 3(b)) by reason of the Company’s filing a report on Form 10-K, Form 10-Q or Form 8-K or any analogous report under the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), the Company shall have incorporated such report by reference into the

JGM  AGS

Registration Statement, if applicable, or shall file such amendments or supplements with the SEC on the same day on which the Exchange Act report is filed which created the requirement for the Company to amend or supplement the Registration Statement.

b. The Company shall furnish to the Investor without charge, (i) at least one copy of such Registration Statement as declared effective by the SEC and any amendment(s) thereto, including financial statements and schedules, all documents incorporated therein by reference, all exhibits and each preliminary prospectus, (ii) ten (10) copies of the final prospectus included in such Registration Statement and all amendments and supplements thereto (or such other number of copies as such Investor may reasonably request) and (iii) such other documents as such Investor may reasonably request from time to time in order to facilitate the disposition of the Registrable Securities owned by such Investor.  

c. The Company shall use its best efforts to (i) register and qualify the Registrable Securities covered by a Registration Statement under such other securities or “blue sky” laws of such jurisdictions in the United States as the Investor reasonably requests, (ii) prepare and file in those jurisdictions, such amendments (including post-effective amendments) and supplements to such registrations and qualifications as may be necessary to maintain the effectiveness thereof during the Registration Period, (iii) take such other actions as may be necessary to maintain such registrations and qualifications in effect at all times during the Registration Period, and (iv) take all other actions reasonably necessary or advisable to qualify the Registrable Securities for sale in such jurisdictions; provided, however, that the Company shall not be required in connection therewith or as a condition thereto to (w) make any change to its certificate of incorporation or by-laws, (x) qualify to do business in any jurisdiction where it would not otherwise be required to qualify but for this Section 3(d), (y) subject itself to general taxation in any such jurisdiction, or (z) file a general consent to service of process in any such jurisdiction. The Company shall promptly notify the Investor of the receipt by the Company of any notification with respect to the suspension of the registration or qualification of any of the Registrable Securities for sale under the securities or “blue sky” laws of any jurisdiction in the United States or its receipt of actual notice of the initiation or threat of any proceeding for such purpose.

d. As promptly as practicable after becoming aware of such event or development, the Company shall notify the Investor in writing of the happening of any event as a result of which the prospectus included in a Registration Statement, as then in effect, includes an untrue statement of a material fact or omission to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading (provided that in no event shall such notice contain any material, nonpublic information), and promptly prepare a supplement or amendment to such Registration Statement to correct such untrue statement or omission, and deliver ten (10) copies of such supplement or amendment to each Investor. The Company shall also promptly notify the Investor in writing (i) when a prospectus or any prospectus supplement or post-effective amendment has been filed, and when a Registration Statement or any post-effective amendment has become effective (notification of such effectiveness shall be delivered to the Investor by facsimile on the same day of such effectiveness), (ii) of any request by the SEC for amendments or supplements to a Registration Statement or related prospectus or related information, and (iii) of the Company’s reasonable determination that a post-effective amendment to a Registration Statement would be appropriate.

e. The Company shall use its best efforts to prevent the issuance of any stop order or other suspension of effectiveness of a Registration Statement, or the suspension of the qualification of any of the Registrable Securities for sale in any jurisdiction within the United States of America and, if such an order or suspension is issued, to obtain the withdrawal of such order or suspension at the earliest possible moment and to notify the Investor of the issuance of such order and the resolution thereof or its receipt of actual notice of the initiation or threat of any proceeding for such purpose. 

                f. At the reasonable request of the Investor, the Company shall furnish to the Investor, on the date of the effectiveness of the Registration Statement and thereafter from time to time on such dates as the Investor may reasonably request (i) a letter, dated such date, from the Company’s independent certified public accountants in form and substance as is customarily given by independent certified public accountants to underwriters in an underwritten public offering, and (ii) an opinion, dated as of such date, of counsel representing the Company for purposes of such Registration Statement, in form, scope and substance as is customarily given in an underwritten public offering, addressed to the Investor.

g. The Company shall make available to the Investor (i) copies of any draft Registration Statement at least 3 business days prior to filing thereof, and (ii) subject to restrictions imposed by the United States federal government or any agency or instrumentality thereof, copies of all public correspondence between the Commission and the Company concerning the Registration Statement. The Company will make available for inspection by the Investor and any attorney, accountant or other professional retained by the Investor (collectively, the “ Inspectors ”) all pertinent financial and other records, and pertinent corporate documents and properties of the Company (collectively, the “Records”), as shall be reasonably necessary to enable them to exercise their due diligence responsibility, and cause the Company’s officers, directors and employees to supply all information which any Inspector may reasonably request in connection with the Registration Statement. The Investor agrees that Records obtained by it as a result of such inspections which is conspicuously marked by the Company as “Confidential” (subject to the Company’s obligations with respect to material non-public information set forth in Section 8.1(a) herein) shall be deemed confidential and held in strict confidence by the Investor, unless (a) the disclosure of such Records is necessary to avoid or correct a misstatement or omission in any Registration Statement or is otherwise required under the Securities Act, (b) the release of such Records is ordered pursuant to a final, non-appealable subpoena or order from a court or government body of competent jurisdiction, or (c) the information in such Records has been made generally available to the public other than by disclosure in violation of this or any other agreement of which the Inspector and the Investor has knowledge. The Investor agrees that it shall, upon learning that disclosure of such Records is sought in or by a court or governmental body of competent jurisdiction or through other means, give prompt notice to the Company and allow the Company, at its expense, to undertake appropriate action to prevent disclosure of, or to obtain a protective order for, the Records deemed confidential.

h. The Company shall hold in confidence and not make any disclosure of information concerning the Investor provided to the Company unless (i) disclosure of such information is necessary to comply with federal or state securities laws, (ii) the disclosure of such information is necessary to avoid or correct a misstatement or omission in any Registration Statement, (iii) the release of such information is ordered pursuant to a subpoena or other final, non-appealable order from a court or governmental body of competent jurisdiction, or (iv) such information has been made generally available to the public other than by disclosure in violation of this Agreement or any other agreement. The Company agrees that it shall, upon learning that disclosure of such information concerning the Investor is sought in or by a court or governmental body of competent jurisdiction or through other means, give prompt written notice to the

JGM   AGS

Investor and allow the Investor, at the Investor’s expense, to undertake appropriate action to prevent disclosure of, or to obtain a protective order for, such information.

i. The Company shall use its best efforts either to cause all the Registrable Securities covered by a Registration Statement (i) to be listed on each securities exchange on which securities of the same class or series issued by the Company are then listed, if any, if the listing of such Registrable Securities is then permitted under the rules of such exchange or to secure the inclusion for quotation on a Primary Market. The Company shall pay all fees and expenses in connection with satisfying its obligation under this Section 3(i).

j. The Company shall cooperate with the Investor to the extent applicable, to facilitate the timely preparation and delivery of certificates (not bearing any restrictive legend) representing the Registrable Securities to be offered pursuant to a Registration Statement and enable such certificates to be in such denominations or amounts, as the case may be, as the Investor may reasonably request and registered in such names as the Investor may request.

k. The Company shall use its best efforts to cause the Registrable Securities covered by the applicable Registration Statement to be registered with or approved by such other governmental agencies or authorities as may be necessary to consummate the disposition of such Registrable Securities.

l. The Company shall make generally available to its security holders as soon as practical, but not later than ninety (90) days after the close of the period covered thereby, an earnings statement (in form complying with the provisions of Rule 158 under the Securities Act) covering a twelve-month period beginning not later than the first day of the Company’s fiscal quarter next following the effective date of the Registration Statement.

m. The Company shall otherwise use its best efforts to comply with all applicable rules and regulations of the SEC in connection with any registration hereunder.

n. Within two (2) business days after a Registration Statement which covers Registrable Securities is ordered effective by the SEC, the Company shall deliver, and shall cause legal counsel for the Company to deliver, to the transfer agent for such Registrable Securities (with copies to the Investor) confirmation that such Registration Statement has been declared effective by the SEC in the form attached hereto as Exhibit A .

o. The Company shall take all other reasonable actions necessary to expedite and facilitate disposition by the Investor of Registrable Securities pursuant to a Registration Statement. The Commitment Shares in the Reserve Equity Financing Agreement between the Company and Investor shall be accepted by the Investor’s brokerage account prior to an Advance Notice being sent to the Investor.

4. OBLIGATIONS OF THE INVESTOR .

The Investor agrees that, upon receipt of any notice from the Company of the happening of any event of the kind described in Section 3(d), the Investor will immediately discontinue disposition of Registrable Securities pursuant to any Registration Statement(s) covering such Registrable Securities until the Investor’s receipt of the copies of the supplemented or amended prospectus contemplated by Section 3(d) or receipt of notice that no supplement or amendment is equired. Notwithstanding anything to the contrary, the Company shall cause its transfer agent to deliver unlegended certificates for shares of Common Stock to a transferee of the Investor in accordance with the terms of the Reserve Equity Financing Agreement in connection with any sale of Registrable Securities with respect to which the Investor has entered into a contract for sale prior to the Investor’s receipt of a notice from the Company of the happening of any event of the kind described in Section 3(d) and for which the Investor has not yet settled.

5. EXPENSES OF REGISTRATION .

All expenses incurred in connection with registrations, filings or qualifications pursuant to Sections 2 and 3, including, without limitation, all registration, listing and qualifications fees, printers, legal and accounting fees shall be paid by the Company.

6. INDEMNIFICATION .

With respect to Registrable Securities which are included in a Registration Statement under this Agreement:

a. To the fullest extent permitted by law, the Company will, and hereby does, indemnify, hold harmless and defend the Investor, the directors, officers, partners, employees, agents, representatives of, and each Person, if any, who controls the Investor within the meaning of the Securities Act or the Exchange Act (each, an “ Indemnified Person ”), against any and all losses, claims, damages, liabilities, judgments, fines, penalties, charges, costs, reasonable attorneys’ fees, amounts paid in settlement or expenses, joint or several (collectively, “ Claims ”) incurred in investigating, preparing or defending any action, claim, suit, inquiry, proceeding, investigation or appeal taken from the foregoing by or before any court or governmental, administrative or other regulatory agency, body or the SEC, whether pending or threatened, whether or not an indemnified party is or may be a party thereto (“ Indemnified Damages ”), to which any of them may become subject insofar as such Claims (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon: (i) any untrue statement or alleged untrue statement of a material fact in a Registration Statement or any post-effective amendment thereto or in any filing made in connection with the qualification of the offering under the securities or other “blue sky” laws of any jurisdiction in which Registrable Securities are offered (“ Blue Sky Filing ”), or the omission or alleged omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading; (ii) any untrue statement or alleged untrue statement of a material fact contained in any final prospectus (as amended or supplemented, if the Company files any amendment thereof or supplement thereto with the SEC) or the omission or alleged omission to state therein any material fact necessary to make the statements made therein, in light of the circumstances under which the statements therein were made, not misleading; or (iii) any violation or alleged

JGMAGS

violation by the Company of the Securities Act, the Exchange Act, any other law, including, without limitation, any state securities law, or any rule or regulation there under relating to the offer or sale of the Registrable Securities pursuant to a Registration Statement (the matters in the foregoing clauses (i) through (iii) being, collectively, “ Violations ”). The Company shall reimburse the Investor and each such controlling person promptly as such expenses are incurred and are due and payable, for any legal fees or disbursements or other reasonable expenses incurred by them in connection with investigating or defending any such Claim. Notwithstanding anything to the contrary contained   herein, the indemnification agreement contained in this Section 6(a): (x) shall not apply to a Claim by an Indemnified Person arising out of or based upon a Violation which occurs in reliance upon and in conformity with information furnished in writing to the Company by such Indemnified Person expressly for use in connection with the preparation of the Registration Statement or any such amendment thereof or supplement thereto; (y) shall not be available to the extent such Claim is based on a failure of the Investor to deliver or to cause to be delivered the prospectus made available by the Company, if such prospectus was timely made available by the Company pursuant to Section 3(e); and (z) shall not apply to amounts paid in settlement of any Claim if such settlement is effected without the prior written consent of the Company, which consent shall not be unreasonably withheld. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of the Indemnified Person.

b. In connection with a Registration Statement, the Investor agrees to indemnify, hold harmless and defend, to the same extent and in the same manner as is set forth in Section 6(a), the Company, each of its directors, each of its officers who signs the Registration Statement and each Person, if any, who controls the Company within the meaning of the Securities Act or the Exchange Act (each an “ Indemnified Party ”), against any Claim or Indemnified Damages to which any of them may become subject, under the Securities Act, the Exchange Act or otherwise, insofar as such Claim or Indemnified Damages arise out of or is based upon any Violation, in each case to the extent, and only to the extent, that such Violation occurs in reliance upon and in conformity with written information furnished to the Company by the Investor expressly for use in connection with such Registration Statement; and, subject to Section 6(d), the Investor will reimburse any legal or other expenses reasonably incurred by them in connection with investigating or defending any such Claim; provided, however, that the indemnity agreement contained in this Section 6(b) and the agreement with respect to contribution contained in Section 7 shall not apply to amounts paid in settlement of any Claim if such settlement is effected without the prior written consent of the Investor, which consent shall not be unreasonably withheld; provided, further, however, that the Investor shall be liable under this Section 6(b) for only that amount of a Claim or Indemnified Damages as does not exceed the net proceeds to the Investor as a result of the sale of Registrable Securities pursuant to such Registration Statement. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such Indemnified Party. Notwithstanding anything to the contrary contained herein, the indemnification agreement contained in this Section 6(b) with respect to any prospectus shall not inure to the benefit of any Indemnified Party if the untrue statement or omission of material fact contained in the prospectus was corrected and such new prospectus was delivered to the Investor prior to the Investor’s use of the prospectus to which the Claim relates.

c. Promptly after receipt by an Indemnified Person or Indemnified Party under this Section 6 of notice of the commencement of any action or proceeding (including any governmental action or proceeding) involving a Claim, such Indemnified Person or Indemnified Party shall, if a Claim in respect thereof is to be made against any indemnifying party under this Section 6, deliver to the indemnifying party a written notice of the commencement thereof, and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume control of the defense thereof with counsel mutually satisfactory to the indemnifying party and the Indemnified Person or the Indemnified Party, as the case may be; provided, however, that an Idemnified Person or Indemnified Party shall have the right to retain its own counsel with the fees and expenses of not more than one counsel for such Indemnified Person or Indemnified Party to be paid by the indemnifying party, if, in the reasonable opinion of counsel retained by the indemnifying party, the representation by such counsel of the Indemnified Person or Indemnified Party and the indemnifying party would be inappropriate due to actual or potential differing interests between such Indemnified Person or Indemnified Party and any other party represented by such counsel in such proceeding. The Indemnified Party or Indemnified Person shall cooperate fully with the indemnifying party in connection with any negotiation or defense of any such action or claim by the indemnifying party and shall furnish to the indemnifying party all information reasonably available to the Indemnified Party or Indemnified Person which relates to such action or claim. The indemnifying party shall keep the Indemnified Party or Indemnified Person fully apprised at all times as to the status of the defense or any settlement negotiations with respect thereto. No indemnifying party shall be liable for any settlement of any action, claim or proceeding effected without its prior written consent, provided, however, that the indemnifying party shall not unreasonably withhold, delay or condition its consent. No indemnifying party shall, without the prior written consent of the Indemnified Party or Indemnified Person, consent to entry of any judgment or enter into any settlement or other compromise which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party or Indemnified Person of a release from all liability in respect to such claim or litigation. Following indemnification as provided for hereunder, the indemnifying party shall be subrogated to all rights of the Indemnified Party or Indemnified Person with respect to all third parties, firms or corporations relating to the matter for which indemnification has been made. The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action shall not relieve such indemnifying party of any liability to the Indemnified Person or Indemnified Party under this Section 6, except to the extent that the indemnifying party is prejudiced in its ability to defend such action.

d. The indemnification required by this Section 6 shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills are received or Indemnified Damages are incurred.

e. The indemnity agreements contained herein shall be in addition to (i) any cause of action or similar right of the Indemnified Party or Indemnified Person against the indemnifying party or others, and (ii) any liabilities the indemnifying party may be subject to pursuant to the law.

7. CONTRIBUTION .

To the extent any indemnification by an indemnifying party is prohibited or limited by law, the indemnifying party agrees to make the maximum contribution with respect to any amounts for which it would otherwise be liable under Section 6 to the fullest extent permitted by law; provided, however, that: (i) no seller of Registrable Securities guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any seller of Registrable Securities who was not guilty of fraudulent misrepresentation; and (ii) contribution by any seller of Registrable Securities shall be limited in amount to the net amount of proceeds received by such seller from the sale of such Registrable Securities.  

JGM  AGS

8. REPORTS UNDER THE EXCHANGE ACT .

With a view to making available to the Investor the benefits of Rule 144 promulgated under the Securities Act or any similar rule or regulation of the SEC that may at any time permit the Investors to sell securities of the Company to the public without registration (“ Rule 144 ”) the Company agrees to:

a. make and keep public information available, as those terms are understood and defined in Rule 144;

b. file with the SEC in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act so long as the Company remains subject to such requirements (it being understood that nothing herein shall limit the Company’s obligations under Section 6.3 of the Reserve Equity Financing Agreement) and the filing of such reports and other documents is required for the applicable provisions of Rule 144; and

c. furnish to the Investor so long as the Investor owns Registrable Securities, promptly upon request, (i) a written statement by the Company that it has complied with the reporting requirements of Rule 144, the Securities Act and the Exchange Act, (ii) a copy of the most recent annual or quarterly report of the Company and such other reports and documents so filed by the Company, and (iii) such other information as may be reasonably requested to permit the Investor to sell such securities pursuant to Rule 144 without registration.

9. AMENDMENT OF REGISTRATION RIGHTS .

Provisions of this Agreement may be amended and the observance thereof may be waived (either generally or in a particular instance and either retroactively or prospectively), only by a written agreement between the Company and the Investor. Any amendment or waiver effected in accordance with this Section 9 shall be binding upon the Investor and the Company. No consideration shall be offered or paid to any Person to amend or consent to a waiver or modification of any provision of any of this Agreement unless the same consideration also is offered to all of the parties to this Agreement.

10. MISCELLANEOUS .

a. A Person is deemed to be a holder of Registrable Securities whenever such Person owns or is deemed to own of record such Registrable Securities. If the Company receives conflicting instructions, notices or elections from two or more Persons with respect to the same Registrable Securities, the Company shall act upon the basis of instructions, notice or election received from the registered owner of such Registrable Securities.  

b. Any notices, consents, waivers or other communications required or permitted to be given under the terms of this Agreement must be in writing and will be deemed to have been delivered: (i) upon receipt, when delivered personally; (ii) upon receipt, when sent by facsimile (provided confirmation of transmission is mechanically or electronically generated and kept on file by the sending party); or (iii) one business day after deposit with a nationally recognized overnight delivery service, in each case properly addressed to the party to receive the same. The addresses and facsimile numbers for such communications shall be:

       If to the Company: jerrygmik@xunenergy.com

       If to the Investor: asilberstein@agscapitalgroup.com

Any party may change its address by providing written notice to the other parties hereto at least five days prior to the effectiveness of such change. Written confirmation of receipt (A) given by the recipient of such notice, consent, waiver or other communication, (B) mechanically or electronically generated by the sender’s facsimile machine containing the time, date, recipient facsimile number and an image of the first page of such transmission or (C) provided by a courier or overnight courier service shall be rebuttable evidence of personal service, receipt by facsimile or receipt from a nationally recognized overnight delivery service in accordance with clause (i), (ii) or (iii) above, respectively.

c. Failure of any party to exercise any right or remedy under this Agreement or otherwise, or delay by a party in exercising such right or remedy, shall not operate as a waiver thereof.

JGM  AGS

d.  All questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by the internal laws of the State of New York, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of New York or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of New York. Any dispute arising out of or in connection with this Agreement or otherwise relating to the parties relationship that cannot be settled by the Company and the Investor after discussion shall be settled solely by arbitration. Any such arbitration shall be fully and finally resolved in binding arbitration in a proceeding in the State of New York, City of New York, in accordance with the rules of the American Arbitration Association before a single arbitrator.  The arbitrator shall not have the authority to modify or change any of the terms of this Agreement.  The arbitrator may award interim relief and grant specific performance in addition to monetary damages.  The Company and the Investor further agree that no demand for punitive or exemplary damages shall be made in any arbitration proceeding.  Any monetary award shall be in U.S. dollars.  The arbitrator's award shall be final and binding upon the parties, and judgment upon the award may be entered in any court of competent jurisdiction in any state of the United States or country or application may be made to such court for a judicial acceptance of the award and an enforcement as the law of such jurisdiction may require or allow. 

e. This Agreement shall inure to the benefit of and be binding upon the permitted successors and assigns of each of the parties hereto.

f. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.

g. This Agreement may be executed in identical counterparts, each of which shall be deemed an original but all of which shall constitute one and the same agreement. This Agreement, once executed by a party, may be delivered to the other party hereto by facsimile transmission of a copy of this Agreement bearing the signature of the party so delivering this Agreement.

h. Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.   

i. The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent and no rules of strict construction will be applied against any party.

j. This Agreement is intended for the benefit of the parties hereto and their respective permitted successors and assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other Person.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

   JGM  AGS

IN WITNESS WHEREOF, the parties have caused this Registration Rights Agreement to be duly executed as of day and year first above written.

COMPANY:

Xun Energy, Inc.

By: /s/ Jerry G. Mikolajczyk

Name: Jerry G. Mikolajczyk

Title: President and Chief Executive Officer

INVESTOR:

AGS CAPITAL GROUP LLC

By: /s/Allen Silberstein

Name: Allen Silberstein

Title: Chief Executive Officer

EXHIBIT AFORM OF NOTICE OF EFFECTIVENESSOF REGISTRATION STATEMENT

Attention:

Re: Xun Energy, Inc.

Ladies and Gentlemen:

We are counsel to Xun Energy, Inc. (the “ Company ”), and have represented the Company in connection with that certain Reserve Equity Financing Agreement (the “ Reserve Equity Financing Agreement ”) entered into by and between the Company and AGS Capital Group, LLC (the “ Investor ”) pursuant to which the Company issued to the Investor shares of its Common Stock, par value $.0001 per share (the “ Common Stock ”). Pursuant to the Reserve Equity Financing Agreement, the Company also has entered into a Registration Rights Agreement with the Investor (the “ Registration Rights Agreement ”) pursuant to which the Company agreed, among other things, to register the Registrable Securities (as defined in the Registration Rights Agreement) under the Securities Act of 1933, as amended (the “ Securities Act ”). In connection with the Company’s obligations under the Registration Rights Agreement, on  _____  , the Company filed a Registration Statement on Form  _____  (File No. 333-  _____  ) (the “ Registration Statement ”) with the Securities and Exchange Commission (the “ SEC ”) relating to the Registrable Securities which names the Investor as a selling stockholder thereunder.

In connection with the foregoing, we advise you that a member of the SEC’s staff has advised us by telephone that the SEC has entered an order declaring the Registration Statement effective under the Securities Act at [ENTER TIME OF EFFECTIVENESS] on [ENTER DATE OF EFFECTIVENESS] and we have no knowledge, after telephonic inquiry of a member of the SEC’s staff, that any stop order suspending its effectiveness has been issued or that any proceedings for that purpose are pending before, or threatened by, the SEC and the Registrable Securities are available for resale under the Securities Act pursuant to the Registration Statement.

    Very truly yours,

    By:

cc: AGS Capital Group, LLC

JGM  AGS

EX-22

Exhibit 22.1

SUBSIDIARIES

Wholly owned subsidiaries of the Company:

Name of Subsidiary	Jurisdiction
Nux Holdings of Kentucky, Inc.	Kentucky
Xun Oil of Kentucky	Kentucky
Xun Oil Corporation	Florida
Xun Oil of Pennsylvania	Pennsylvania

EX-23

Exhibit 23.1

Weinberg & Baer LLC

115 Sudbrook Lane, Baltimore, MD 21208

Phone (410) 702-5660

________________________________________________________________________

Mr. Jerry G. Mikolajczyk, CEO

Xun Energy, Inc.

12759 NE Whitaker Way, #C453

Portland, OR 97230

Dear Mr. Mikolajczyk:

CONSENT OF INDEPENDENT AUDITOR

We consent to the incorporation in the Registration Statement of Xun Energy, Inc. on Form S-1A of our report on the financial statements of the Company as its registered independent auditor dated September 2, 2013, as of and for the periods ended May 31, 2013 and 2012 and from inception to May 31, 2013. We further consent to the reference to our firm in the section on Experts.

Respectfully submitted,

                                                

Weinberg & Baer LLC

Baltimore, Maryland

September 16, 2013   

1

XML

Note 17: Executive and Board Compensation: ScheduleOfBoardCompensation (Details) (USD $)	1 Months Ended												3 Months Ended				12 Months Ended
	May 31, 2013	Apr. 30, 2013	Mar. 31, 2013	Feb. 28, 2013	Jan. 31, 2013	Dec. 31, 2012	Nov. 30, 2012	Oct. 31, 2012	Sep. 30, 2012	Aug. 31, 2012	Jul. 31, 2012	Jun. 30, 2012	May 31, 2013	Feb. 28, 2013	Nov. 30, 2012	Aug. 31, 2012	May 31, 2013
Details
Board Shares Approved, Not Issued	0	0	0	0	0	0	0	0	0	0	0	0	0	0	0	0	0
Board Shares Issued	15,000	15,000	15,000	15,000	15,000	15,000	15,000	15,000	15,000	15,000	15,000	15,000	45,000	45,000	45,000	45,000	180,000
N5DayAverageShareClosingPrice	$ 0.00680	$ 0.01028	$ 0.01392	$ 0.01522	$ 0.00982	$ 0.00774	$ 0.00590	$ 0.00770	$ 0.02320	$ 0.03900	$ 0.04400	$ 0.03800	$ 0.01033	$ 0.01093	$ 0.01228	$ 0.04033	$ 0.01846
Cost Base	$ 102.00	$ 154.20	$ 208.80	$ 228.30	$ 147.30	$ 116.10	$ 89.10	$ 115.60	$ 348.00	$ 585.00	$ 660.00	$ 570.00	$ 465.00	$ 491.70	$ 552.70	$ 1,815.00	$ 3,323.50

XML

Note 13: Loans Payable: CPN#5 (Details) (CPN5Member, USD $)	May 31, 2013
CPN5Member
Convertible Promissory Note	$ 62,000
AccruedInterest	$ 3,092

XML

Note 13: Loans Payable: CPN#7 (Details) (CPN7Member, USD $)	May 31, 2013
CPN7Member
Convertible Promissory Note	$ 25,000
AccruedInterest	$ 2,275

XML

Note 10: Stockholders' Equity

12 Months Ended

May 31, 2013

Notes

Note 10: Stockholders' Equity

NOTE 10: STOCKHOLDERS’ EQUITY

AUTHORIZED

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

On July 20, 2010, the Company filed a Certificate of Amendment to the Company’s certificate of incorporation with the Nevada Secretary of State, which increased the Company’s authorization to issue 5,000,000,000 shares of $0.0001 par value common stock, refer to NOTE 15: CORPORATE ACTIONS.         

On November 30, 2011 and January 12, 2013, the Board of Directors of the Company approved the allocation of 4,000,000 of the 50,000,000 authorized Preferred Shares of the Company as Series A Preferred Shares with the following rights:

• Convertible to one hundred (100) common shares of the Company for each one (1) Series A Preferred Share

• Voting rights equal to one hundred (100) votes for each Series A Preferred Share

The consideration for one (1) Series A Preferred Share is set at $0.50.

On April 29, 2013, the Board of Directors of the Company approved  the authorization of seven hundred fifty thousand (750,000) Preferred Shares, designated as Series B Preferred Shares (Series B Shares), with a value of fifty cents ($0.50) per Series B Preferred Share, each with the following rights:

1.       May be converted by the holder into Company common stock. The conversion ratio is such that if the full 750,000 Series B Shares are issued, convert into Company common shares representing 70% of the fully diluted outstanding common shares outstanding after the conversion (which includes all common shares outstanding plus all common shares potentially issuable upon the conversion of all derivative securities not held by the holder).

2.       If the full 750,000 Series B Shares are not issued, the issued Series B Shares divided by 750,000 multiplied by 70% will represent the percentage of the fully diluted outstanding common shares outstanding after the conversion (which includes all common shares outstanding plus all common shares potentially issuable upon the conversion of all derivative securities not held by the holder). For example: 500,000 Series B Shares issued  will result in the holder having 46.67% (500,000/750,000 X 70% = 46.67%) of the fully diluted outstanding common shares.

3.       The holder of Series B Shares may cast the number of votes at a shareholders meeting or by written consent that equals the number of common shares into which the Series B Shares are convertible on the record date for the shareholder action.

4.       In the event the Board of Directors declares a dividend payable to Company common shareholders, the holders of Series B Shares will receive the dividend that would be payable if the Series B Shares were converted into Company common shares prior to the dividend.

5.       In the event of a liquidation of the Company, the holders of Series B Shares will receive a preferential distribution of $0.001 per share, and will share in the distribution as if the Series B Shares had been converted into common shares.

The Series B Preferred Shares would be offered by the discretion of the President to existing shareholders holding more than 10% of the issued and outstanding shares of the Company or to directors of the Company. The subscribers for the Series B Shares will agree to execute a Series B Shares Unanimous Shareholders Agreement which will include right of first refusal to buy or sell the Series B Shares between the Series B Share holders or directors of the Company.

ISSUED AND OUTSTANDING

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

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

The Company issued 1,259,000 common shares on November 30, 2010 for $62,950 for Accounts Receivable assignment.

The Company issued 741,000 common shares on November 30, 2010 for $37,050 cash in a negotiated transaction with an investor to fund the ongoing operations of the Company.

The Company issued 10,000 common shares on February 28, 2011 for $1,100 pursuant to an Oil and Gas Field Operations Services agreement with the Company.

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

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

The Company issued 18 Million shares on April 12, 2012 for $900,000 pursuant to a twenty-four month agreement with Charles Morgan Securities Inc. On September 20, 2012, the Company and CMS mutually agreed to terminate the IBA agreement between the Company and CMS and the 18 Million shares were cancelled.

The Company authorized and approved an aggregate of 136,129 shares for the period ended May 31, 2012 with an average price of $0.0333 per share to the Executive and Board pursuant to Board Member Compensation Agreements with Mr. Peter Matousek, Mr. Donald Lynch, Mr. Jerry G. Mikolajczyk, Mr. Kevin M. Grapes and Dr. William D. Spier, refer to NOTE 17: EXECUTIVE AND BOARD COMPENSATION for additional detail. The Company issued 105,000 of the 136,129 shares to the Board as of May 31, 2012.  The balance,  31,129 shares, cost of $2,106 for the period March 1, 2012 to May 31, 2012, were issued to the Board on June 25, 2012.

The Company issued 20 Million shares on August 31, 2012 for $1,000,000 pursuant to a twenty-four month agreement with Prodigy Asset Management, LLC.

The Company issued 11.7 Million shares on August 31, 2012 for $585,000 pursuant to a Purchase and Sales agreement with Vencedor Energy Partners for the acquisition of 30 oil and gas well locations in Venango County, Pennsylvania.

The Company issued 1,428,571 shares on October 22, 2012 for $5,000 pursuant to a Convertible Promissory Note dated October 19, 2012.

The Company issued 16.2 Million shares on October 26, 2012 for $810,000 pursuant to a twelve month Financial Consulting Services Agreement with Vaquero Private Capital, Inc. effective as of June 1, 2012.

The Company issued 243,103  shares on October 26, 2012 for $6,077 for interest and penalties to a 3rd party lender.

The Company authorized and approved 45,000 shares for the period ended August 31, 2012 with an average price of $0.04033 per share to the Board pursuant to Board Member Compensation Agreements with Mr. Jerry G. Mikolajczyk, Mr. Peter Matousek and Dr. William D. Spier, refer to NOTE 17: EXECUTIVE AND BOARD COMPENSATION for additional detail. The 45,000 shares were issued to the Board on October 26, 2012.

The Company issued 1,162,790 shares on November 12, 2012 for $5,000 pursuant to a Convertible Promissory Note dated October 19, 2012.

The Company authorized and approved 45,000 shares for the period ended November 30, 2012 with an average price of $0.012167 per share to the Board pursuant to Board Member Compensation Agreements with Mr. Jerry G. Mikolajczyk, Mr. Peter Matousek and Dr. William D. Spier, refer to NOTE 17: EXECUTIVE AND BOARD COMPENSATION for additional detail. The 45,000 shares were issued to the Board on December 18, 2012.

The Company issued 54,322  shares on December 18, 2012 for $1,880 for interest and penalties to a 3rd party lender.

The Company issued 423,728 shares on April 17, 2013 for $2,500 pursuant to the conversion of a Convertible Promissory Note dated October 19, 2012.

The Company issued 45,000 shares on April 30, 2013 for the period ended February 28, 2013 with an average price of $0.0109267 per share for Board Member Compensation Agreements with Mr. Peter Matousek, Mr. Jerry G. Mikolajczyk, and Dr. William D. Spier.

The Company issued 4,081,633 shares on April 30, 2013 for $40,000 as incentive to enter into a reserve equity financing agreement dated May 7, 2013.

The Company issued 2,061,855 shares on April 30, 2013 for $10,000 pursuant to the conversion of a Convertible Promissory Note dated October 19, 2012.

The Company issued 2,857,143 shares on May 2, 2013 for $12,000 pursuant to the conversion of a Convertible Promissory Note dated October 26, 2012.

The Company issued 2,222,222 shares on May 8, 2013 for $10,000 pursuant to the conversion of a Convertible Promissory Note dated October 19, 2012.

The Company issued 3,658,537 shares on May 9, 2013 for $15,000  pursuant to the conversion of a Convertible Promissory Note dated October 26, 2012.

The Company issued 1,700,000 shares on May 10, 2013 for $6,800 including $1,300 for interest pursuant to the conversion of a Convertible Promissory Note dated October 26, 2012.

The Company issued 4,811,707 shares on May 13, 2013 for $19,728 including $2,228 for interest pursuant to the conversion of a Convertible Promissory Note dated October 19, 2012.

The Company issued 45,000 shares on May 31, 2013  for the period ended May 31, 2013 with an average price of $0.010333 per share for Board Member Compensation Agreements with Mr. Peter Matousek, Mr. Jerry G. Mikolajczyk, and Dr. William D. Spier.

XML

Note 13: Loans Payable: Convertible Promissory Notes (cpn) (Policies)

12 Months Ended

May 31, 2013

Policies

Convertible Promissory Notes (cpn)

CONVERTIBLE PROMISSORY NOTES (CPN)

CPN#3 - The Company issued an unsecured 9 month 8% Convertible Promissory Note (CPN#3) on December 6, 2012 due on September 10, 2013 for $37,500. The principal and accrued interest is convertible into shares of common stock at the discretion of the note holder at a price equal to 55% of the Market Price. "Market Price" means the average of the lowest three (3) Trading Prices for the Common Stock during the ten (10) Trading Day period ending on the latest complete Trading Day prior to the Conversion Date. "Trading Price" means, for any security as of any date, the closing bid price on the Over-the-Counter Bulletin Board or applicable trading market as reported by a reliable reporting service designated by the note holder. The note holder is limited to owning 4.99% of the Company’s issued and outstanding shares. Default interest is 22% per annum should the Company default on the CPN#3. The Company may prepay CPN#3 at any time for the period beginning on the date of the CPN#3 and ending on the date which is ninety (90) days following the date of the CPN#3, the CPN#3 may be prepaid by the Company upon payment to the note holder of an amount equal to the outstanding principal amount of the CPN#3 multiplied by 125% together with accrued and unpaid interest thereon. At any time during the period beginning on the ninety (91) day from the date of the CPN#3 and ending on the date which is one hundred twenty (120) days following the date of CPN#3, the Company may prepay the CPN#3 to the note holder upon payment of an amount equal to the outstanding principal amount of the CPN#3 multiplied by 135% together with accrued and unpaid interest thereon. At any time during the period beginning on the date which is one hundred twenty one (121) days from the date of the CPN#3 and ending on one hundred eighty (180) days following the date of this CPN#3, the Company may prepay the CPN#3 to the note holder upon payment of an amount equal to the outstanding principal amount of the CPN#3 multiplied by 145% together with accrued and unpaid interest thereon. After the expiration of one hundred eighty (180) days following the date of the CPN#3, the Company shall have no right of prepayment. On January 9, 2013, CPN#3 was amended to have a floor price of $0.00005. As of May 31, 2013, the Company accrued interest of $690. 

CPN#4  - The Company has loans in the amount of $231,160, non-interest bearing, with Comtax Services, Inc. The loans from Comtax Services, Inc. have been provided to the Company as working capital.  On January 12, 2013 the Company amended the

Promissory Notes with Comtax Services, Inc. and issued an unsecured one year 10% Convertible Promissory Note (CPN#4) effective October 19, 2012 due on October 18, 2013 for $231,160. The principal and accrued interest is convertible up to 509,520 Series A Preferred Shares at a strike price of $0.50 per Series A Preferred Share with the following rights:

1.       Convertible to one hundred (100) common shares of the Company for each one (1) Series A Preferred Share; and

2.       Voting rights equal to one hundred (100) votes for each Series A Preferred Share.

On April 30, 2013, Comtax Services, Inc. assigned $75,000 of the principal of CPN#4 reducing the Company's obligations for CPN#4 to $156,160. As of May 31, 2013, the Company accrued interest of $16,262.

CPN#5  - The Company has a loans in the amount of $62,000, non-interest bearing, with Comtax Services, Inc. The loans from Comtax Services, Inc. have been provided to the Company as working capital.  On January 12, 2013 the Company amended the Promissory Notes for $62,000 with Comtax Services, Inc. and issued an unsecured one year 10% Convertible Promissory Note (CPN#5) effective December 1, 2012 due on November 30, 2013  for $62,000. The principal and accrued interest is convertible up to 136,400 Series A Preferred Shares at a strike price of $0.50 per Series A Preferred Share with the following rights: 

1.       Convertible to one hundred (100) common shares of the Company for each one (1) Series A Preferred Share; and

2.       Voting rights equal to one hundred (100) votes for each Series A Preferred Share.

As of May 31, 2013, the Company accrued interest of $3,092.

CPN#6 - On February 14, 2012, the Company issued a Promissory Note for $100,000 and is carrying a contingent liability of $30,000, with Altmann Revocable Living Trust, Rlt. (ALRT), totaling $130,000 which became due December 31, 2012 with interest calculated at 8% per annum. The Company amended the $100,000 Promissory Note plus accrued interest of $7,036 to an unsecured one year 8% Convertible Promissory Note (CPN#6) effective January 1, 2013 due on January 1, 2014 for $100,000 with accrued interest of $7,036. The principal and accrued interest is convertible into shares of common stock at the discretion of the note holder at the Conversion Price which shall be the greater of: (i) the Variable Conversion Price and (ii) the Fixed Conversion Price (subject to equitable adjustments for stock splits, stock dividends or rights offerings by the Company relating to the Company's securities or the securities of any subsidiary of the Company, combinations, recapitalization, reclassifications, extraordinary distributions and similar events). The "Variable Conversion Price is 80% of the Market Price. "Market Price" means the average of the Closing Prices (as defined below) for the Common Stock during the five (5) Trading Day period ending one Trading Day prior to the date the Conversion Notice is sent by the Holder to the Company via facsimile (the "Conversion Date"). "Closing Price" means, for any security as of any date, the closing price on the OTCQB (or such other OTC Markets or OTC Tiers, stock markets or stock exchange upon which the Company’s common stock is listed or traded). The note holder is limited to owning 4.99% of the Company’s issued and outstanding shares. The Company may prepay CPN#6 in advance in full or in part at any time and from time to time without premium or penalty. "Fixed Conversion Price" shall mean $0.0001. As of May 31, 2013, the Company accrued interest of $10,345.

CPN#7 - On June 25, 2012, the Company issued an unsecured Promissory Note for $25,000 to a 3rd party due on July 16, 2012 with a default penalty of $2,500, default interest at 20% per annum plus late fees. The Promissory Note was renegotiated with a due date of December 31, 2012. The Company paid the 3rd party $7,958.04 in interest, default fees and late fees for the period June 25, 2012 and December 31, 2012. The Company amended the $25,000 Promissory Note plus default penalty of  $2,500 to an unsecured one year 20% Convertible Promissory Note (CPN#7) effective January 1, 2013 due on August 1, 2013. The principal and accrued interest is convertible into shares of common stock at the discretion of the note holder at the Conversion Price which shall be the greater of: (i) the Variable Conversion Price and (ii) the Fixed Conversion Price (subject to equitable adjustments for stock splits, stock dividends or rights offerings by the Company relating to the Company's securities or the securities of any subsidiary of the Company, combinations, recapitalization, reclassifications, extraordinary distributions and similar events). The "Variable Conversion Price is 80% of the Market Price. "Market Price" means the average of the Closing Prices (as defined below) for the Common Stock during the five (5) Trading Day period ending one Trading Day prior to the date the Conversion Notice is sent by the Holder to the Company via facsimile (the "Conversion Date"). "Closing Price" means, for any security as of any date, the closing price on the OTCQB (or such other OTC Markets or OTC Tiers, stock markets or stock exchange upon which the Company’s common stock is listed or traded). The note holder is limited to owning 4.99% of the Company’s issued and outstanding shares. The Company may prepay CPN#7 in advance in full or in part at any time and from time to time without premium or penalty. "Fixed Conversion Price" shall mean $0.0001. As of May 31, 2013, the Company accrued interest of $2,275.

CPN#8 - On April 30, 2013, the Company issued an amended unsecured one year 8% Convertible Promissory Note (CPN#8) for $75,000 previously issued on October 19, 2012, assigned from CPN#4, due on October 19, 2013. The principal and accrued interest is convertible into shares of common stock at the discretion of the note holder. The Conversion Price (the “Conversion Price”) shall be the greater of: (i) the Variable Conversion Price (as defined herein) and (ii) the Fixed Conversion Price (subject to equitable adjustments for stock splits, stock dividends or rights offerings by the Company relating to the Company’s securities or the securities of any subsidiary of the Company, combinations, recapitalization, reclassifications, extraordinary distributions and similar events).

58

The “Variable Conversion Price” shall mean 50% multiplied by the Market Price (as defined herein) (representing a discount rate of 50%). “Market Price” means the average of the lowest three (3) Closing Prices (as defined below) for the Common Stock during the five (5) Trading Day period ending one Trading Day prior to the date the Conversion Notice is sent by the Holder to the Company via facsimile (the “Conversion Date”).  “Closing Price” means, for any security as of any date, the closing price on the Over-the-Counter Bulletin Board (the “OTCBB”) as reported by a reliable reporting service (“Reporting Service”) mutually acceptable to Company and Holder, or, if the OTCBB is not the principal trading market for such security, the closing price of such security on the principal securities exchange or trading market where such security is listed or traded or, if no closing price of such security is available in any of the foregoing manners, the average of the closing prices of any market makers for such security that are listed in the “pink sheets” by the National Quotation Bureau, Inc.  If the Closing Price cannot be calculated for such security on such date in the manner provided above, the Trading Price shall be the fair market value as mutually determined by the Company and the holders of a majority in interest of the Notes being converted for which the calculation of the Closing Price is required in order to determine the Conversion Price of such Notes.  “Trading Day” shall mean any day on which the Common Stock is traded for any period on the OTCBB, or on the principal securities exchange or other securities market on which the Common Stock is then being traded. The “Fixed Conversion Price” shall mean $0.0001. The Company shall have the right, exercisable on not less than three (3) Trading Days prior written notice to the Holder of the Note to prepay the outstanding Note (principal and accrued interest), in full, of an amount in cash (the “Prepayment Amount”) equal to 150%, multiplied by the sum of: (a) the then outstanding principal amount of CPN#8  plus (b) accrued and unpaid interest on the unpaid principal amount of CPN#8 to the Prepayment Date plus (c) Default Interest, if any, on the amounts referred to in clauses (a) and (b). As of May 31, 2013, the Company accrued interest of $510.

CPN#9 - The Company issued an unsecured 9 month 8% Convertible Promissory Note (CPN#9) on May 2, 2013 due on February 6, 2014 for $32,500. The principal and accrued interest is convertible into shares of common stock at the discretion of the note holder.  The Conversion Price shall be the greater of: (i) the Variable Conversion Price (as defined herein) and (ii) the Fixed Conversion Price (subject, in each case, to equitable adjustments for stock splits, stock dividends or rights offerings by the Company relating to the Company’s securities or the securities of any subsidiary of the Company, combinations, recapitalization, reclassifications, extraordinary distributions and similar events). The "Variable Conversion Price" shall mean 55% multiplied by the Market Price (representing a discount rate of 45%). "Market Price" means the average of the lowest three (3) Trading Prices for the Common Stock during the ten (10) Trading Day period ending on the latest complete Trading Day prior to the Conversion Date. "Trading Price" means, for any security as of any date, the closing bid price on the Over-the-Counter Bulletin Board or applicable trading market as reported by a reliable reporting service designated by the note holder. The note holder is limited to owning 4.99% of the Company’s issued and outstanding shares. Default interest is 22% per annum should the Company default on the CPN#9. The Company may prepay CPN#9 at any time for the period beginning on the date of the CPN#9 and ending on the date which is ninety (90) days following the date of the CPN#9, the CPN#9 may be prepaid by the Company upon payment to the note holder of an amount equal to the outstanding principal amount of the CPN#9 multiplied by 125% together with accrued and unpaid interest thereon. At any time during the period beginning on the ninety (91) day from the date of the CPN#9 and ending on the date which is one hundred twenty (120) days following the date of CPN#9, the Company may prepay the CPN#9 to the note holder upon payment of an amount equal to the outstanding principal amount of the CPN#9 multiplied by 135% together with accrued and unpaid interest thereon. At any time during the period beginning on the date which is one hundred twenty one (121) days from the date of the CPN#9 and ending on one hundred eighty (180) days following the date of this CPN#9, the Company may prepay the CPN#9 to the note holder upon payment of an amount equal to the outstanding principal amount of the CPN#9 multiplied by 145% together with accrued and unpaid interest thereon. After the expiration of one hundred eighty (180) days following the date of the CPN#9, the Company shall have no right of prepayment. The floor price of $0.00005. As of May 31, 2013, the Company accrued interest of $207.

CPN#10 - The Company issued an unsecured 9 month 8% Convertible Promissory Note (CPN#10) on May 13, 2013 due on February 17, 2014 for $42,500. The principal and accrued interest is convertible into shares of common stock at the discretion of the note holder. The Conversion Price shall be the greater of: (i) the Variable Conversion Price and (ii) the Fixed Conversion Price (subject, in each case, to equitable adjustments for stock splits, stock dividends or rights offerings by the Company relating to the Company’s securities or the securities of any subsidiary of the Company, combinations, recapitalization, reclassifications, extraordinary distributions and similar events). The "Variable Conversion Price" shall mean 55% multiplied by the Market Price (representing a discount rate of 45%). "Market Price" means the average of the lowest three (3) Trading Prices for the Common Stock during the ten (10) Trading Day period ending on the latest complete Trading Day prior to the Conversion Date. "Trading Price" means, for any security as of any date, the closing bid price on the Over-the-Counter Bulletin Board or applicable trading market as reported by a reliable reporting service designated by the note holder. The note holder is limited to owning 4.99% of the Company’s issued and outstanding shares. Default interest is 22% per annum should the Company default on the CPN#10. The Company may prepay CPN#10 at any time for the period beginning on the date of the CPN#10 and ending on the date which is ninety (90) days following the date of the CPN#10, the CPN#10 may be prepaid by the Company upon payment to the note holder of an amount equal to the outstanding principal amount of the CPN#10 multiplied by 125% together with accrued and unpaid interest thereon. At any time during the period beginning on the ninety (91) day from the date of the CPN#10 and ending on the date which is one hundred twenty (120) days following the date of CPN#10, the Company may prepay the CPN#10 to the note holder upon payment of an amount equal to the outstanding principal amount of the CPN#10 multiplied by 135% together with accrued and unpaid interest thereon. At any time during the period beginning on the date which is one hundred twenty one (121) days from the date of the CPN#10 and ending on one

59

 hundred eighty (180) days following the date of this CPN#10, the Company may prepay the CPN#10 to the note holder upon payment of an amount equal to the outstanding principal amount of the CPN#10 multiplied by 145% together with accrued and unpaid interest thereon. After the expiration of one hundred eighty (180) days following the date of the CPN#10, the Company shall have no right of prepayment. The floor price of $0.00005. As of May 31, 2013, the Company accrued interest of $168.

CPN#11 - The Company issued an unsecured 9 month 8% Convertible Promissory Note (CPN#11) on May 29, 2013 due on March 1, 2014 for $37,750. The principal and accrued interest is convertible into shares of common stock at the discretion of the note holder. The conversion price (the “Conversion Price”) shall equal the greater of (i) the Variable Conversion Price and (ii) the Fixed Conversion Price (subject to equitable adjustments for stock splits, stock dividends or rights offerings by the Company relating to the Company’s securities or the securities of any subsidiary of the Company, combinations, recapitalization, reclassifications, extraordinary distributions and similar events).  The "Variable Conversion Price" shall mean 57.5% multiplied by the Market Price (as defined herein) (representing a discount rate of 42.5%).  “Market Price” means the average of the lowest three (3) Trading Prices (as defined below) for the Common Stock during the ten (10) Trading Day period ending on the latest complete Trading Day prior to the Conversion Date.  “Trading Price” means, for any security as of any date, the closing bid price on the Over-the-Counter Bulletin Board (the “OTCBB”), OTCQB or applicable trading market as reported by a reliable reporting service (“Reporting Service”) designated by the Holder or, if the OTCBB is not the principal trading market for such security, the closing bid price of such security on the principal securities exchange or trading market where such security is listed or traded or, if no closing bid price of such security is available in any of the foregoing manners, the average of the closing bid prices of any market makers for such security that are listed in the “pink sheets” by the National Quotation Bureau, Inc.  In the case that the Company’s Common Stock is not deliverable by DWAC, an additional 5% discount will apply.  In the case that the Company’s Common Stock is “chilled” for deposit into the DTC system and only eligible for clearing deposit, an additional 7.5% discount shall apply.  If the Trading Price cannot be calculated for such security on such date in the manner provided above, the Trading Price shall be the fair market value as mutually determined by the Company and the holders of a majority in interest of the Notes being converted for which the calculation of the Trading Price is required in order to determine the Conversion Price of such Notes.  “Trading Day” shall mean any day on which the Common Stock is tradable for any period on the OTCBB, OTCQB or on the principal securities exchange or other securities market on which the Common Stock is then being traded.  “Fixed Conversion Price” shall mean $0.00005. The Company may prepay the amounts outstanding hereunder pursuant to the following terms and conditions:  (I) at any time during the period beginning on the Issue Date and ending on the date which is thirty (30) days following the Issue Date, the Company shall have the right, exercisable on not less than three (3) Trading Days prior written notice to the Holder of CPN#11 to prepay the outstanding CPN#11 (principal and accrued interest), in full by making a payment to the Holder of an amount in cash equal to 125%, multiplied by the sum of: (w) the then outstanding principal amount of CPN#11 plus (x) accrued and unpaid interest on the unpaid principal amount of  CPN#11 plus (y) Default Interest; (II) at any time during the period beginning the day which is thirty one (31) days following the Issue Date and ending on the date which is sixty (60) days following the Issue Date, the Company shall have the right, exercisable on not less than three (3) Trading Days prior written notice to the Holder of CPN#11 to prepay the outstanding CPN#11 (principal and accrued interest), in full by making a payment to the Holder of an amount in cash equal to 130%, multiplied by the sum of: (w) the then outstanding principal amount of  CPN#11 plus (x) accrued and unpaid interest on the unpaid principal amount of CPN#11 plus (y) Default Interest; (III) at any time during the period beginning the day which is sixty one (61) days following the Issue Date and ending on the date which is ninety(90) days following the Issue Date, the Company shall have the right, exercisable on not less than three (3) Trading Days prior written notice to the Holder of CPN#11 to prepay the outstanding CPN#11 (principal and accrued interest), in full by making a payment to the Holder of an amount in cash equal to 135%, multiplied by the sum of: (w) the then outstanding principal amount of CPN#11 plus (x) accrued and unpaid interest on the unpaid principal amount of  CPN#11 plus (y) Default Interest; (IV) at any time during the period beginning the day which is ninety one (91) days following the Issue Date and ending on the date which is one hundred twenty (120) days following the Issue Date, the Company shall have the right, exercisable on not less than three (3) Trading Days prior written notice to the Holder of CPN#11 to prepay the outstanding CPN#11 (principal and accrued interest), in full by making a payment to the Holder of an amount in cash equal to 140%, multiplied by the sum of: (w) the then outstanding principal amount of CPN#11 plus (x) accrued and unpaid interest on the unpaid principal amount of CPN#11 plus (y) Default Interest; (V) at any time during the period beginning the day which is one hundred twenty one (121) days following the Issue Date and ending on the date which is one hundred fifty (150) days following the Issue Date, the Company shall have the right, exercisable on not less than three (3) Trading Days prior written notice to the Holder of CPN#11 to prepay the outstanding CPN#11 (principal and accrued interest), in full by making a payment to the Holder of an amount in cash equal to 145%, multiplied by the sum of: (w) the then outstanding principal amount of CPN#11 plus (x) accrued and unpaid interest on the unpaid principal amount of CPN#11 plus (y) Default Interest; (VI) at any time during the period beginning the day which is one hundred fifty one (151) days following the Issue Date and ending on the date which is one hundred eighty (180) days following the Issue Date, the Company shall have the right, exercisable on not less than three (3) Trading Days prior written notice to the Holder of CPN#11 to prepay the outstanding CPN#11 (principal and accrued interest), in full by making a payment to the Holder of an amount in cash equal to 150%, multiplied by the sum of: (w) the then outstanding principal amount of CPN#11 plus (x) accrued and unpaid interest on the unpaid principal amount of CPN#11 plus (y) Default Interest; (VII) after the expiration of one hundred eighty (180) following the date of CPN#11, the Company shall have no right of prepayment. As of May 31, 2013, the Company accrued interest of $17

XML

STATEMENTS OF STOCKHOLDERS' EQUITY (USD $)		Total	Common Stock	Additional Paid-in Capital	Retained Earnings	Total Equity
Stockholders' Equity at May. 31, 2007			$ 0	$ 0	$ 0	$ 0
Shares, Outstanding at May. 31, 2007			0	0	0	0
Stock Issued During Period to Directors, Value, New Issues			40,000	(35,000)	0	5,000
Stock Issued During Period to Directors, Shares, New Issues			400,000,000
Stock Issued During Period, Value, New Issues			11,042	44,166	0	55,208
Stock Issued During Period, Shares, New Issues			110,416,000
Net Income (Loss), Including Portion Attributable to Noncontrolling Interest			0	0	(85)	(85)
Stockholders' Equity at May. 31, 2008			51,042	9,166	(85)	60,123
Shares, Outstanding at May. 31, 2008	[1]		510,416,000
Net Income (Loss), Including Portion Attributable to Noncontrolling Interest			0	0	(50,170)	(50,170)
Stockholders' Equity at May. 31, 2009			51,042	9,166	(50,255)	9,953
Shares, Outstanding at May. 31, 2009	[1]		510,416,000
Net Income (Loss), Including Portion Attributable to Noncontrolling Interest			0	0	(50,744)	(50,744)
Stockholders' Equity at May. 31, 2010			51,042	9,166	(100,999)	(40,791)
Shares, Outstanding at May. 31, 2010	[1]		510,416,000
Stock Issued During Period to Directors, Value, New Issues			8	9,243	0	9,250
Stock Issued During Period to Directors, Shares, New Issues			75,000
For purchase of Accounts Receivable, value			126	62,824	0	62,950
For purchase of Accounts Receivable, shares			1,259,000
Stock Issued During Period, Value, New Issues			74	36,976	0	37,050
Stock Issued During Period, Shares, New Issues			741,000
Common stock issued to Consultant, Value, New Issues			1	1,099	0	1,100
Common stock issued to Consultant, Shares, New Issues			10,000
Stock Repurchased and Retired During Period, Value			(20,000)	(105,000)	0	(125,000)
Stock Repurchased and Retired During Period, Shares			(200,000,000)
Net Income (Loss), Including Portion Attributable to Noncontrolling Interest			0	0	(614,592)	(614,592)
Stockholders' Equity at May. 31, 2011			31,250	14,308	(715,592)	(670,034)
Shares, Outstanding at May. 31, 2011	[1]		312,501,000
Stock Issued During Period to Directors, Value, New Issues			14	7,373	0	7,387
Stock Issued During Period to Directors, Shares, New Issues			142,500
Common stock issued to Consultant, Value, New Issues			1,800	898,200	0	900,000
Common stock issued to Consultant, Shares, New Issues			18,000,000
Net Income (Loss), Including Portion Attributable to Noncontrolling Interest		(985,517)	0	0	(985,517)	(985,517)
Stockholders' Equity at May. 31, 2012			33,064	919,881	(1,701,109)	(748,164)
Shares, Outstanding at May. 31, 2012	[1]		330,643,500
Stock Issued During Period to Directors, Value, New Issues			21	5,409	0	5,430
Stock Issued During Period to Directors, Shares, New Issues			211,129
Stock Issued During Period for Assets, Value, New Issues			1,170	583,830	0	585,000
Stock Issued During Period for Assets, Shares, New Issues			11,700,000
Common stock issued to Consultant, Value, New Issues			4,028	1,845,972	0	1,850,000
Common stock issued to Consultant, Shares, New Issues			40,281,633
Common stock issued to Lender, Value, New Issues			117	11,369	0	11,486
Common stock issued to Lender, Shares, New Issues			1,165,839
Common stock issued due to CPN, Value, New Issues			1,946	28,675	0	30,621
Common stock issued due to CPN, Shares, New Issues			19,458,139
Common stock cancelled to Consultant, Value, New Issues			(1,800)	(898,200)	0	(900,000)
Common stock cancelled to Consultant, Shares, New Issues	[2]		(18,000,000)
Discount on CPN's			0	379,486	0	379,486
Net Income (Loss), Including Portion Attributable to Noncontrolling Interest		(1,752,791)	0	0	(1,752,790)	(1,752,790)
Stockholders' Equity at May. 31, 2013			$ 38,546	$ 2,876,422	$ (3,453,899)	$ (538,931)
Shares, Outstanding at May. 31, 2013	[1]		386,460,240

[1] Note 1 - The number of issued and outstanding shares of common stock has been adjusted to reflect an 80:1 forward split effective August 3, 2010

[2] Note 2 - Refer to NOTE 3 of the Notes to Financial Statements

XML

Note 3: Other Current Assets

12 Months Ended

May 31, 2013

Notes

Note 3: Other Current Assets

NOTE 3: OTHER CURRENT ASSETS

The Other Current Assets account consists of inventory and prepaid expenses. During the fiscal year, the Company entered into two financial advisory contracts to provide consulting services in connection with the Company’s business affairs and assist the Company in raising capital. One consulting contract is with Vaquero Private Capital, Inc. (VPC) is for $810,000 for a 12 month period effective June 1, 2012. As consideration for the services to be provided by VPC, the Company paid VPC 16.2 Million shares of the Company on execution of the agreement. The Company charged $810,000 as a prepaid financial services expense and is amortizing the prepaid expense over 12 months. Refer to additional information on this agreement in Note 21: TERMINATION OF FINANCIAL SERVICES AGREEMENT.

The second consulting contract is with Prodigy Asset Management, Inc. (PAM) is for $1,000,000 for a 24 month period effective August 31, 2012. As one of the considerations for the services to be provided by PAM, the Company paid PAM 20 Million shares of the Company on execution of the agreement. The Company charged $1,000,000 as a prepaid financial services expense and is amortizing the prepaid expense over 24 months.

51

For the fiscal year ending May 31, 2012, the Company entered into a Investment Banking and Advisory (IBA) agreement with Charles Morgan Securities, Inc. (CMS). As one of the considerations for the services to be provided by CMS, the Company paid CMS 18 Million shares of the Company on execution of the agreement. The Company charged $900,000 as a prepaid financial services expense and is amortizing the prepaid expense over 24 months. On September 20, 2012, the Company and CMS mutually agreed to terminate the IBA agreement between the Company and CMS.  The Company and CMS agreed that the IBA agreement and all rights, obligations, interest, claims and causes of action pursuant thereto shall automatically be canceled, terminated, released and extinguished. As a condition of the Termination Agreement, the Company is obligated to pay $4,000 for legal fees incurred by CMS. The Company issued 18 million common stock (Shares) to CMS of which 7.5 million Shares were released to CMS. These shares are being held as collateral until the Company's pays the $4,000 of legal fees incurred per The Termination Agreement.

On March 18, 2013, the Company entered into an Investor Relations and Marketing Agreement (IRMA) for $351,000 with a third party payable in cash. The IRMA requires the fees to be pre-paid prior to services rendered. The Company has been invoiced for the pre-payment and recorded the invoice in our accounts payable and recorded the expense as a prepaid charge. The Company may terminate the IRMA without penalties or damages.

The Schedule of Other Current Assets are as follows:

Schedule of Other Current Assets
Other Current Asset		May 31, 2013		May 31, 2012
Other Current Assets, Beginning Balance	$	833,274	$	0
Prepaid Legal	$	(3,274)	$	8,274
Prepaid Financial Services	$	1,336,000	$	900,000
Less: Amortization		(1,185,000)		(75,000)
Other Current Assets, Balance end of period	$	981,000	$	833,274

XML

Note 17: Executive and Board Compensation

12 Months Ended

May 31, 2013

Notes

Note 17: Executive and Board Compensation

NOTE 17: EXECUTIVE AND BOARD COMPENSATION

The Company entered in a Management and Financial Service Agreement with Mr. Wayne St. Cyr as the Executive Vice President, Marketing and Strategic Development on December 21, 2010 for a ten day period ending December 31, 2010 which was extended for a 12 month term to December 31, 2011, whereby the Executive Vice President, Marketing and Strategic Development is paid $10,000 per month. The Company has not renewed the contract with Mr. Ct. Cyr and has retained Mr. St. Cyr on a month to month basis. In addition to his duties as Executive Vice President, Marketing and Strategic Development, Mr. St. Cyr is the Corporate Secretary for the Company. Mr. St Cyr is paid $10,000 per month.

The Company entered into a Management and Financial Service Agreement for Mr. Jerry G. Mikolajczyk for a 12-month period commencing on June 1, 2011 and ending May 31, 2012. Mr. Mikolajczyk is hired through a service company, and will be paid $120,000 in cash payments for the services of Mr. Mikolajczyk. The terms and conditions will be renegotiated upon the successful consummation of a Business Combination through the acquisition of, or merger or consolidation with, a company that has substantial additional capital and or operating revenues; or the Company is able to finance operating expenses with additional debt or through equity financing of not less than $5,000,000. The Company has not renewed the contract with Mr. Mikolajczyk. Mr. Mikolajczyk continues to work for the Company on a month-to-month basis and is paid $10,000 per month.

The Company entered into a Management and Financial Service Agreement with Mr. Peter Matousek for a 12-month period commencing June 1, 2011 and ending May 31, 2012 whereby Mr. Matousek will be paid $90,000 in cash payments. The terms and conditions will be renegotiated upon the successful consummation of a Business Combination through the acquisition of, or merger or consolidation with, a company that has substantial additional capital and or operating revenues; or the Company is able to finance operating expenses with additional debt or through equity financing of not less than $5,000,000. The Company has not renewed the contract with Mr. Matousek. Mr. Matousek continues to work for the Company on a month-to-month basis and is paid $7,500 per month.

The Company entered into Board Member Compensation Agreements with Mr. Kevin M. Grapes and Mr. Jerry G. Mikolajczyk as directors of the Company for a term of one (1) year ending August 31, 2012. Both Mr. Grapes and Mr. Mikolajczyk will receive 5,000 shares per month of the Company’s common stock in consideration for them serving on the Company’s Board of Directors. The common stock will be valued based on the average of the 5 trading day close price prior to each month end. This amount includes all costs related to the engagement Director of the Company except 3^rd party or travel expenses. 

On May 21, 2012, Mr. Kevin M. Grapes resigned as a Board member.

62

On May 22, 2012, Company entered into a Board Member Compensation Agreement with Dr. William D. Spier as a director of the Company for a term of one (1) year ending May 31, 2013. Dr. Spier will receive 5,000 shares per month of the Company’s common stock in consideration for them serving on the Company’s Board of Directors. The common stock will be valued based on the average of the 5 trading day close price prior to each month end. This amount includes all costs related to the engagement Director of the Company except 3^rd party or travel expenses.

On May 25, 2012, Company entered into a Board Member Compensation Agreement with Mr. Peter Matousek as a director of the Company for a term of one (1) year ending May 31, 2013. Mr. Matousek will receive 5,000 shares per month of the Company’s common stock in consideration for them serving on the Company’s Board of Directors. The common stock will be valued based on the average of the 5 trading day close price prior to each month end. This amount includes all costs related to the engagement Director of the Company except 3^rd party or travel expenses.

The Company authorized and approved an aggregate of 136,129 shares for the period ended May 31, 2012 with an average price of $0.0333 per share to the Board pursuant to a Board Member Compensation Agreements with Mr. Jerry G. Mikolajczyk, Mr. Kevin M. Grapes, Mr. Peter Matousek and Dr. William D. Spier. The Company issued 105,000 of the 136,129 shares to the Board as of May 31, 2012.  The balance,  31,129 shares, cost of $2,106 for the period March 1, 2012 to May 31, 2012,  were issued to the Board on June 25, 2012.

The Company authorized and approved an aggregate of 45,000 shares for the period ended August 31, 2012 with an average price of $0.04033 per share to the Board pursuant to Board Member Compensation Agreements with Mr. Jerry G. Mikolajczyk, Mr. Peter Matousek and Dr. William D. Spier. The 45,000 shares were issued to the Board on October 26, 2012.

On August 31, 2012, Jerry G. Mikolajczyk was re-appointed as a director by the Board of Directors of  the Company for another one-year term ending August 31, 2013.  In consideration for Mr. Mikolajczyk’s service as director, the Company will issue 5,000 shares per month of the Company’s stock, which will be valued based on the average of the five trading day close price prior to each month end.  In addition, the Company will reimburse Mr. Mikolajczyk for the preapproved cost of airfare, travel expenses and disbursements made on behalf of the Company.

The Company authorized and approved an aggregate of 45,000 shares for the period ended November  30, 2012 with an average price of $0.01228 per share to the Board pursuant to Board Member Compensation Agreements with Mr. Jerry G. Mikolajczyk, Mr. Peter Matousek and Dr. William D. Spier.

The Company authorized and approved an aggregate of 45,000 shares for the period ended February 28, 2013 with an average price of $0.01093 per share to the Board pursuant to Board Member Compensation Agreements with Mr. Jerry G. Mikolajczyk, Mr. Peter Matousek and Dr. William D. Spier.

On May 30, 2013, the Board of Directors renewed the Board Member Compensation Agreement with Dr. William D. Spier as a director of the Company for a term of one (1) year ending May 31, 2014. Mr. Spier will receive 5,000 shares per month of the Company’s common stock in consideration for them serving on the Company’s Board of Directors. The common stock will be valued based on the average of the 5 trading day close price prior to each month end. This amount includes all costs related to the engagement Director of the Company except 3^rd party or travel expenses. The terms and conditions will be renegotiated upon the successful consummation of a Business Combination through the acquisition of, or merger or consolidation with, a company that has substantial additional capital and or operating revenues; or the Company is able to finance operating expenses with additional debt or through equity financing of not less than $5 million.

On May 30, 2013, the Board of Directors renewed the Board Member Compensation Agreement with Mr. Peter Matousek as a director of the Company for a term of one (1) year ending May 31, 2014. Mr. Matousek will receive 5,000 shares per month of the Company’s common stock in consideration for them serving on the Company’s Board of Directors. The common stock will be valued based on the average of the 5 trading day close price prior to each month end. This amount includes all costs related to the engagement Director of the Company except 3^rd party or travel expenses. The terms and conditions will be renegotiated upon the successful consummation of a Business Combination through the acquisition of, or merger or consolidation with, a company that has substantial additional capital and or operating revenues; or the Company is able to finance operating expenses with additional debt or through equity financing of not less than $5 million.

On May 31, 2013, the Company entered into a Management and Financial Service Agreement with Dr. William D. Spier as Treasurer of the Company for a 12-month period commencing June 1, 2013 and ending May 31, 2014 whereby Dr. Spier will be paid $90,000 in cash payments. The terms and conditions will be renegotiated upon the successful consummation of a Business Combination through the acquisition of, or merger or consolidation with, a company that has substantial additional capital and or operating revenues; or the Company is able to finance operating expenses with additional debt or through equity financing of not less than $5 million.

63

The Company authorized and approved an aggregate of 45,000 shares for the period ended May 31, 2013 with an average price of $0.01033 per share to the Board pursuant to Board Member Compensation Agreements with Mr. Jerry G. Mikolajczyk, Mr. Peter Matousek and Dr. William D. Spier.

The Schedule of Board Compensation below represents the shares issued or approved to the Board with the 5-Day Average Share Closing Price for each month during the fiscal year ending May 31, 2013:

	Schedule of Board Compensation
Month		Board Shares Approved, Not Issued	Board Shares Issued	5 Day Average Share Closing Price	Cost Base
June		0	15,000	$0.03800	$570.00
July		0	15,000	$0.04400	$660.00
August		0	15,000	$0.03900	$585.00
Quarter Total		0	45,000	$0.04033	$1,815.00
September		0	15,000	$0.02320	$348.00
October		0	15,000	$0.00770	$115.60
November		0	15,000	$0.00590	$89.10
Quarter Total		0	45,000	$0.01228	$552.70
December		0	15,000	$0.00774	$116.10
January		0	15,000	$0.00982	$147.30
February		0	15,000	$0.01522	$228.30
Quarter Total		0	45,000	$0.01093	$491.70
March		0	15,000	$0.01392	$208.80
April		0	15,000	$0.01028	$154.20
May		0	15,000	$0.00680	$102.00
Quarter Total		0	45,000	$0.01033	$465.00
Year Total		0	180,000	$0.01846	$3,323.50

                The following Schedules of Executive Compensation discloses compensation paid/accrued during the fiscal years ended May 31, 2013 and 2012 to the Company’s Officers and the most highly compensated executive officer whose total compensation exceeded $100,000 for the fiscal year ended May 31, 2013 (Collectively, the “Named Executive Officers”). No restricted stock awards, long-term incentive plan payouts or other types of compensation, other than the compensation identified in the table below, were paid/accrued to the Named Executive Officers during these fiscal years.

2013 Schedule of Executive Compensation
Name and Principal Position	Salary[2]	Bonus	Stock Award	Option Awards	Total Salary
Jerry G. Mikolajczyk, President/CEO/CFO	120000	0	0	0	120000
Wayne St. Cyr, Executive Vice President	120000	0	0	0	120000
Peter Matousek, VP-Investor Relations[1]	90000	0	0	0	90000
Dr. William D. Spier, Treasurer	29032	0	0	0	29032

2012 Schedule of Executive Compensation
Name and Principal Position	Salary[2]	Bonus	Stock Award	Option Awards	Total Salary
Jerry G. Mikolajczyk, President/CEO/CFO	120000	0	0	0	120000
Wayne St. Cyr, Executive Vice President	120000	0	0	0	120000
Peter Matousek, VP-Investor Relations[1]	90000	0	0	0	90000

XML

Note 5. Advertising (Details) (USD $)	65 Months Ended
	May 31, 2013
Details
Advertising Expense	$ 0

XML

Note 2: Summary of Significant Accounting Practices: Intangible Assets - Legal and Contractual - Rights: Schedule of Oil and Gas Rights (Tables)

12 Months Ended

May 31, 2013

Tables/Schedules

Schedule of Oil and Gas Rights

Schedule of Oil and Gas Rights
Description		May 31, 2013		May 31, 2012
Oil and Gas Leases: Beginning of year	$	0	$	5,583
Acquisitions/Work in Progress	$	643,500	$	399,743
Subtotal	$	643,500	$	405,326
Capitalized as Fixed Assets		(107,250)		0
Forfeitures during the period	$	0	$	(5,583)
Impairments during the period	$	0	$	(399,743)
Oil and Gas Leases: End of year	$	536,250	$	0

XML

Note 11: Recent Accounting Pronouncements

12 Months Ended

May 31, 2013

Notes

Note 11: Recent Accounting Pronouncements

NOTE 11: RECENT ACCOUNTING PRONOUNCEMENTS

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

XML

Note 17: Executive and Board Compensation: 2013 Schedule of Executive Compensation (Details) (USD $)	12 Months Ended
	May 31, 2013	May 31, 2012
JerryGMikolajczykMember
Salary	$ 120,000
Bonus	0
Stock Award	0
Option Awards	0
Total Salary	120,000	120,000
WayneStCyrOfficerMember
Salary	120,000
Bonus	0
Stock Award	0
Option Awards	0
Total Salary	120,000	120,000
Peter Matousek
Salary	90,000
Bonus	0
Stock Award	0
Option Awards	0
Total Salary	90,000	90,000
DrWDSpierMember
Salary	29,032
Bonus	0
Stock Award	0
Option Awards	0
Total Salary	$ 29,032

XML

Note 2: Summary of Significant Accounting Practices: Estimated Fair Value of Financial Instruments (Policies)

12 Months Ended

May 31, 2013

Policies

Estimated Fair Value of Financial Instruments

ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying value of the Company’s financial instruments, consisting of accounts payable and accrued liabilities approximate their fair value due to the short-term maturity of such instruments. Unless otherwise noted, it is management’s opinion that the Company is not exposed to significant interest, currency, or credit risks arising from these financial statements.

XML

Note 13: Loans Payable: CPN#9 (Details) (CPN9Member, USD $)	May 31, 2013
CPN9Member
Convertible Promissory Note	$ 32,500
AccruedInterest	$ 207

XML

Note 3: Other Current Assets: Schedule of Other Current Assets (Tables)

12 Months Ended

May 31, 2013

Tables/Schedules

Schedule of Other Current Assets

Schedule of Other Current Assets
Other Current Asset		May 31, 2013		May 31, 2012
Other Current Assets, Beginning Balance	$	833,274	$	0
Prepaid Legal	$	(3,274)	$	8,274
Prepaid Financial Services	$	1,336,000	$	900,000
Less: Amortization		(1,185,000)		(75,000)
Other Current Assets, Balance end of period	$	981,000	$	833,274

XML

Note 2: Summary of Significant Accounting Practices: Cash Equivalents (Policies)

12 Months Ended

May 31, 2013

Policies

Cash Equivalents

CASH EQUIVALENTS

The Company may, from time to time, invest cash in excess of our immediate operating requirements in short-term time deposits and money market instruments generally with original maturities at the date of purchase of three months or less. The Company considers all liquid investments with maturity of three months or less when purchased to be cash equivalents.

XML

Note 20: Venango 30 Well Location

12 Months Ended

May 31, 2013

Notes

Note 20: Venango 30 Well Location

NOTE 20:  VENANGO 30 WELL LOCATION

On August 31, 2012 the Company entered into an Oil and Gas Well Location Agreement with Vencedor Energy Partners (Assignor). The agreement allows the Company to drill 30 offset oil and gas wells on 3 producing oil and gas leases in Venango County, Pennsylvania.

The Company paid $585,000 in the form of 11,700,000 shares of common stock (Shares) of the Company for the rights.

The Company will have 100% working interest in the wells and Net Revenue Interest as follows:

Lease Name	Net Revenue Interest Breakdown
Rice	Master Lease Lessor - 12.5% Royalty, Master Lease Lessee 2.5% Override royalty interest, Assignor - 2.5% Override royalty interest; and the Company - 82.5% royalty interest;
Lalley	Master Lease Lessor - 12.5% Royalty, Master Lease Lessee 2.5% Override royalty interest, Assignor - 2.5% Override royalty interest; and the Company - 82.5% royalty interest; and
Corse	Master Lease Lessor - 15.0% Royalty, Master Lease Lessee 2.5% Override royalty interest, Assignor - 2.5% Override royalty interest; and the Company - 80.0% royalty interest.

65

The Agreement allows the Company to have the exclusive right to explore, operate, produce all naturally-occurring oil, gas, casing-head gas or gasoline, gas condensate and/or all other liquid or gaseous hydrocarbons and other marketable or non-marketable substances produced (Oil and Gas) from Oil and Gas deposits contained within and under the well location and any and all other rights and privileges necessary, incident to, or convenient for the economical operation of the well location and other lands for the production of Oil and Gas to the Company. A well location is defined as a circle having a radius of l50 feet with the well, to a depth as allowed in the Master Lease, at the center thereof.

The Company owns the rights and may select up to 30 well locations from the following:

Lease Name	Locations	Rights
Rice	Up to 10	One well per location, to a depth from the surface through the Speechley sands which depth is approximately 2,200 feet on the Premises alone for producing oil and gas by any means, and all rights necessary convenient and incident thereto, granted pursuant to the Master Rice Lease.
Lalley	Up to 8	One well per location, to a depth from the surface through the Speechley sands which depth is approximately 2,200 feet on the Premises alone for producing oil and gas by any means, and all rights necessary convenient and incident thereto, granted pursuant to the Master Lalley Lease.
Corse	Up to 15	One well per location, to a depth from the surface through the Speechley sands which depth is approximately 2,000 feet on the Premises alone for producing oil and gas by any means, and all rights necessary convenient and incident thereto, granted pursuant to the Master Corse Lease.

If Company does not begin or provide proof of funds or funding for the first well on or before January 31, 2013, subject to our operator, Vencedor Energy Partners, obtaining the necessary permits to allow the Company to commence drilling and completions operations, and does not begin or provide proof of funds or funding for 3 more wells on or before March 31, 2013, then the Company will have forfeited its rights and the Agreement shall terminate and unwind and the Assignor agrees to return the Shares (11,700,000) to the Company.

On January 29, 2013, pursuant to a letter agreement between the Company and the Assignor, the Company acknowledged and agreed to the notice of the delay of the permits up to 4 weeks beyond January 31, 2013.

After completing 8 wells and if Company does not complete any of the remaining 22 well drilling provision set forth in the Agreement within the 2 years from the date of the execution of the Agreement, then the Company will forfeit its rights to the well locations not completed. The Company will retain its rights for the well locations completed and will retain an Override Royalty of Seven and one half per cent (7.5%) on the well locations forfeited.

The Company has 2 years from the date of execution of the Agreement to complete the drilling of the 30 well locations and has the option to acquire an additional 15 well locations for the same terms and conditions of the Agreement after the first 30 wells locations have been completed.

The Company will provide funding in groups of 4 to 6 wells to optimize economies of scale, with the exception of the first 4 wells which can be funded on an individual basis.

The Company agreed, the Participation and Operating Agreement (the "POA"), to have Assignor the designated Operator (the "Operator") of the Oil and Gas Well Locations which includes all the responsibilities as a designated operator in the State of Pennsylvania which includes the duties of managing and supervising the drilling and completions of the Oil and Gas Locations.

On December 18, 2012, pursuant to the POA, the Operator invoiced the Company $835,000 for the drilling and completion of five oil wells on the Rice lease. The Company has recorded the transaction capitalizing the drilling and completions as work in progress. The liability is included in the Company's Accounts Payable. 

On March 18, 2013, pursuant to a letter agreement, Amendment #3, between the Company and Vencedor Energy Partners, the Company has agreed to delete Section 4a (financing conditions) of the Oil and Gas Well Location Assignment dated August 31, 2012 between Xun Energy, Inc. and Vencedor Energy Partners.

On March 30, 2013, the Company's operator, Vencedor Energy Partners, began site work on the Rice lease.

66

THE COMPANY WILL NEED TO RAISE ADDITIONAL FUNDS TO DRILL THE OIL AND GAS WELLS AND THERE IS NO GUARANTEE THAT THE COMPANY WILL BE SUCCESSFUL IN RAISING THE FUNDS NECESSARY TO COMPLETE 1 OR ANY OF THE 30 OFFSET OIL AND GAS WELLS.

XML

Note 19: Executive and Board Changes

12 Months Ended

May 31, 2013

Notes

Note 19: Executive and Board Changes

NOTE 19: EXECUTIVE AND BOARD CHANGES

On May 31, 2011, Mr. Matousek, our President and CEO, advised that the roles and responsibilities are increasing for the Company and that Mr. Jerry G. Mikolajczyk, while as consultant to the Company, has been instrumental in developing and building the Company to its current status including funding and operations. Mr. Matousek advised that it is in the best interests for the Company and the Shareholders that Mr. Mikolajczyk have authority to continue developing the Company and have authority to make decisions at an Executive Level of the Company. Subsequently, Mr. Matousek resigned as President, CEO and CFO and the Company

64

appointed Jerry G. Mikolajczyk as Interim President, CEO and CFO until a permanent President and CEO is recruited and a permanent CFO is recruited. The Company entered into a Management and Financial Service Agreement for Mr. Jerry G. Mikolajczyk for a 12-month period commencing on June 1, 2011 and ending May 31, 2012. Mr. Mikolajczyk is hired through a service company, and will be paid $120,000 in cash payments for the services of Mr. Mikolajczyk. The terms and conditions will be renegotiated upon the successful consummation of a Business Combination through the acquisition of, or merger or consolidation with, a company that has substantial additional capital and or operating revenues; or the Company is able to finance operating expenses with additional debt or through equity financing of not less than $5,000,000. The Company has not renewed the contract with Mr. Mikolajczyk. Mr. Mikolajczyk continues to work for the Company on a month-to-month basis and is paid $10,000 per month.

The Company also appointed Mr. Peter Matousek as the Company’s Vice-President of Investor Relations. The Company entered into a Management and Financial Service Agreement with Mr. Peter Matousek for a 12-month period commencing June 1, 2011 and ending May 31, 2012 whereby Mr. Matousek will be paid $90,000 in cash payments. The terms and conditions will be renegotiated upon the successful consummation of a Business Combination through the acquisition of, or merger or consolidation with, a company that has substantial additional capital and or operating revenues; or the Company is able to finance operating expenses with additional debt or through equity financing of not less than $5 million. The Company has not renewed the contract with Mr. Matousek. Mr. Matousek continues to work for the Company on a month-to-month basis and is paid $7,500 per month.

On August 31, 2011, directors Peter Matousek, Donald Lynch and Jerry G. Mikolajczyk termed out. On September 1, 2011, the Company obtained the written consent of the stockholders holding a majority, 86.51%, of the outstanding voting rights of the Company (the "Consent"). The Consent approved the election of Kevin M. Grapes and Jerry G. Mikolajczyk as directors of the Company for a term of one (1) year ending August 31, 2012.

On May 21, 2012, Mr. Kevin M. Grapes resigned as a Board member.

On May 22, 2012, Company entered into a Board Member Compensation Agreement with Dr. William D. Spier as a director of the Company for a term of one (1) year ending May 31, 2013.

On May 25, 2012, Company entered into a Board Member Compensation Agreement with Mr. Peter Matousek as a director of the Company for a term of one (1) year ending May 31, 2013.

On August 31, 2012, Company entered into a Board Member Compensation Agreement with Mr. Jerry G. Mikolajczyk as a director of the Company for a term of one (1) year ending August 31, 2013.

Each Board member will receive 5,000 shares per month of the Company’s common stock in consideration for them serving on the Company’s Board of Directors. The common stock will be valued based on the average of the 5 trading day close price prior to each month end. This amount includes all costs related to the engagement Director of the Company except 3^rd party or travel expenses. The terms and conditions will be renegotiated upon the successful consummation of a Business Combination through the acquisition of, or merger or consolidation with, a company that has substantial additional capital and or operating revenues; or the Company is able to finance operating expenses with additional debt or through equity financing of not less than $5 million.

XML

Note 2: Summary of Significant Accounting Practices: Oil and Gas Revenue Recognition (Policies)

12 Months Ended

May 31, 2013

Policies

Oil and Gas Revenue Recognition

OIL AND GAS REVENUE RECOGNITION

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

XML

Note 2: Summary of Significant Accounting Practices: Fiscal Year (Policies)

12 Months Ended

May 31, 2013

Policies

Fiscal Year

FISCAL YEAR

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

XML

Note 2: Summary of Significant Accounting Practices: Property and Equipment (Policies)

12 Months Ended

May 31, 2013

Policies

Property and Equipment

PROPERTY AND EQUIPMENT

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

All costs incidental to the acquisition, exploration, and development of oil and gas properties, including costs of undeveloped leasehold, and leasehold equipment, are capitalized.  Please refer to INTANGIBLE ASSETS - LEGAL AND CONTRACTUAL - RIGHTS in this NOTE for further detail.

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

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

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

Capitalized costs are depleted by an equivalent unit-of-production cost method, converting gas to oil at the ratio of six thousand cubic feet of gas to one barrel of oil. Depletion is calculated using the capitalized costs, including estimated asset retirement costs, plus the estimated future expenditures (based on current costs) to be incurred in developing or working over an oil or gas well, proved reserves, net of estimated salvage values.

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

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

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

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

49

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

The Schedule of  Plant, Property and Equipment details are as follows:

Schedule of  Plant, Property and Equipment
Description		May 31, 2013		May 31, 2012
Plant - Oil Wells: Beginning of year	$	0	$	0
Work in Progress-Intangible	$	694,035	$	0
Work in Progress-Tangible	$	140,965	$	0
Rights (leases)	$	107,250	$	0
Subtotal	$	942,250	$	0
Depletion	$	0	$	0
Depreciation	$	0	$	0
Net Plant - Oil Wells: End of year	$	942,250	$	0

XML

Note 2: Summary of Significant Accounting Practices: Income Tax Policy (Policies)

12 Months Ended

May 31, 2013

Policies

Income Tax Policy

INCOME TAX POLICY

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

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

XML

Note 1: Organization, Consolidation and Presentation of Financial Statements: Nature of Business (Policies)

12 Months Ended

May 31, 2013

Policies

Nature of Business

NATURE OF BUSINESS

The Company is engaged primarily in the acquisition, work-over development, and production of oil and gas properties. Such activities are concentrated in North American onshore, primarily in the United States in the State of Pennsylvania. The Company plans to acquire producing or near producing oil and gas properties that will provide cash flow and an upside for future development. We will be scouting for additional properties in and around Texas, Oklahoma, Pennsylvania, Kansas and in Canada.

The Company was incorporated under the laws of the state of Nevada on December 20, 2007 as Real Value Estates, Inc. On July 20, 2010, the Company changed its name to Xun Energy, Inc. and on February 7, 2011, the Company established two subsidiaries in the State of Kentucky.  The Company acquired three oil and gas leases in the State of Kentucky on February 28, 2011 and began production of oil on one of its leases in March 2011.

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

On August 31, 2012, the Company acquired 30 oil and gas well locations in Venango County, Pennsylvania with an option to acquire an additional 15 oil and gas locations. Work commenced on the first 5 oil well locations on the Rice lease in Venango, County, Pennsylvania, USA in March  2013 and as of May 31, 2013 the roads and drill pads were under constructed.

XML

Note 2: Summary of Significant Accounting Practices: Intangible Assets - Legal and Contractual - Rights: Schedule of Oil and Gas Rights (Details)	May 31, 2013	May 31, 2012
Details
Oil and Gas Leases: Beginning of year	0	5,583
Acquisitions/Work in Progress	643,500	399,743
Subtotal	643,500	405,326
Capitalized as Fixed Assets	(107,250)	0
Forfeitures during the period	0	(5,583)
Impairments during the period	0	(399,743)
Oil and Gas Leases: End of year	536,250	0

XML

Note 12: Change of Control: Schedule of Ownership and Percentage of Control (Details) (Common Stock)	12 Months Ended
	May 31, 2013
DonaldLynchMember
Common Stock, Shares, Issued	80,000,000	[1]
Percentage of Class	15.67%	[1]
Peter Matousek
Common Stock, Shares, Issued	320,000,000	[1]
Percentage of Class	62.69%	[1]
All Officers and Directors as a Group
Common Stock, Shares, Issued	400,000,000	[1]
Percentage of Class	78.37%	[1]

[1] post forward split

XML

Note 2: Summary of Significant Accounting Practices: Property and Equipment: Schedule of Plant, Property and Equipment (Details)	May 31, 2013	May 31, 2012
Details
Plant - Oil Wells: Beginning of year	0	0
Work in Progress-Intangible	694,035	0
Work in Progress-Tangible	140,965	0
Rights (leases)	107,250	0
Subtotal	942,250	0
Depletion	0	0
Depreciation	0	0
Net Plant - Oil Wells: End of year	942,250	0

XML

Note 2: Summary of Significant Accounting Practices: Oil and Gas Development - Workover Program (Policies)

12 Months Ended

May 31, 2013

Policies

Oil and Gas Development - Workover Program

OIL AND GAS DEVELOPMENT - WORKOVER PROGRAM                 

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

XML

Note 8. Income Taxes (Details) (USD $)	May 31, 2013
Details
Deferred Tax Assets, Net of Valuation Allowance	$ 1,208,865	[1]
Liability for Uncertain Tax Positions, Current	0
Unrecognized Tax Benefits, Income Tax Penalties and Interest Accrued	$ 0

[1] assuming a 35% effective tax rate

XML

Note 18: Common Shares Purchase Litigation

12 Months Ended

May 31, 2013

Notes

Note 18: Common Shares Purchase Litigation

NOTE 18: COMMON SHARES PURCHASE LITIGATION

On May 10, 2011, the Company accepted an Offer to Purchase from Lea Kennedy d/b/a LuxemBarings (“Purchaser”) to purchase $10 million of the Company’s common stock based on the average of 5 consecutive trading day’s close prior to date of closing. The Offer to Purchase was scheduled to close on or before June 24, 2011. The Purchaser failed to complete the transaction, after mutually agreed extensions of the closing date. The Company has retained legal counsel to take legal action against the Purchaser for failing to complete the purchase transaction and for damages to the Company as a result of the failure to complete the transaction. The Company has recognized losses, at cost, in the financial statements for the period ended May 31, 2012 and legal costs for the fiscal year ending May 31, 2013.

On March 23, 2013 The United States District Court For The Southern District Of Illinois granted summary judgment on Xun Energy’s breach of contract claim against Lea Kennedy d/b/a/ LuxemBarings. The amount of damages remains an issue to be resolved in the case and the Company's "fraud in the inducement claim" alleged in its complaint remains pending.

Subsequent to May 31, 2013, on July, 8, 2013,  the Company was awarded a judgment dismissing, without prejudice, the legal action between Xun Energy, Inc., as Plaintiff and Lea Kennedy, an individual, d/b/a LUXEMBARINGS, as Defendant. The Company filed for a voluntary dismissal without prejudice on the legal action, refer to NOTE 23: SUBSEQUENT EVENTS.

XML

STATEMENT OF CASH FLOWS, SUPPLEMENTAL DISCLOSURES (USD $)	12 Months Ended		65 Months Ended
	May 31, 2013	May 31, 2012	May 31, 2013
SUPPLEMENTAL DISCLOSURE WITH RESPECT TO CASH FLOWS
Cash paid for income taxes	$ 0	$ 0	$ 0
Cash paid for interest	0	0	222
Inventory - non cash capitalization	0	(283)	0
Convertible Promissory Note - non-cash capitalization	51,879	0	51,879
Prepaid Expenses - non-cash capitalization	950,000	900,000	1,850,000
Purchase of Intangible Assets - non-cash capitalization	585,000	0	585,000
Debt Discount - non cash capitalization	327,607	0	327,607
Common Stock issued for repayment of loans	$ 82,500	$ 0	$ 82,500

XML

Note 1: Organization, Consolidation and Presentation of Financial Statements

12 Months Ended

May 31, 2013

Notes

Note 1: Organization, Consolidation and Presentation of Financial Statements

NOTE 1: ORGANIZATION, CONSOLIDATION AND PRESENTATION OF FINANCIAL STATEMENTS

NATURE OF BUSINESS

The Company is engaged primarily in the acquisition, work-over development, and production of oil and gas properties. Such activities are concentrated in North American onshore, primarily in the United States in the State of Pennsylvania. The Company plans to acquire producing or near producing oil and gas properties that will provide cash flow and an upside for future development. We will be scouting for additional properties in and around Texas, Oklahoma, Pennsylvania, Kansas and in Canada.

The Company was incorporated under the laws of the state of Nevada on December 20, 2007 as Real Value Estates, Inc. On July 20, 2010, the Company changed its name to Xun Energy, Inc. and on February 7, 2011, the Company established two subsidiaries in the State of Kentucky.  The Company acquired three oil and gas leases in the State of Kentucky on February 28, 2011 and began production of oil on one of its leases in March 2011.

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

On August 31, 2012, the Company acquired 30 oil and gas well locations in Venango County, Pennsylvania with an option to acquire an additional 15 oil and gas locations. Work commenced on the first 5 oil well locations on the Rice lease in Venango, County, Pennsylvania, USA in March  2013 and as of May 31, 2013 the roads and drill pads were under constructed.

OPERATING COMPANY

On April 18, 2011, the Company filed a Form 8-K with the United States Securities and Exchange Commission (“SEC”) disclosing that the Company is no longer considered a shell and has completed a workover program on one of its wells. Subsequent to filing of the Form 8-K with the SEC, the Company has filed its required four quarterly filings to "cure" itself of  "shell status". The Company operations are extensively involved in oil and gas operations even though the Company has had limited revenue from the oil and gas operations.

XML

Note 4: Other Assets

12 Months Ended

May 31, 2013

Notes

Note 4: Other Assets

NOTE 4: OTHER ASSETS

The Schedule of Other Assets are as follows:

Schedule of Other Assets
Description - Other Assets		May 31, 2013		May 31, 2012
Rights - Oil and Gas Leases	$	536,250	$	0
Trademarks	$	0	$	20
Incorporation Costs	$	70	$	170
Bonds	$	0	$	500
Total Other Assets	$	536,320	$	690

XML

Note 13: Loans Payable: Short Term Loans (Details) (USD $)	May 31, 2013	May 31, 2012
Loan payable	$ 544,746	$ 419,649
JerryGMikolajczykLighthouseMember
LoanPayableRelatedParty	398,249
JerryGMikolajczykSeriesBMember
LoanPayableRelatedParty	20,000
JerryGMikolajczykLDNote5Member
LoanPayableRelatedParty	9,375
AccruedInterest	112
LDNote1Member
AccruedInterest	1,048
Loan payable	87,500
LDNotes234Member
AccruedInterest	337
Loan payable	$ 28,125

XML

Note 2: Summary of Significant Accounting Practices

12 Months Ended

May 31, 2013

Notes

Note 2: Summary of Significant Accounting Practices

NOTE  2: SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES

BASIS OF ACCOUNTING

Our consolidated financial statements include the accounts of all of our wholly-owned subsidiaries and we have eliminated all significant intercompany balances and transactions in consolidation.

FISCAL YEAR

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

PRINCIPLES OF CONSOLIDATION

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

INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS)

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

EARNINGS PER SHARE

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

48

CASH EQUIVALENTS

The Company may, from time to time, invest cash in excess of our immediate operating requirements in short-term time deposits and money market instruments generally with original maturities at the date of purchase of three months or less. The Company considers all liquid investments with maturity of three months or less when purchased to be cash equivalents.

USE OF ESTIMATES -

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual amounts could differ from these estimates, and changes in these estimates are recorded when known. Significant items subject to such estimates and assumptions include, but are not limited to, the following:

• Estimates of proved reserves and related estimates of the present value of future net revenues;

• Carrying value of oil and gas properties;

• Estimates of the fair value of reporting units and related assessment of goodwill for impairment;

• Income taxes;

• Asset retirement obligations;

• Legal contingencies and environmental risks and exposures.

PROPERTY AND EQUIPMENT

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

All costs incidental to the acquisition, exploration, and development of oil and gas properties, including costs of undeveloped leasehold, and leasehold equipment, are capitalized.  Please refer to INTANGIBLE ASSETS - LEGAL AND CONTRACTUAL - RIGHTS in this NOTE for further detail.

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

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

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

Capitalized costs are depleted by an equivalent unit-of-production cost method, converting gas to oil at the ratio of six thousand cubic feet of gas to one barrel of oil. Depletion is calculated using the capitalized costs, including estimated asset retirement costs, plus the estimated future expenditures (based on current costs) to be incurred in developing or working over an oil or gas well, proved reserves, net of estimated salvage values.

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

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

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

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

49

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

The Schedule of  Plant, Property and Equipment details are as follows:

Schedule of  Plant, Property and Equipment
Description		May 31, 2013		May 31, 2012
Plant - Oil Wells: Beginning of year	$	0	$	0
Work in Progress-Intangible	$	694,035	$	0
Work in Progress-Tangible	$	140,965	$	0
Rights (leases)	$	107,250	$	0
Subtotal	$	942,250	$	0
Depletion	$	0	$	0
Depreciation	$	0	$	0
Net Plant - Oil Wells: End of year	$	942,250	$	0

OIL AND GAS EXPLORATION

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

OIL AND GAS DEVELOPMENT - OFFSET DRILLING

The Company's development - offset drilling program consists of drilling new wells within a proven and producing property. Well locations are selected by geologists based on known and historical data from producing oil and gas wells within the property or adjoining properties. All costs of drilling a new offset well are capitalized and amortized (depletion) on a per-unit of barrel equivalent of production.

OIL AND GAS DEVELOPMENT - WORKOVER PROGRAM                 

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

OIL AND GAS RESERVES

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

 INTANGIBLE ASSETS - LEGAL AND CONTRACTUAL - RIGHTS

The Company capitalizes the expenses incurred for acquiring oil and gas leases. The oil and gas leases are contracts between mineral owner, otherwise known as the lessor and the Company or working interest owner, otherwise known as the lessee in which the lessor grants the lessee the rights to explore, drill and produce oil, gas and other minerals for a specified primary term and thereafter as long as oil, gas, or other minerals are being produced in paying quantities. This lease gives the lessee a working interest. The oil and gas lease is granted in exchange for royalty payments to the lessor.

The capitalized costs include but are not limited to: the acquisition cost of the oil and gas leases, legal, travel, consultant studies, reserve reports, financing charges including an overhead allocation on closing. Many of the oil and gas leases have production covenants, which if not complied with during the term of the lease, the Company may forfeit the oil and gas lease. On a yearly basis, the oil and gas leases are reviewed for expiry and or non performance by the Company of any of the covenants in the oil and gas leases.

50

The Schedule of Oil and Gas Rights are as follows:

Schedule of Oil and Gas Rights
Description		May 31, 2013		May 31, 2012
Oil and Gas Leases: Beginning of year	$	0	$	5,583
Acquisitions/Work in Progress	$	643,500	$	399,743
Subtotal	$	643,500	$	405,326
Capitalized as Fixed Assets		(107,250)		0
Forfeitures during the period	$	0	$	(5,583)
Impairments during the period	$	0	$	(399,743)
Oil and Gas Leases: End of year	$	536,250	$	0

OIL AND GAS REVENUE RECOGNITION

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

GENERAL AND ADMINISTRATIVE EXPENSES

General and administrative expenses are reported net of amounts reimbursed by working interest owners of the oil and gas properties operated by the Company.

ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying value of the Company’s financial instruments, consisting of accounts payable and accrued liabilities approximate their fair value due to the short-term maturity of such instruments. Unless otherwise noted, it is management’s opinion that the Company is not exposed to significant interest, currency, or credit risks arising from these financial statements.

INCOME TAX POLICY

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

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

XML

Note 2: Summary of Significant Accounting Practices: Oil and Gas Exploration (Policies)

12 Months Ended

May 31, 2013

Policies

Oil and Gas Exploration

OIL AND GAS EXPLORATION

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

XML

Note 21: Termination of Financial Consulting Services Agreement

12 Months Ended

May 31, 2013

Notes

Note 21: Termination of Financial Consulting Services Agreement

NOTE 21: TERMINATION OF FINANCIAL CONSULTING SERVICES AGREEMENT

On December 18, 2012, the Company issued a Notice of Termination to Vaquero Private Capital, Inc. (“VPC”) for breach of contract by VPC, terminating the September 4, 2012 twelve month Financial Consulting Services Agreement (the “Agreement”) effective as of June 1, 2012, pursuant to which VPC would provide consulting services in connection with the Company’s business affairs and assist the Company in raising capital.  In consideration of the services to be provided by VPC, the Company paid VPC a prepaid fee of $810,000 in the form of 16.2 million common shares of the Company. The Company has placed a Stop Order on the transference of 16.2 million shares pending resolution of the breach of contract by VPC.

XML

Note 1: Organization, Consolidation and Presentation of Financial Statements: Operating Company (Policies)

12 Months Ended

May 31, 2013

Policies

Operating Company

OPERATING COMPANY

On April 18, 2011, the Company filed a Form 8-K with the United States Securities and Exchange Commission (“SEC”) disclosing that the Company is no longer considered a shell and has completed a workover program on one of its wells. Subsequent to filing of the Form 8-K with the SEC, the Company has filed its required four quarterly filings to "cure" itself of  "shell status". The Company operations are extensively involved in oil and gas operations even though the Company has had limited revenue from the oil and gas operations.

XML

Note 10: Stockholders' Equity: Authorized (Details) (USD $)	May 31, 2013	May 31, 2012
Details
Common Stock, shares authorized	5,000,000,000	5,000,000,000
Common Stock, par value	$ 0.0001	$ 0.0001
Preferred Stock, shares authorized	50,000,000	50,000,000
Preferred Stock par value	$ 0.0001	$ 0.0001

XML

Note 2: Summary of Significant Accounting Practices: Earnings Per Share (Policies)

12 Months Ended

May 31, 2013

Policies

Earnings Per Share

EARNINGS PER SHARE

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

XML

Note 9. Net Operating Losses (Details) (USD $)	May 31, 2013
Details
Operating Loss Carryforwards	$ 3,453,900

XML

Note 2: Summary of Significant Accounting Practices: Property and Equipment: Schedule of Plant, Property and Equipment (Tables)

12 Months Ended

May 31, 2013

Tables/Schedules

Schedule of Plant, Property and Equipment

Schedule of  Plant, Property and Equipment
Description		May 31, 2013		May 31, 2012
Plant - Oil Wells: Beginning of year	$	0	$	0
Work in Progress-Intangible	$	694,035	$	0
Work in Progress-Tangible	$	140,965	$	0
Rights (leases)	$	107,250	$	0
Subtotal	$	942,250	$	0
Depletion	$	0	$	0
Depreciation	$	0	$	0
Net Plant - Oil Wells: End of year	$	942,250	$	0

XML

Note 10: Stockholders' Equity: Authorized (Policies)

12 Months Ended

May 31, 2013

Policies

Authorized

AUTHORIZED

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

On July 20, 2010, the Company filed a Certificate of Amendment to the Company’s certificate of incorporation with the Nevada Secretary of State, which increased the Company’s authorization to issue 5,000,000,000 shares of $0.0001 par value common stock, refer to NOTE 15: CORPORATE ACTIONS.         

On November 30, 2011 and January 12, 2013, the Board of Directors of the Company approved the allocation of 4,000,000 of the 50,000,000 authorized Preferred Shares of the Company as Series A Preferred Shares with the following rights:

• Convertible to one hundred (100) common shares of the Company for each one (1) Series A Preferred Share

• Voting rights equal to one hundred (100) votes for each Series A Preferred Share

The consideration for one (1) Series A Preferred Share is set at $0.50.

On April 29, 2013, the Board of Directors of the Company approved  the authorization of seven hundred fifty thousand (750,000) Preferred Shares, designated as Series B Preferred Shares (Series B Shares), with a value of fifty cents ($0.50) per Series B Preferred Share, each with the following rights:

1.       May be converted by the holder into Company common stock. The conversion ratio is such that if the full 750,000 Series B Shares are issued, convert into Company common shares representing 70% of the fully diluted outstanding common shares outstanding after the conversion (which includes all common shares outstanding plus all common shares potentially issuable upon the conversion of all derivative securities not held by the holder).

2.       If the full 750,000 Series B Shares are not issued, the issued Series B Shares divided by 750,000 multiplied by 70% will represent the percentage of the fully diluted outstanding common shares outstanding after the conversion (which includes all common shares outstanding plus all common shares potentially issuable upon the conversion of all derivative securities not held by the holder). For example: 500,000 Series B Shares issued  will result in the holder having 46.67% (500,000/750,000 X 70% = 46.67%) of the fully diluted outstanding common shares.

3.       The holder of Series B Shares may cast the number of votes at a shareholders meeting or by written consent that equals the number of common shares into which the Series B Shares are convertible on the record date for the shareholder action.

4.       In the event the Board of Directors declares a dividend payable to Company common shareholders, the holders of Series B Shares will receive the dividend that would be payable if the Series B Shares were converted into Company common shares prior to the dividend.

5.       In the event of a liquidation of the Company, the holders of Series B Shares will receive a preferential distribution of $0.001 per share, and will share in the distribution as if the Series B Shares had been converted into common shares.

The Series B Preferred Shares would be offered by the discretion of the President to existing shareholders holding more than 10% of the issued and outstanding shares of the Company or to directors of the Company. The subscribers for the Series B Shares will agree to execute a Series B Shares Unanimous Shareholders Agreement which will include right of first refusal to buy or sell the Series B Shares between the Series B Share holders or directors of the Company.

XML

Note 2: Summary of Significant Accounting Practices: Intangible Assets - Legal and Contractual - Rights (Policies)

12 Months Ended

May 31, 2013

Policies

Intangible Assets - Legal and Contractual - Rights

 INTANGIBLE ASSETS - LEGAL AND CONTRACTUAL - RIGHTS

The Company capitalizes the expenses incurred for acquiring oil and gas leases. The oil and gas leases are contracts between mineral owner, otherwise known as the lessor and the Company or working interest owner, otherwise known as the lessee in which the lessor grants the lessee the rights to explore, drill and produce oil, gas and other minerals for a specified primary term and thereafter as long as oil, gas, or other minerals are being produced in paying quantities. This lease gives the lessee a working interest. The oil and gas lease is granted in exchange for royalty payments to the lessor.

The capitalized costs include but are not limited to: the acquisition cost of the oil and gas leases, legal, travel, consultant studies, reserve reports, financing charges including an overhead allocation on closing. Many of the oil and gas leases have production covenants, which if not complied with during the term of the lease, the Company may forfeit the oil and gas lease. On a yearly basis, the oil and gas leases are reviewed for expiry and or non performance by the Company of any of the covenants in the oil and gas leases.

50

The Schedule of Oil and Gas Rights are as follows:

Schedule of Oil and Gas Rights
Description		May 31, 2013		May 31, 2012
Oil and Gas Leases: Beginning of year	$	0	$	5,583
Acquisitions/Work in Progress	$	643,500	$	399,743
Subtotal	$	643,500	$	405,326
Capitalized as Fixed Assets		(107,250)		0
Forfeitures during the period	$	0	$	(5,583)
Impairments during the period	$	0	$	(399,743)
Oil and Gas Leases: End of year	$	536,250	$	0

XML

STATEMENTS OF OPERATIONS (USD $)	12 Months Ended		59 Months Ended
	May 31, 2013	May 31, 2012	Nov. 30, 2012
Income Statements
Revenue - Operations	$ 0	$ 0	$ 4,637
Total Revenue	0	0	4,637
Cost of Goods Sold	0	0	1,653
Gross Profit	0	0	2,984
General and Administrative	1,620,461	557,330	2,893,073
Loss before income taxes	(1,620,461)	(557,330)	(2,890,089)
Other income (expense)	(132,330)	(428,187)	(563,810)
Net (Loss)	$ (1,752,791)	$ (985,517)	$ (3,453,899)
(Loss) per Common Shares	$ (0.00495136)	$ (0.00313916)
Number of Common Shares	354,002,196	313,943,234

XML

Note 7: Related Party Transactions

12 Months Ended

May 31, 2013

Notes

Note 7: Related Party Transactions

NOTE 7: RELATED PARTY TRANSACTIONS

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

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

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

On March 28, 2011, the Company entered into Redemption Agreement with Peter Matousek, the Company’s president and director, which provides in part for the Company to redeem from Mr. Matousek 140 million shares of the Company’s common stock at a price of $87,500 or $0.000625 per share. On May 31, 2011, Mr. Matousek assigned the Note Payable to Comtax Services, Inc.

Prior to June 1, 2011, our President, CEO and Director, Jerry G. Mikolajczyk, performed services for the Company on a consulting contract through a consulting agency, Comtax Services, Inc. (Comtax). From April 1, 2010 to February 28, 2011, Comtax charged a fixed monthly fee of $2,500, a minimum of 10 hours per month for Mr. Mikolajczyk, an aggregate of $27,500 for the 11 months for Mr. Mikolajczyk’s services to the Company. For the period March 1, 2011 to May 31, 2011, Comtax charged the Company an aggregate of $387,275 (1,106.5 hours) for the services of Mr. Mikolajczyk plus $9,656.50 in travel expenses Mr. Mikolajczyk incurred on behalf of the Company. On October 31, 2012, Comtax assigned the trade payables to Mr. Mikolajczyk d/b/a/ Lighthouse Investments, as unsecured Promissory Notes. The Promissory Notes, an aggregate of $398,248.50, are non-interest bearing. Mr. Mikolajczyk was an officer of Comtax until his resignation on May 31, 2011 and terminated his consulting contract with Comtax as of May 31, 2011 prior to accepting his executive and director positions with the Company.

The Company issued an aggregate of 142,500 shares for the period ending May 31, 2012 with an average price of $0.0518 per share to the Executive and Board pursuant to a Management and Financial Service Agreement with Mr. Peter Matousek and a Board Member Compensation Agreement with Mr. Peter Matousek, Mr. Donald Lynch, Mr. Kevin M. Grapes, Mr. Jerry G. Mikolajczyk, and Dr. William D. Spier, refer to NOTE 17: EXECUTIVE AND BOARD COMPENSATION for additional detail.

The Company issued an aggregate of 180,000 shares for the period ending May 31, 2013 with an average price of $0.01846 per share to the Board pursuant to Board Member Compensation Agreements with Mr. Peter Matousek, Mr. Jerry G. Mikolajczyk, and Dr. William D. Spier, refer to NOTE 17: EXECUTIVE AND BOARD COMPENSATION for additional detail.

On May 1, 2013, President, CEO and Director, Jerry G. Mikolajczyk, loaned to the Company $20,000 to be applied against the purchase of Series B Preferred Shares. The loan is unsecured and non-interest bearing.

XML

STATEMENTS OF CASH FLOWS (USD $)	12 Months Ended		65 Months Ended
	May 31, 2013	May 31, 2012	May 31, 2013
Statement of Cash Flows
Net Income (Loss), Including Portion Attributable to Noncontrolling Interest	$ (1,752,791)	$ (985,517)	$ (3,453,899)
Share based - interest	5,430	7,387	23,167
Share based - compensation	11,486	0	11,486
Share based - financial services	950,000	75,000	1,025,000
Non-cash amortization - debt discount	116,950	0	116,950
Non-cash - inventory	0	283	283
Gain on debt extinguishment	(30,000)	0	(30,000)
Corporate Overhead allocated to Fixed Assets	(58,500)	0	(60,822)
Depletion	0	0	835
Other Current Assets, net	(147,726)	(408,017)	(555,743)
Interest Accrued	33,703	689	34,513
Adjustments, Noncash Items, to Reconcile Net Income (Loss) to Cash Provided by (Used in) Operating Activities	881,343	(324,658)	565,669
Property, Plan and Equipment Impairment	0	18,840	18,840
Oil and Gas Leases forfeitures	0	5,583	5,583
Oil and Gas Lease impairment	0	399,743	399,743
Other Asset Impairment	120	0	120
Reclamation Bonds returned	500	0	500
Increase (Decrease) in Operating Assets	620	424,166	424,786
Accounts payable and accrued liabilities	1,046,669	525,861	2,083,337
Increase (Decrease) in Operating Liabilities	1,046,669	525,861	2,083,337
Adjustments to Reconcile Net Income (Loss) to Cash Provided by (Used in) Operating Activities	1,928,631	625,370	3,073,793
Net Cash Provided by (Used in) Operating Activities	175,841	(360,147)	(380,107)
Payments to Acquire Property, Plant, and Equipment	(835,000)	0	(852,637)
Payments to Acquire Intangible Assets	0	(70)	(5,773)
Payments to Acquire Other Productive Assets	0	0	(500)
Net Cash Provided by (Used in) Investing Activities	(835,000)	(70)	(858,909)
Proceeds from issuance of common stock	0	0	160,208
Repayments of Short-term Debt	(10,500)	(35,642)	(127,142)
Proceeds from Short-term Debt	693,059	370,791	1,229,350
Net Cash Provided by (Used in) Financing Activities	682,559	335,149	1,262,416
Net Increase in Cash	23,400	(25,068)	23,400
Cash, Beginning of Period	0	25,069	0
Cash, End of Period	$ 23,400	$ 0	$ 23,400

XML

Note 4: Other Assets: Schedule of Other Assets (Tables)

12 Months Ended

May 31, 2013

Tables/Schedules

Schedule of Other Assets

Schedule of Other Assets
Description - Other Assets		May 31, 2013		May 31, 2012
Rights - Oil and Gas Leases	$	536,250	$	0
Trademarks	$	0	$	20
Incorporation Costs	$	70	$	170
Bonds	$	0	$	500
Total Other Assets	$	536,320	$	690

XML

STATEMENT OF FINANCIAL POSITION (USD $)	May 31, 2013	May 31, 2012
ASSETS
Cash	$ 23,400	$ 0
Other Current Assets	981,000	833,274
Total Current Assets	1,004,400	833,274
Property, Plant and Equipment	942,250	0
Total Property, Plant and Equipment	942,250	0
Rights - Oil and Gas Leases	536,250	0
Trademarks	0	20
Incorporation Costs	70	170
Total Legal and Contractual	536,320	190
Total Intangible Assets	536,320	190
Bonds	0	500
Total Other Long Term Assets	0	500
Total Other Assets	536,320	690
Total Assets	2,482,970	833,964
Accounts payable and accrued expenses	2,083,338	1,036,669
Loan payable	544,746	419,649
Convertibe Promisorry Notes, net of discount	393,818	0
Total Current Liabilities	3,021,901	1,456,318
Notes - 3 Years and Less	0	116,374
Notes - 3 Years and Less Related Party	0	9,436
Total Long Term Liabilities	0	125,810
Total Liabilities	3,021,901	1,582,128
Preferred Stock, shares authorized	50,000,000	50,000,000
Preferred Stock par value	$ 0.0001	$ 0.0001
Preferred Stock, issued and outstanding	0	0
Paid in Capital at Par - Preferred Stock	0	0
Additional Paid in Capital - Preferred Stock	0	0
Common Stock, shares authorized	5,000,000,000	5,000,000,000
Common Stock, par value	$ 0.0001	$ 0.0001
Common Stock, shares issued and outstanding	385,460,240	330,643,500
Paid in Capital at Par - Common Stock	38,546	33,064
Additional Paid in Capital - Common Stock	2,876,422	919,881
Deficit Accumulated During the Development Stage	(3,453,899)	(1,701,109)
Total Stockholders' Equity (Deficit)	(538,932)	(748,164)
Total Liabilities and Stockholders' Equity (Deficit)	$ 2,482,970	$ 833,964

XML

Note 10: Stockholders' Equity: Issued and Outstanding (Policies)

12 Months Ended

May 31, 2013

Policies

Issued and Outstanding

ISSUED AND OUTSTANDING

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

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

The Company issued 1,259,000 common shares on November 30, 2010 for $62,950 for Accounts Receivable assignment.

The Company issued 741,000 common shares on November 30, 2010 for $37,050 cash in a negotiated transaction with an investor to fund the ongoing operations of the Company.

The Company issued 10,000 common shares on February 28, 2011 for $1,100 pursuant to an Oil and Gas Field Operations Services agreement with the Company.

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

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

The Company issued 18 Million shares on April 12, 2012 for $900,000 pursuant to a twenty-four month agreement with Charles Morgan Securities Inc. On September 20, 2012, the Company and CMS mutually agreed to terminate the IBA agreement between the Company and CMS and the 18 Million shares were cancelled.

The Company authorized and approved an aggregate of 136,129 shares for the period ended May 31, 2012 with an average price of $0.0333 per share to the Executive and Board pursuant to Board Member Compensation Agreements with Mr. Peter Matousek, Mr. Donald Lynch, Mr. Jerry G. Mikolajczyk, Mr. Kevin M. Grapes and Dr. William D. Spier, refer to NOTE 17: EXECUTIVE AND BOARD COMPENSATION for additional detail. The Company issued 105,000 of the 136,129 shares to the Board as of May 31, 2012.  The balance,  31,129 shares, cost of $2,106 for the period March 1, 2012 to May 31, 2012, were issued to the Board on June 25, 2012.

The Company issued 20 Million shares on August 31, 2012 for $1,000,000 pursuant to a twenty-four month agreement with Prodigy Asset Management, LLC.

The Company issued 11.7 Million shares on August 31, 2012 for $585,000 pursuant to a Purchase and Sales agreement with Vencedor Energy Partners for the acquisition of 30 oil and gas well locations in Venango County, Pennsylvania.

The Company issued 1,428,571 shares on October 22, 2012 for $5,000 pursuant to a Convertible Promissory Note dated October 19, 2012.

The Company issued 16.2 Million shares on October 26, 2012 for $810,000 pursuant to a twelve month Financial Consulting Services Agreement with Vaquero Private Capital, Inc. effective as of June 1, 2012.

The Company issued 243,103  shares on October 26, 2012 for $6,077 for interest and penalties to a 3rd party lender.

The Company authorized and approved 45,000 shares for the period ended August 31, 2012 with an average price of $0.04033 per share to the Board pursuant to Board Member Compensation Agreements with Mr. Jerry G. Mikolajczyk, Mr. Peter Matousek and Dr. William D. Spier, refer to NOTE 17: EXECUTIVE AND BOARD COMPENSATION for additional detail. The 45,000 shares were issued to the Board on October 26, 2012.

The Company issued 1,162,790 shares on November 12, 2012 for $5,000 pursuant to a Convertible Promissory Note dated October 19, 2012.

The Company authorized and approved 45,000 shares for the period ended November 30, 2012 with an average price of $0.012167 per share to the Board pursuant to Board Member Compensation Agreements with Mr. Jerry G. Mikolajczyk, Mr. Peter Matousek and Dr. William D. Spier, refer to NOTE 17: EXECUTIVE AND BOARD COMPENSATION for additional detail. The 45,000 shares were issued to the Board on December 18, 2012.

The Company issued 54,322  shares on December 18, 2012 for $1,880 for interest and penalties to a 3rd party lender.

The Company issued 423,728 shares on April 17, 2013 for $2,500 pursuant to the conversion of a Convertible Promissory Note dated October 19, 2012.

The Company issued 45,000 shares on April 30, 2013 for the period ended February 28, 2013 with an average price of $0.0109267 per share for Board Member Compensation Agreements with Mr. Peter Matousek, Mr. Jerry G. Mikolajczyk, and Dr. William D. Spier.

The Company issued 4,081,633 shares on April 30, 2013 for $40,000 as incentive to enter into a reserve equity financing agreement dated May 7, 2013.

The Company issued 2,061,855 shares on April 30, 2013 for $10,000 pursuant to the conversion of a Convertible Promissory Note dated October 19, 2012.

The Company issued 2,857,143 shares on May 2, 2013 for $12,000 pursuant to the conversion of a Convertible Promissory Note dated October 26, 2012.

The Company issued 2,222,222 shares on May 8, 2013 for $10,000 pursuant to the conversion of a Convertible Promissory Note dated October 19, 2012.

The Company issued 3,658,537 shares on May 9, 2013 for $15,000  pursuant to the conversion of a Convertible Promissory Note dated October 26, 2012.

The Company issued 1,700,000 shares on May 10, 2013 for $6,800 including $1,300 for interest pursuant to the conversion of a Convertible Promissory Note dated October 26, 2012.

The Company issued 4,811,707 shares on May 13, 2013 for $19,728 including $2,228 for interest pursuant to the conversion of a Convertible Promissory Note dated October 19, 2012.

The Company issued 45,000 shares on May 31, 2013  for the period ended May 31, 2013 with an average price of $0.010333 per share for Board Member Compensation Agreements with Mr. Peter Matousek, Mr. Jerry G. Mikolajczyk, and Dr. William D. Spier.

XML

Note 13: Loans Payable: CPN#8 (Details) (CPN8Member, USD $)	May 31, 2013
CPN8Member
Convertible Promissory Note	$ 75,000
AccruedInterest	$ 510

XML

Note 13: Loans Payable: CPN#4 (Details) (CPN4Member, USD $)	May 31, 2013
CPN4Member
Convertible Promissory Note	$ 231,160
AccruedInterest	$ 16,262

XML

Note 22: Financing Agreements

12 Months Ended

May 31, 2013

Notes

Note 22: Financing Agreements

NOTE 22: FINANCING AGREEMENTS

On May 7, 2013, Xun Energy, Inc., (the “Company”) entered into a reserve equity financing agreement (the “Financing Agreement”) with AGS Capital Group, LLC, (“AGS”). Pursuant to the Financing Agreement, the Company has the right, but not the obligation, to issue $15,000,000 of the Company’s common stock to AGS over the course of 3 years. The Company has full control and discretion over the timing and amount of any shares that they sell to AGS when the Market Price, as defined in the Financing Agreement, is $0.50 or higher per share. For each advance, the Company may issue an amount of stock up to $250,000. Such advance will not exceed more than 200% of the average daily trading volume for the previous 10 trading days. The purchase price of the shares shall be set at ninety percent (90%) of the average of the three (3) lowest closing bid prices of the stock during the ten (10) consecutive weekday trading days (the “Pricing Period”) immediately after the date on which the Company provides an advance notice. The Company, at its option, may select a safety net price for any specified advance which the Company will not sell shares to AGS under that advance when the Purchase Price (Market Price less 10% discount) falls below such safety net price during the Pricing Period. The Company issued 4,081,633 shares of common stock as a commitment fee deposit towards the commitment fee of $40,000 to be deducted from the first advance.

On May 7, 2013, the Company entered into a registration rights agreement with AGS (the “RRA,” and along with the Financing Agreement, the “Agreements”).  According to the RRA, the Company must file a registration statement on Form S-1, registering the shares of common stock which may be issued to AGS pursuant to the Financing Agreement within thirty (30) days of the date of the RRA.

Prior to the date of the Agreements, AGS had no material interaction, other than the negotiation of the Agreements, with the Company.

On May 29, 2013, the Company filed a Registration Statement, Form S-1,  registering  the shares of common stock of the Company as follows:

1.       75,000,000 shares of the Company's common stock (the “Put Shares”) that the Company will put to AGS pursuant to Financing Agreement between AGS and the Company, dated May 7, 2013, and

2.       4,081,633 commitment shares of the Company's common stock the Company paid to AGS as a fee for providing the facility.

In the event of stock splits, stock dividends, or similar transactions involving the common stock, the number of common shares registered shall, unless otherwise expressly provided, automatically be deemed to cover the additional securities to be offered or issued pursuant to Rule 416 promulgated under the Securities Act of 1933, as amended (the “Securities Act”). In the event that adjustment provisions of the Drawdown Agreement require the registrant to issue more shares than are being registered in this registration statement, for reasons other than those stated in Rule 416 of the Securities Act of 1933, as amended, the Company will file a new registration statement to register those additional shares.

XML

Note 16: Commitments

12 Months Ended

May 31, 2013

Notes

Note 16: Commitments

NOTE 16: COMMITMENTS

The Company entered in a Management and Financial Service Agreement with Mr. Wayne St. Cyr as the Executive Vice President, Marketing and Strategic Development on December 21, 2010 for a ten day period ending December 31, 2010 which was extended for a 12 month term to December 31, 2011, whereby the Executive Vice President, Marketing and Strategic Development is paid $10,000 per month. The Company has not renewed the contract with Mr. Ct. Cyr and has retained Mr. St. Cyr on a month to month basis. In addition to his duties as Executive Vice President, Marketing and Strategic Development, Mr. St. Cyr is the Corporate Secretary for the Company. Mr. St Cyr is paid $10,000 per month.

The Company entered into a Management and Financial Service Agreement for Mr. Jerry G. Mikolajczyk for a 12 month period commencing on June 1, 2011 and ending May 31, 2012. Mr. Mikolajczyk is hired through a service company, and will be paid $120,000 in cash payments for the services of Mr. Mikolajczyk. The terms and conditions will be renegotiated upon the successful consummation of a Business Combination through the acquisition of, or merger or consolidation with, a company that has substantial additional capital and or operating revenues; or the Company is able to finance operating expenses with additional debt or through equity financing of not less than $5,000,000. The Company has not renewed the contract with Mr. Mikolajczyk. Mr. Mikolajczyk continues to work for the Company on a month-to-month basis and is paid $10,000 per month.

The Company entered into a Management and Financial Service Agreement with Mr. Peter Matousek for a 12 month period commencing June 1, 2011 and ending May 31, 2012 whereby Mr. Matousek will be paid $90,000 in cash payments. The terms and conditions will be renegotiated upon the successful consummation of a Business Combination through the acquisition of, or merger or consolidation with, a company that has substantial additional capital and or operating revenues; or the Company is able to finance operating expenses with additional debt or through equity financing of not less than $5,000,000. The Company has not renewed the contract with Mr. Matousek. Mr. Matousek continues to work for the Company on a month-to-month basis and is paid $7,500 per month.

The Company entered into a Management and Financial Service Agreement with Dr. William D. Spier for a 7.25-month period commencing October 23 and ending May 31, 2013 whereby Dr. Spier was paid $29,032 in cash payments. The agreement was renewed for an additional 12 months at $7,500 per month ending May 31, 2014. The terms and conditions will be renegotiated upon the successful consummation of a Business Combination through the acquisition of, or merger or consolidation with, a company that has substantial additional capital and or operating revenues; or the Company is able to finance operating expenses with additional debt or through equity financing of not less than $5,000,000.

XML

Note 2: Summary of Significant Accounting Practices: Oil and Gas Reserves (Policies)

12 Months Ended

May 31, 2013

Policies

Oil and Gas Reserves

OIL AND GAS RESERVES

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

XML

Note 13: Loans Payable: CPN#6 (Details) (CPN6Member, USD $)	May 31, 2013
CPN6Member
Convertible Promissory Note	$ 100,000
AccruedInterest	$ 10,345

XML

Note 13: Loans Payable: Asc Disclosure (Policies)

12 Months Ended

May 31, 2013

Policies

Asc Disclosure

ASC DISCLOSURE

In accordance with ASC 470-20 Debt with Conversion and Other Options, the Company recorded total debt discounts of $379,486, and $-0- for the variable conversion feature of the convertible debts incurred during the fiscal year ended May 31, 2013 and year ended May 31, 2012, respectively. The discount will be amortized to debt discount over the term of the debentures using the effective interest method. The Company recorded $116,950 and $-0- of debt discount expense pursuant to the amortization of the convertible promissory note discounts during the fiscal year ended May 31, 2013 and May 31, 2012, respectively. The Company recorded $33,564 and $-0- of accrued interest payable for convertible promissory notes the during the fiscal year ended May 31, 2013 and May 31, 2012, respectively.

In accordance with ASC 815-15, the Company determined that the variable conversion feature and shares to be issued are not embedded derivative features, and these are included in Loan Payable on the balance sheet.

XML

Note 3: Other Current Assets: Schedule of Other Current Assets (Details)	May 31, 2013	May 31, 2012
Details
Other Current Assets, Beginning Balance	833,274	0
Prepaid Legal	(3,274)	8,274
Prepaid Financial Services	1,336,000	900,000
Less: Amortization	(1,185,000)	(75,000)
Other Current Assets, Balance end of period	981,000	833,274

XML

Note 2: Summary of Significant Accounting Practices: Use of Estimates - (Policies)

12 Months Ended

May 31, 2013

Policies

Use of Estimates -

USE OF ESTIMATES -

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual amounts could differ from these estimates, and changes in these estimates are recorded when known. Significant items subject to such estimates and assumptions include, but are not limited to, the following:

• Estimates of proved reserves and related estimates of the present value of future net revenues;

• Carrying value of oil and gas properties;

• Estimates of the fair value of reporting units and related assessment of goodwill for impairment;

• Income taxes;

• Asset retirement obligations;

• Legal contingencies and environmental risks and exposures.

XML

Note 2: Summary of Significant Accounting Practices: Principles of Consolidation (Policies)

12 Months Ended

May 31, 2013

Policies

Principles of Consolidation

PRINCIPLES OF CONSOLIDATION

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

XML

Note 2: Summary of Significant Accounting Practices: International Financial Reporting Standards (ifrs) (Policies)

12 Months Ended

May 31, 2013

Policies

International Financial Reporting Standards (ifrs)

INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS)

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

XML

Note 6. Going Concern

12 Months Ended

May 31, 2013

Notes

Note 6. Going Concern

NOTE 6. GOING CONCERN

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company has net losses for the period from inception (December 20, 2007) to May 31, 2013. This condition raises substantial doubt about the Company’s ability to continue as a going concern. The Company’s continuation as a going concern is dependent on its ability to meet its obligations, to obtain additional financing as may be required and ultimately to attain profitability. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Management is planning to raise additional funds through debt or equity offerings. There is no guarantee that the Company will be successful in these efforts. There is no guarantee that the Company will be successful generating profits from its oil and gas operations. There is no guarantee that the Company will be able to drawdown on the $15 Million Reserve Equity Financing Agreement with AGS Capital Group, LLC.

XML

Note 17: Executive and Board Compensation: 2012 Schedule of Executive Compensation (Tables)

12 Months Ended

May 31, 2013

Tables/Schedules

2012 Schedule of Executive Compensation

2012 Schedule of Executive Compensation
Name and Principal Position	Salary[2]	Bonus	Stock Award	Option Awards	Total Salary
Jerry G. Mikolajczyk, President/CEO/CFO	120000	0	0	0	120000
Wayne St. Cyr, Executive Vice President	120000	0	0	0	120000
Peter Matousek, VP-Investor Relations[1]	90000	0	0	0	90000

XML

Note 23: Subsequent Events

12 Months Ended

May 31, 2013

Notes

Note 23: Subsequent Events

NOTE 23: SUBSEQUENT EVENTS

On June 5, 2013, the Company issued an unsecured Convertible Promissory Note (CPN#12) for $250,000 plus accrued and unpaid interest and other fees with a $25,000 original issue discount (the “OID”). The Note Holder paid $25,000 consideration on closing of CPN#12 (CPN#12A). The Note Holder may pay additional consideration to the Company in such amounts and at such dates as Note Holder may choose in its sole discretion. The Maturity Date is one year from the effective date of each payment (the “Maturity Date”) and is the date upon which the Principal Sum of the Note, as well as any unpaid interest and other fees, shall be due and payable. The Conversion Price is the lesser of $0.006 or 60% of the average of the two lowest trade prices in the 25 trading days previous to the conversion, but no lower than $0.00005 (in the case that conversion shares are not deliverable by DWAC an additional 10% discount will apply; and if the shares are ineligible for deposit into the DTC system and only eligible for Xclearing deposit an additional 5%

67

discount shall apply; in the case of both an additional cumulative 15% discount shall apply). Unless otherwise agreed in writing by both parties, at no time will the Note Holder convert any amount of the Note into common stock that would result in the Note Holder owning more than 4.99% of the common stock outstanding. The Company may repay the CPN at any time on or before 90 days from the effective date, after which the Company may not make further payments on the CPN prior to the Maturity Date without written approval from Note Holder. If the Company repays the CPN on or before 90 days from the effective date, the Interest Rate shall be zero percent (0%). If the Company does not repay the CPN on or before 90 days from the effective date, a one-time Interest charge of 12% shall be applied to the Principal Sum. Any interest payable is in addition to the OID, and that OID (or prorated OID, if applicable) remains payable regardless of time and manner of payment by Borrower. CPN#12 is structured to be advanced to the Company at the discretion of the Note Holder. The Company has drawn down $25,000 of the $225,000 allowable and is obligated to $2,778 of the OID ($25,000/$225,000 x $25,000 (OID)).

On June 25, 2013, the Company incorporated a wholly owned subsidiary, Xun Oil of Pennsylvania Corporation, in the Commonwealth of Pennsylvania, USA.

On July 1, 2013, the Company requested the withdrawal of the Registration Statement, Form S-1 (Registration No. 333-188906)  because the related reserve equity financing agreement with AGS contained provisions that result in the selling stockholder not being irrevocably bound to purchase the shares that the Company elects to sell under the agreement. No securities were sold pursuant to the Registration Statement.

On July 2, 2013, the Company issued an unsecured 9 month 8% Convertible Promissory Note (CPN#13) due on April 8, 2014 for $32,500. The principal and accrued interest is convertible into shares of common stock at the discretion of the note holder.  The Conversion Price shall be the greater of: (i) the Variable Conversion Price and (ii) the Fixed Conversion Price (subject, in each case, to equitable adjustments for stock splits, stock dividends or rights offerings by the Company relating to the Company’s securities or the securities of any subsidiary of the Company, combinations, recapitalization, reclassifications, extraordinary distributions and similar events). The "Variable Conversion Price" shall mean 55% multiplied by the Market Price (representing a discount rate of 45%). "Market Price" means the average of the lowest three (3) Trading Prices for the Common Stock during the ten (10) Trading Day period ending on the latest complete Trading Day prior to the Conversion Date. "Trading Price" means, for any security as of any date, the closing bid price on the Over-the-Counter Bulletin Board or applicable trading market as reported by a reliable reporting service designated by the note holder. The note holder is limited to owning 4.99% of the Company’s issued and outstanding shares. Default interest is 22% per annum should the Company default on the CPN#13. The Company may prepay CPN#13 at any time for the period beginning on the date of the CPN#13 and ending on the date which is ninety (90) days following the date of the CPN#13, the CPN#13 may be prepaid by the Company upon payment to the note holder of an amount equal to the outstanding principal amount of the CPN#13 multiplied by 125% together with accrued and unpaid interest thereon. At any time during the period beginning on the ninety (91) day from the date of the CPN#13 and ending on the date which is one hundred twenty (120) days following the date of CPN#13, the Company may prepay the CPN#13 to the note holder upon payment of an amount equal to the outstanding principal amount of the CPN#13 multiplied by 135% together with accrued and unpaid interest thereon. At any time during the period beginning on the date which is one hundred twenty one (121) days from the date of the CPN#13 and ending on one hundred eighty (180) days following the date of this CPN#13, the Company may prepay the CPN#13 to the note holder upon payment of an amount equal to the outstanding principal amount of the CPN#13 multiplied by 145% together with accrued and unpaid interest thereon. After the expiration of one hundred eighty (180) days following the date of the CPN#13, the Company shall have no right of prepayment. The floor price of $0.00005.

On July, 8, 2013,  the Company was awarded a judgment dismissing, without prejudice, the legal action between Xun Energy, Inc., as Plaintiff and Lea Kennedy, an individual, d/b/a LUXEMBARINGS, as Defendant. The Company filed for a voluntary dismissal without prejudice on the legal action.

On July 11, 2013, the Company entered into a amended and restated reserve equity financing agreement (the “Financing Agreement”) with AGS Capital Group, LLC, (“AGS”). Pursuant to the Financing Agreement, the Company has the right, but not the obligation, to issue $15,000,000 of the Company’s common stock to AGS over the course of 3 years. The Company has full control and discretion over the timing and amount of any shares that they sell to AGS when the Market Price, as defined in the Financing Agreement, is $0.50 or higher per share. For each advance, the Company may issue an amount of stock up to $250,000. Such advance will not exceed more than 200% of the average daily trading volume for the previous 10 trading days. The purchase price of the shares shall be set at ninety percent (90%) of the average of the three (3) lowest closing bid prices of the stock during the ten (10) consecutive weekday trading days (the “Pricing Period”) immediately after the date on which the Company provides an advance notice. The Company, at its option, may select a safety net price for any specified advance which the Company will not sell shares to AGS under that advance when the Purchase Price (Market Price less 10% discount) falls below such safety net price during the Pricing Period. The Company issued 4,081,633 shares of common stock as a commitment fee deposit towards the commitment fee of $40,000 to be deducted from the first advance. Prior to the date of the Agreement, AGS had no material interaction with the Company, other than the negotiation of the Agreement and the negotiation and execution of the original reserve equity financing agreement and registration rights agreement.

On July 11, 2013, the Company also entered into a registration rights agreement with AGS (the “RRA,” and along with the Financing Agreement, the “Agreements”).  According to the RRA, the Company must file a registration statement on Form S-1, registering the

68

shares of common stock which may be issued to AGS pursuant to the Financing Agreement within thirty (30) days of the date of the RRA. Prior to the date of the Agreement, AGS had no material interaction with the Company, other than the negotiation of the Agreement and the negotiation and execution of the original reserve equity financing agreement and registration rights agreement.

On August 1, 2013, the Company issued an unsecured 7 month 8% Convertible Promissory Note (CPN#14) due on March 1, 2014 for $15,000 for value of services rendered. The principal and accrued interest is convertible into shares of common stock at the discretion of the note holder. The note holder may convert all or a portion of the principal amount of CPN#14 into shares of Common Stock at a Conversion Price for each share of Common Stock equal to the higher of (a) $0.0001 subject to adjustment for any future stock splits, reverse stock split, stock dividend, etc., or (b) the Current Market Price multiplied by sixty percent (60%) (the "Conversion Price"). "Current Market Price" means the average of the three lowest closing bid price for the Common Stock as reported by Bloomberg, LP or, if not so reported, as reported on the over-the-counter market, for the five (5) trading days ending on the trading day immediately before the relevant Conversion Date. The Company may prepay CPN#14 without any penalty.

On August 26, 2013, the Company's operator, Vencedor Energy Partners (VEP), completed the drilling, casing and cementing of our first oil well of the 30 well drilling program. Rice oil well number 15 was drilled to the Target Depth of 1,050' on the Rice lease, in Venango County, PA. Samples were taken during the drilling program for analysis. Petroleum odors were emitted at the 720', 745', and 915' levels of the wellbore, indicating oil presence at these depths.  The review of the drill cuttings (samples) from the Rice #15 supported the need for a wire line log to be conducted on the well. VEP's geologist confirmed that the samples taken on August 26, 2013 revealed a well formed zone in the Venango 2 and also potential lenses in the Venango 1 and Red Valley sequence. Oil saturation is estimated at 30-35% for the Venango sequence with a strong show in the Red Valley sequence. The log will provide enough details to determine other key factors in determining whether or not the oil well should be put into production.

On August 29, 2013, the Company issued an unsecured 9 month 8% Convertible Promissory Note (CPN#15) due on June 3, 2014 for $32,500. The principal and accrued interest is convertible into shares of common stock at the discretion of the note holder.  The Conversion Price shall be the greater of: (i) the Variable Conversion Price and (ii) the Fixed Conversion Price (subject, in each case, to equitable adjustments for stock splits, stock dividends or rights offerings by the Company relating to the Company’s securities or the securities of any subsidiary of the Company, combinations, recapitalization, reclassifications, extraordinary distributions and similar events). The "Variable Conversion Price" shall mean 55% multiplied by the Market Price (representing a discount rate of 45%). "Market Price" means the average of the lowest three (3) Trading Prices for the Common Stock during the ten (10) Trading Day period ending on the latest complete Trading Day prior to the Conversion Date. "Trading Price" means, for any security as of any date, the closing bid price on the Over-the-Counter Bulletin Board or applicable trading market as reported by a reliable reporting service designated by the note holder. The note holder is limited to owning 4.99% of the Company’s issued and outstanding shares. Default interest is 22% per annum should the Company default on the CPN#15. The Company may prepay CPN#15 at any time for the period beginning on the date of the CPN#15 and ending on the date which is ninety (90) days following the date of the CPN#15, the CPN#15 may be prepaid by the Company upon payment to the note holder of an amount equal to the outstanding principal amount of the CPN#15 multiplied by 125% together with accrued and unpaid interest thereon. At any time during the period beginning on the ninety (91) day from the date of the CPN#15 and ending on the date which is one hundred twenty (120) days following the date of CPN#15, the Company may prepay the CPN#15 to the note holder upon payment of an amount equal to the outstanding principal amount of the CPN#15 multiplied by 135% together with accrued and unpaid interest thereon. At any time during the period beginning on the date which is one hundred twenty one (121) days from the date of the CPN#15 and ending on one hundred eighty (180) days following the date of this CPN#15, the Company may prepay the CPN#15 to the note holder upon payment of an amount equal to the outstanding principal amount of the CPN#15 multiplied by 145% together with accrued and unpaid interest thereon. After the expiration of one hundred eighty (180) days following the date of the CPN#15, the Company shall have no right of prepayment. The floor price of $0.00005.

On August 31, 2013, the Board of Directors renewed the Board Member Compensation Agreement with Mr. Jerry G. Mikolajczyk as a director of the Company for a term of one (1) year ending August 31, 2014. Mr. Mikolajczyk will receive 5,000 shares per month of the Company’s common stock in consideration for them serving on the Company’s Board of Directors. The common stock will be valued based on the average of the 5 trading day close price prior to each month end. This amount includes all costs related to the engagement Director of the Company except 3^rd party or travel expenses. The terms and conditions will be renegotiated upon the successful consummation of a Business Combination through the acquisition of, or merger or consolidation with, a company that has substantial additional capital and or operating revenues; or the Company is able to finance operating expenses with additional debt or through equity financing of not less than $5 million.

XML

Note 2: Summary of Significant Accounting Practices: Oil and Gas Development - Offset Drilling (Policies)

12 Months Ended

May 31, 2013

Policies

Oil and Gas Development - Offset Drilling

OIL AND GAS DEVELOPMENT - OFFSET DRILLING

The Company's development - offset drilling program consists of drilling new wells within a proven and producing property. Well locations are selected by geologists based on known and historical data from producing oil and gas wells within the property or adjoining properties. All costs of drilling a new offset well are capitalized and amortized (depletion) on a per-unit of barrel equivalent of production.

XML

Note 9. Net Operating Losses

12 Months Ended

May 31, 2013

Notes

Note 9. Net Operating Losses

NOTE 9. NET OPERATING LOSSES

As of May 31, 2013, the Company has a net operating loss carry-forward of approximately $3,453,900, which will expire 20 years from the date the loss was incurred.

XML

Note 13: Loans Payable: CPN#3 (Details) (CPN3Member, USD $)	May 31, 2013
CPN3Member
Convertible Promissory Note	$ 37,500
AccruedInterest	$ 690

XML

Note 5. Advertising

12 Months Ended

May 31, 2013

Notes

Note 5. Advertising

NOTE 5. ADVERTISING

The Company’s policy regarding advertising is to expense advertising when incurred. The Company had notincurred any advertising expense as of May 31, 2013.

XML

Report of Registered Independent Auditors

12 Months Ended

May 31, 2013

Notes

Report of Registered Independent Auditors

REPORT OF REGISTERED INDEPENDENT AUDITORS

To the Board of Directors and Stockholders

of Xun Energy, Inc.

We have audited the accompanying balance sheets of Xun Energy, Inc. and subsidiaries (a Nevada corporation in the development stage) as of May 31, 2013 and 2012, and the related statements of operations, stockholders’ equity, and cash flows for the years ended May 31, 2013 and 2012, and from inception (December 20, 2007) through May 31, 2013. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with standards of the Public Company Accounting Oversight Board (United States of America). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Xun Energy, Inc. and subsidiaries as of May 31, 2013 and 2012, and the results of its operations and its cash flows for the years ended May 31, 2013 and 2012, and from inception (December 20, 2007) through May 31, 2013, in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 6 to the financial statements, the Company is in the development stage, and has not established any source of revenue to cover its operating costs. As such, it has incurred an operating loss since inception. Further, as of May 31, 2013, the cash resources of the Company were insufficient to meet its planned business objectives. These and other factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plan regarding these matters is also described in Note 6 to the financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Respectfully submitted,

Weinberg & Baer LLC

Baltimore, Maryland

September 2, 2013

XML

Note 13: Loans Payable: Short Term Loans (Policies)

12 Months Ended

May 31, 2013

Policies

Short Term Loans

SHORT TERM LOANS

The Company has loans in the amount of $398,249, non-interest bearing and unsecured, with our President, CEO and Director, Jerry G. Mikolajczyk d/b/a Lighthouse Investments.

The Company has a loan in the amount of $20,000, is non-interest bearing and unsecured, with our President, CEO and Director, Jerry G. Mikolajczyk.

Our President, CEO and Director, Jerry G. Mikolajczyk, acquired 100% interest in Womack Holdings, Inc. on July 15, 2011. Womack Holdings, Inc. holds a unsecured Note Payable by the Company. The Note Payable is in the amount of $9,375. The principal, $9,375, will accrue interest at the rate of 0.55% (IRS Short Term AFR – April 2011) per annum, until March 31, 2014 (the “Maturity Date”). Principal plus all accrued interest will be due on the Maturity Date. The Company accrued $112 interest as of May 31, 2013.

On March 28, 2011, the Company entered into Redemption Agreement with Peter Matousek, the Company’s president and director, which provides in part for the Company to redeem from Mr. Matousek a total of 140 million shares of the Company’s common stock at a price of $87,500 or $0.000625 per share. On May 31, 2011, Mr. Matousek assigned the unsecured Note Payable to Comtax Services, Inc. The terms of the stock redemption, agreement is a non-callable 3-year note. The principal will accrue interest at the rate of 0.55% (IRS Short Term AFR – April 2011) per annum, until March 31, 2014 (the “Maturity Date”). Principal plus all accrued interest will be due on the Maturity Date. The Company accrued $1048 interest as of May 31, 2013.

On March 28, 2011, the Company entered into redemption agreements with four shareholders, which in total provided for the redemption of 60 million shares of the Company’s common stock. The purchase price for the 60 million totaled $37,500 or $0.000625 per share. The terms of the stock redemption, agreement is a non-callable 3-year note. The principal will accrue interest at the rate of 0.55% (IRS Short Term AFR – April 2011) per annum, until March 31, 2014 (the “Maturity Date”). Principal plus all accrued interest will be due on the Maturity Date. The Company accrued $337 interest on the three Promissory Notes (face value - $28,125) as of May 31, 2013.

XML

Note 2: Summary of Significant Accounting Practices: General and Administrative Expenses (Policies)

12 Months Ended

May 31, 2013

Policies

General and Administrative Expenses

GENERAL AND ADMINISTRATIVE EXPENSES

General and administrative expenses are reported net of amounts reimbursed by working interest owners of the oil and gas properties operated by the Company.

XML

Note 13: Loans Payable: CPN#11 (Details) (CPN11Member, USD $)	May 31, 2013
CPN11Member
Convertible Promissory Note	$ 37,750
AccruedInterest	$ 17

XML

Note 2: Summary of Significant Accounting Practices: Basis of Accounting (Policies)

12 Months Ended

May 31, 2013

Policies

Basis of Accounting

BASIS OF ACCOUNTING

Our consolidated financial statements include the accounts of all of our wholly-owned subsidiaries and we have eliminated all significant intercompany balances and transactions in consolidation.

XML

Note 13: Loans Payable: CPN#10 (Details) (CPN10Member, USD $)	May 31, 2013
CPN10Member
Convertible Promissory Note	$ 42,500
AccruedInterest	$ 168

XML

Note 17: Executive and Board Compensation: 2012 Schedule of Executive Compensation (Details) (USD $)	12 Months Ended
	May 31, 2013	May 31, 2012
JerryGMikolajczykMember
Salary		120000
Bonus		$ 0
Stock Award		0
Option Awards		0
Total Salary	120,000	120,000
WayneStCyrOfficerMember
Salary		120000
Bonus		0
Stock Award		0
Option Awards		0
Total Salary	120,000	120,000
Peter Matousek
Salary		90000
Bonus		0
Stock Award		0
Option Awards		0
Total Salary	$ 90,000	$ 90,000

XML

Note 4: Other Assets: Schedule of Other Assets (Details)	May 31, 2013	May 31, 2012
Details
Rights - Oil and Gas Leases	536,250	0
Trademarks	0	20
Incorporation Costs	70	170
Bonds	0	500
Total Other Assets	536,320	690

XML

Note 12: Change of Control: Schedule of Ownership and Percentage of Control (Tables)

12 Months Ended

May 31, 2013

Tables/Schedules

Schedule of Ownership and Percentage of Control

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

XML

Note 13: Loans Payable: Asc Disclosure (Details) (USD $)	May 31, 2013	May 31, 2012
Details
Debt discounts	$ 379,486
Debt Discount - non cash capitalization	327,607	0
Non-cash amortization - debt discount	116,950	0
Interest Payable, Current	$ 33,564

XML

Note 12: Change of Control

12 Months Ended

May 31, 2013

Notes

Note 12: Change of Control

NOTE 12: CHANGE OF CONTROL

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

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

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

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

On May 31, 2011, Mr. Jerry G. Mikolajczyk, the Company's President, CEO and Director, acquired 180,000,000 common stock shares of the Company from Mr. Peter Matousek, former President, CEO and Director of the Company. The acquisition by Mr. Mikolajczyk gave him control of 57.6% of the issued and outstanding shares of the Company. Subsequent to May 31, 2011, Mr. Mikolajczyk acquired additional shares directly and indirectly in the Company. As of Mr. Mikolajczyk’s last Form 4 filed with the SEC on August 27, 2012, Mr. Mikolajczyk is beneficial owner of 188,534,421 (48.92%) of the issued and outstanding shares of the Company.

XML

Note 8. Income Taxes

12 Months Ended

May 31, 2013

Notes

Income Tax Policy

INCOME TAX POLICY

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

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

XML

Note 7: Related Party Transactions (Details) (USD $) Share data in Millions, unless otherwise specified	3 Months Ended				12 Months Ended		14 Months Ended		3 Months Ended			12 Months Ended
	May 31, 2013		May 31, 2011		May 31, 2013		May 31, 2011		Feb. 28, 2008 MsMarinaKarpilovskiMember	Feb. 28, 2008 MrMichaelZazkisMember	May 31, 2011 Peter Matousek	May 31, 2012 All Officers and Directors as a Group
Related Party Transaction, Description of Transaction	On May 1, 2013, President, CEO and Director, Jerry G. Mikolajczyk, loaned to the Company $20,000 to be applied against the purchase of Series B Preferred Shares. The loan is unsecured and non-interest bearing.	[1]	On March 28, 2011, the Company entered into Redemption Agreement with Peter Matousek, the Company’s president and director, which provides in part for the Company to redeem from Mr. Matousek 140 million shares of the Company’s common stock at a price of $87,500 or $0.000625 per share. On May 31, 2011, Mr. Matousek assigned the Note Payable to Comtax Services, Inc	[2]	The Company issued an aggregate of 180,000 shares for the period ending May 31, 2013 with an average price of $0.01846 per share to the Board pursuant to Board Member Compensation Agreements with Mr. Peter Matousek, Mr. Jerry G. Mikolajczyk, and Dr. William D. Spier, refer to NOTE 17: EXECUTIVE AND BOARD COMPENSATION for additional detail.	[3]	Prior to June 1, 2011, our President, CEO and Director, Jerry G. Mikolajczyk, performed services for the Company on a consulting contract through a consulting agency, Comtax Services, Inc. (Comtax). From April 1, 2010 to February 28, 2011, Comtax charged a fixed monthly fee of $2,500, a minimum of 10 hours per month for Mr. Mikolajczyk, an aggregate of $27,500 for the 11 months for Mr. Mikolajczyk’s services to the Company. For the period March 1, 2011 to May 31, 2011, Comtax charged the Company an aggregate of $387,275 (1,106.5 hours) for the services of Mr. Mikolajczyk plus $9,656.50 in travel expenses Mr. Mikolajczyk incurred on behalf of the Company. On October 31, 2012, Comtax assigned the trade payables to Mr. Mikolajczyk d/b/a/ Lighthouse Investments, as unsecured Promissory Notes. The Promissory Notes, an aggregate of $398,248.50, are non-interest bearing. Mr. Mikolajczyk was an officer of Comtax until his resignation on May 31, 2011 and terminated his consulting contract with Comtax as of May 31, 2011 prior to accepting his executive and director positions with the Company.	[4]	On December 20, 2007, pursuant to the terms of a subscription agreement, we sold 80,000,000 (post forward split) shares of our common stock to Ms. Marina Karpilovski, the Company's former President and a director, for cash payment to us of $1,000.	On December 20, 2007 pursuant to the terms of a subscription agreement, we sold 320,000,000 (post forward split) shares of our common stock to Mr. Michael Zazkis, the Company's former Secretary, Treasurer and a director, for cash payment to us of $4,000.		The Company issued an aggregate of 142,500 shares for the period ending May 31, 2012 with an average price of $0.0518 per share to the Executive and Board pursuant to a Management and Financial Service Agreement with Mr. Peter Matousek and a Board Member Compensation Agreement with Mr. Peter Matousek, Mr. Donald Lynch, Mr. Kevin M. Grapes, Mr. Jerry G. Mikolajczyk, and Dr. William D. Spier, refer to NOTE 17: EXECUTIVE AND BOARD COMPENSATION for additional detail.	[5]
Related Party Transaction, Amounts of Transaction									$ 1,000	$ 4,000
Stock Repurchased During Period, Shares											140
Stock Repurchased During Period, Value											$ 87,500

[1] Loan to Company from Mikolajczyk to be applied to Series B Preferred Shares

[2] Stock Redemption by Peter Matousek

[3] Board member compensation to board members Matousek, Mikolajczyk and Spier

[4] Transactions prior to June 1, 2011

[5] Executive and Board member compensation to Matousek, Lynch, Grapes, Mikolajczyk and Spier

XML

Note 15: Corporate Action

12 Months Ended

May 31, 2013

Notes

Note 15: Corporate Action

NOTE 16: CORPORATE ACTION

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

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

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

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

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

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

XML

Note 13: Loans Payable

12 Months Ended

May 31, 2013

Notes

Note 13: Loans Payable

NOTE 13: LOANS PAYABLE

SHORT TERM LOANS

The Company has loans in the amount of $398,249, non-interest bearing and unsecured, with our President, CEO and Director, Jerry G. Mikolajczyk d/b/a Lighthouse Investments.

The Company has a loan in the amount of $20,000, is non-interest bearing and unsecured, with our President, CEO and Director, Jerry G. Mikolajczyk.

Our President, CEO and Director, Jerry G. Mikolajczyk, acquired 100% interest in Womack Holdings, Inc. on July 15, 2011. Womack Holdings, Inc. holds a unsecured Note Payable by the Company. The Note Payable is in the amount of $9,375. The principal, $9,375, will accrue interest at the rate of 0.55% (IRS Short Term AFR – April 2011) per annum, until March 31, 2014 (the “Maturity Date”). Principal plus all accrued interest will be due on the Maturity Date. The Company accrued $112 interest as of May 31, 2013.

On March 28, 2011, the Company entered into Redemption Agreement with Peter Matousek, the Company’s president and director, which provides in part for the Company to redeem from Mr. Matousek a total of 140 million shares of the Company’s common stock at a price of $87,500 or $0.000625 per share. On May 31, 2011, Mr. Matousek assigned the unsecured Note Payable to Comtax Services, Inc. The terms of the stock redemption, agreement is a non-callable 3-year note. The principal will accrue interest at the rate of 0.55% (IRS Short Term AFR – April 2011) per annum, until March 31, 2014 (the “Maturity Date”). Principal plus all accrued interest will be due on the Maturity Date. The Company accrued $1048 interest as of May 31, 2013.

On March 28, 2011, the Company entered into redemption agreements with four shareholders, which in total provided for the redemption of 60 million shares of the Company’s common stock. The purchase price for the 60 million totaled $37,500 or $0.000625 per share. The terms of the stock redemption, agreement is a non-callable 3-year note. The principal will accrue interest at the rate of 0.55% (IRS Short Term AFR – April 2011) per annum, until March 31, 2014 (the “Maturity Date”). Principal plus all accrued interest will be due on the Maturity Date. The Company accrued $337 interest on the three Promissory Notes (face value - $28,125) as of May 31, 2013.

CONVERTIBLE PROMISSORY NOTES (CPN)

CPN#3 - The Company issued an unsecured 9 month 8% Convertible Promissory Note (CPN#3) on December 6, 2012 due on September 10, 2013 for $37,500. The principal and accrued interest is convertible into shares of common stock at the discretion of the note holder at a price equal to 55% of the Market Price. "Market Price" means the average of the lowest three (3) Trading Prices for the Common Stock during the ten (10) Trading Day period ending on the latest complete Trading Day prior to the Conversion Date. "Trading Price" means, for any security as of any date, the closing bid price on the Over-the-Counter Bulletin Board or applicable trading market as reported by a reliable reporting service designated by the note holder. The note holder is limited to owning 4.99% of the Company’s issued and outstanding shares. Default interest is 22% per annum should the Company default on the CPN#3. The Company may prepay CPN#3 at any time for the period beginning on the date of the CPN#3 and ending on the date which is ninety (90) days following the date of the CPN#3, the CPN#3 may be prepaid by the Company upon payment to the note holder of an amount equal to the outstanding principal amount of the CPN#3 multiplied by 125% together with accrued and unpaid interest thereon. At any time during the period beginning on the ninety (91) day from the date of the CPN#3 and ending on the date which is one hundred twenty (120) days following the date of CPN#3, the Company may prepay the CPN#3 to the note holder upon payment of an amount equal to the outstanding principal amount of the CPN#3 multiplied by 135% together with accrued and unpaid interest thereon. At any time during the period beginning on the date which is one hundred twenty one (121) days from the date of the CPN#3 and ending on one hundred eighty (180) days following the date of this CPN#3, the Company may prepay the CPN#3 to the note holder upon payment of an amount equal to the outstanding principal amount of the CPN#3 multiplied by 145% together with accrued and unpaid interest thereon. After the expiration of one hundred eighty (180) days following the date of the CPN#3, the Company shall have no right of prepayment. On January 9, 2013, CPN#3 was amended to have a floor price of $0.00005. As of May 31, 2013, the Company accrued interest of $690. 

CPN#4  - The Company has loans in the amount of $231,160, non-interest bearing, with Comtax Services, Inc. The loans from Comtax Services, Inc. have been provided to the Company as working capital.  On January 12, 2013 the Company amended the

Promissory Notes with Comtax Services, Inc. and issued an unsecured one year 10% Convertible Promissory Note (CPN#4) effective October 19, 2012 due on October 18, 2013 for $231,160. The principal and accrued interest is convertible up to 509,520 Series A Preferred Shares at a strike price of $0.50 per Series A Preferred Share with the following rights:

1.       Convertible to one hundred (100) common shares of the Company for each one (1) Series A Preferred Share; and

2.       Voting rights equal to one hundred (100) votes for each Series A Preferred Share.

On April 30, 2013, Comtax Services, Inc. assigned $75,000 of the principal of CPN#4 reducing the Company's obligations for CPN#4 to $156,160. As of May 31, 2013, the Company accrued interest of $16,262.

CPN#5  - The Company has a loans in the amount of $62,000, non-interest bearing, with Comtax Services, Inc. The loans from Comtax Services, Inc. have been provided to the Company as working capital.  On January 12, 2013 the Company amended the Promissory Notes for $62,000 with Comtax Services, Inc. and issued an unsecured one year 10% Convertible Promissory Note (CPN#5) effective December 1, 2012 due on November 30, 2013  for $62,000. The principal and accrued interest is convertible up to 136,400 Series A Preferred Shares at a strike price of $0.50 per Series A Preferred Share with the following rights: 

1.       Convertible to one hundred (100) common shares of the Company for each one (1) Series A Preferred Share; and

2.       Voting rights equal to one hundred (100) votes for each Series A Preferred Share.

As of May 31, 2013, the Company accrued interest of $3,092.

CPN#6 - On February 14, 2012, the Company issued a Promissory Note for $100,000 and is carrying a contingent liability of $30,000, with Altmann Revocable Living Trust, Rlt. (ALRT), totaling $130,000 which became due December 31, 2012 with interest calculated at 8% per annum. The Company amended the $100,000 Promissory Note plus accrued interest of $7,036 to an unsecured one year 8% Convertible Promissory Note (CPN#6) effective January 1, 2013 due on January 1, 2014 for $100,000 with accrued interest of $7,036. The principal and accrued interest is convertible into shares of common stock at the discretion of the note holder at the Conversion Price which shall be the greater of: (i) the Variable Conversion Price and (ii) the Fixed Conversion Price (subject to equitable adjustments for stock splits, stock dividends or rights offerings by the Company relating to the Company's securities or the securities of any subsidiary of the Company, combinations, recapitalization, reclassifications, extraordinary distributions and similar events). The "Variable Conversion Price is 80% of the Market Price. "Market Price" means the average of the Closing Prices (as defined below) for the Common Stock during the five (5) Trading Day period ending one Trading Day prior to the date the Conversion Notice is sent by the Holder to the Company via facsimile (the "Conversion Date"). "Closing Price" means, for any security as of any date, the closing price on the OTCQB (or such other OTC Markets or OTC Tiers, stock markets or stock exchange upon which the Company’s common stock is listed or traded). The note holder is limited to owning 4.99% of the Company’s issued and outstanding shares. The Company may prepay CPN#6 in advance in full or in part at any time and from time to time without premium or penalty. "Fixed Conversion Price" shall mean $0.0001. As of May 31, 2013, the Company accrued interest of $10,345.

CPN#7 - On June 25, 2012, the Company issued an unsecured Promissory Note for $25,000 to a 3rd party due on July 16, 2012 with a default penalty of $2,500, default interest at 20% per annum plus late fees. The Promissory Note was renegotiated with a due date of December 31, 2012. The Company paid the 3rd party $7,958.04 in interest, default fees and late fees for the period June 25, 2012 and December 31, 2012. The Company amended the $25,000 Promissory Note plus default penalty of  $2,500 to an unsecured one year 20% Convertible Promissory Note (CPN#7) effective January 1, 2013 due on August 1, 2013. The principal and accrued interest is convertible into shares of common stock at the discretion of the note holder at the Conversion Price which shall be the greater of: (i) the Variable Conversion Price and (ii) the Fixed Conversion Price (subject to equitable adjustments for stock splits, stock dividends or rights offerings by the Company relating to the Company's securities or the securities of any subsidiary of the Company, combinations, recapitalization, reclassifications, extraordinary distributions and similar events). The "Variable Conversion Price is 80% of the Market Price. "Market Price" means the average of the Closing Prices (as defined below) for the Common Stock during the five (5) Trading Day period ending one Trading Day prior to the date the Conversion Notice is sent by the Holder to the Company via facsimile (the "Conversion Date"). "Closing Price" means, for any security as of any date, the closing price on the OTCQB (or such other OTC Markets or OTC Tiers, stock markets or stock exchange upon which the Company’s common stock is listed or traded). The note holder is limited to owning 4.99% of the Company’s issued and outstanding shares. The Company may prepay CPN#7 in advance in full or in part at any time and from time to time without premium or penalty. "Fixed Conversion Price" shall mean $0.0001. As of May 31, 2013, the Company accrued interest of $2,275.

CPN#8 - On April 30, 2013, the Company issued an amended unsecured one year 8% Convertible Promissory Note (CPN#8) for $75,000 previously issued on October 19, 2012, assigned from CPN#4, due on October 19, 2013. The principal and accrued interest is convertible into shares of common stock at the discretion of the note holder. The Conversion Price (the “Conversion Price”) shall be the greater of: (i) the Variable Conversion Price (as defined herein) and (ii) the Fixed Conversion Price (subject to equitable adjustments for stock splits, stock dividends or rights offerings by the Company relating to the Company’s securities or the securities of any subsidiary of the Company, combinations, recapitalization, reclassifications, extraordinary distributions and similar events).

58

The “Variable Conversion Price” shall mean 50% multiplied by the Market Price (as defined herein) (representing a discount rate of 50%). “Market Price” means the average of the lowest three (3) Closing Prices (as defined below) for the Common Stock during the five (5) Trading Day period ending one Trading Day prior to the date the Conversion Notice is sent by the Holder to the Company via facsimile (the “Conversion Date”).  “Closing Price” means, for any security as of any date, the closing price on the Over-the-Counter Bulletin Board (the “OTCBB”) as reported by a reliable reporting service (“Reporting Service”) mutually acceptable to Company and Holder, or, if the OTCBB is not the principal trading market for such security, the closing price of such security on the principal securities exchange or trading market where such security is listed or traded or, if no closing price of such security is available in any of the foregoing manners, the average of the closing prices of any market makers for such security that are listed in the “pink sheets” by the National Quotation Bureau, Inc.  If the Closing Price cannot be calculated for such security on such date in the manner provided above, the Trading Price shall be the fair market value as mutually determined by the Company and the holders of a majority in interest of the Notes being converted for which the calculation of the Closing Price is required in order to determine the Conversion Price of such Notes.  “Trading Day” shall mean any day on which the Common Stock is traded for any period on the OTCBB, or on the principal securities exchange or other securities market on which the Common Stock is then being traded. The “Fixed Conversion Price” shall mean $0.0001. The Company shall have the right, exercisable on not less than three (3) Trading Days prior written notice to the Holder of the Note to prepay the outstanding Note (principal and accrued interest), in full, of an amount in cash (the “Prepayment Amount”) equal to 150%, multiplied by the sum of: (a) the then outstanding principal amount of CPN#8  plus (b) accrued and unpaid interest on the unpaid principal amount of CPN#8 to the Prepayment Date plus (c) Default Interest, if any, on the amounts referred to in clauses (a) and (b). As of May 31, 2013, the Company accrued interest of $510.

CPN#9 - The Company issued an unsecured 9 month 8% Convertible Promissory Note (CPN#9) on May 2, 2013 due on February 6, 2014 for $32,500. The principal and accrued interest is convertible into shares of common stock at the discretion of the note holder.  The Conversion Price shall be the greater of: (i) the Variable Conversion Price (as defined herein) and (ii) the Fixed Conversion Price (subject, in each case, to equitable adjustments for stock splits, stock dividends or rights offerings by the Company relating to the Company’s securities or the securities of any subsidiary of the Company, combinations, recapitalization, reclassifications, extraordinary distributions and similar events). The "Variable Conversion Price" shall mean 55% multiplied by the Market Price (representing a discount rate of 45%). "Market Price" means the average of the lowest three (3) Trading Prices for the Common Stock during the ten (10) Trading Day period ending on the latest complete Trading Day prior to the Conversion Date. "Trading Price" means, for any security as of any date, the closing bid price on the Over-the-Counter Bulletin Board or applicable trading market as reported by a reliable reporting service designated by the note holder. The note holder is limited to owning 4.99% of the Company’s issued and outstanding shares. Default interest is 22% per annum should the Company default on the CPN#9. The Company may prepay CPN#9 at any time for the period beginning on the date of the CPN#9 and ending on the date which is ninety (90) days following the date of the CPN#9, the CPN#9 may be prepaid by the Company upon payment to the note holder of an amount equal to the outstanding principal amount of the CPN#9 multiplied by 125% together with accrued and unpaid interest thereon. At any time during the period beginning on the ninety (91) day from the date of the CPN#9 and ending on the date which is one hundred twenty (120) days following the date of CPN#9, the Company may prepay the CPN#9 to the note holder upon payment of an amount equal to the outstanding principal amount of the CPN#9 multiplied by 135% together with accrued and unpaid interest thereon. At any time during the period beginning on the date which is one hundred twenty one (121) days from the date of the CPN#9 and ending on one hundred eighty (180) days following the date of this CPN#9, the Company may prepay the CPN#9 to the note holder upon payment of an amount equal to the outstanding principal amount of the CPN#9 multiplied by 145% together with accrued and unpaid interest thereon. After the expiration of one hundred eighty (180) days following the date of the CPN#9, the Company shall have no right of prepayment. The floor price of $0.00005. As of May 31, 2013, the Company accrued interest of $207.

CPN#10 - The Company issued an unsecured 9 month 8% Convertible Promissory Note (CPN#10) on May 13, 2013 due on February 17, 2014 for $42,500. The principal and accrued interest is convertible into shares of common stock at the discretion of the note holder. The Conversion Price shall be the greater of: (i) the Variable Conversion Price and (ii) the Fixed Conversion Price (subject, in each case, to equitable adjustments for stock splits, stock dividends or rights offerings by the Company relating to the Company’s securities or the securities of any subsidiary of the Company, combinations, recapitalization, reclassifications, extraordinary distributions and similar events). The "Variable Conversion Price" shall mean 55% multiplied by the Market Price (representing a discount rate of 45%). "Market Price" means the average of the lowest three (3) Trading Prices for the Common Stock during the ten (10) Trading Day period ending on the latest complete Trading Day prior to the Conversion Date. "Trading Price" means, for any security as of any date, the closing bid price on the Over-the-Counter Bulletin Board or applicable trading market as reported by a reliable reporting service designated by the note holder. The note holder is limited to owning 4.99% of the Company’s issued and outstanding shares. Default interest is 22% per annum should the Company default on the CPN#10. The Company may prepay CPN#10 at any time for the period beginning on the date of the CPN#10 and ending on the date which is ninety (90) days following the date of the CPN#10, the CPN#10 may be prepaid by the Company upon payment to the note holder of an amount equal to the outstanding principal amount of the CPN#10 multiplied by 125% together with accrued and unpaid interest thereon. At any time during the period beginning on the ninety (91) day from the date of the CPN#10 and ending on the date which is one hundred twenty (120) days following the date of CPN#10, the Company may prepay the CPN#10 to the note holder upon payment of an amount equal to the outstanding principal amount of the CPN#10 multiplied by 135% together with accrued and unpaid interest thereon. At any time during the period beginning on the date which is one hundred twenty one (121) days from the date of the CPN#10 and ending on one

59

 hundred eighty (180) days following the date of this CPN#10, the Company may prepay the CPN#10 to the note holder upon payment of an amount equal to the outstanding principal amount of the CPN#10 multiplied by 145% together with accrued and unpaid interest thereon. After the expiration of one hundred eighty (180) days following the date of the CPN#10, the Company shall have no right of prepayment. The floor price of $0.00005. As of May 31, 2013, the Company accrued interest of $168.

CPN#11 - The Company issued an unsecured 9 month 8% Convertible Promissory Note (CPN#11) on May 29, 2013 due on March 1, 2014 for $37,750. The principal and accrued interest is convertible into shares of common stock at the discretion of the note holder. The conversion price (the “Conversion Price”) shall equal the greater of (i) the Variable Conversion Price and (ii) the Fixed Conversion Price (subject to equitable adjustments for stock splits, stock dividends or rights offerings by the Company relating to the Company’s securities or the securities of any subsidiary of the Company, combinations, recapitalization, reclassifications, extraordinary distributions and similar events).  The "Variable Conversion Price" shall mean 57.5% multiplied by the Market Price (as defined herein) (representing a discount rate of 42.5%).  “Market Price” means the average of the lowest three (3) Trading Prices (as defined below) for the Common Stock during the ten (10) Trading Day period ending on the latest complete Trading Day prior to the Conversion Date.  “Trading Price” means, for any security as of any date, the closing bid price on the Over-the-Counter Bulletin Board (the “OTCBB”), OTCQB or applicable trading market as reported by a reliable reporting service (“Reporting Service”) designated by the Holder or, if the OTCBB is not the principal trading market for such security, the closing bid price of such security on the principal securities exchange or trading market where such security is listed or traded or, if no closing bid price of such security is available in any of the foregoing manners, the average of the closing bid prices of any market makers for such security that are listed in the “pink sheets” by the National Quotation Bureau, Inc.  In the case that the Company’s Common Stock is not deliverable by DWAC, an additional 5% discount will apply.  In the case that the Company’s Common Stock is “chilled” for deposit into the DTC system and only eligible for clearing deposit, an additional 7.5% discount shall apply.  If the Trading Price cannot be calculated for such security on such date in the manner provided above, the Trading Price shall be the fair market value as mutually determined by the Company and the holders of a majority in interest of the Notes being converted for which the calculation of the Trading Price is required in order to determine the Conversion Price of such Notes.  “Trading Day” shall mean any day on which the Common Stock is tradable for any period on the OTCBB, OTCQB or on the principal securities exchange or other securities market on which the Common Stock is then being traded.  “Fixed Conversion Price” shall mean $0.00005. The Company may prepay the amounts outstanding hereunder pursuant to the following terms and conditions:  (I) at any time during the period beginning on the Issue Date and ending on the date which is thirty (30) days following the Issue Date, the Company shall have the right, exercisable on not less than three (3) Trading Days prior written notice to the Holder of CPN#11 to prepay the outstanding CPN#11 (principal and accrued interest), in full by making a payment to the Holder of an amount in cash equal to 125%, multiplied by the sum of: (w) the then outstanding principal amount of CPN#11 plus (x) accrued and unpaid interest on the unpaid principal amount of  CPN#11 plus (y) Default Interest; (II) at any time during the period beginning the day which is thirty one (31) days following the Issue Date and ending on the date which is sixty (60) days following the Issue Date, the Company shall have the right, exercisable on not less than three (3) Trading Days prior written notice to the Holder of CPN#11 to prepay the outstanding CPN#11 (principal and accrued interest), in full by making a payment to the Holder of an amount in cash equal to 130%, multiplied by the sum of: (w) the then outstanding principal amount of  CPN#11 plus (x) accrued and unpaid interest on the unpaid principal amount of CPN#11 plus (y) Default Interest; (III) at any time during the period beginning the day which is sixty one (61) days following the Issue Date and ending on the date which is ninety(90) days following the Issue Date, the Company shall have the right, exercisable on not less than three (3) Trading Days prior written notice to the Holder of CPN#11 to prepay the outstanding CPN#11 (principal and accrued interest), in full by making a payment to the Holder of an amount in cash equal to 135%, multiplied by the sum of: (w) the then outstanding principal amount of CPN#11 plus (x) accrued and unpaid interest on the unpaid principal amount of  CPN#11 plus (y) Default Interest; (IV) at any time during the period beginning the day which is ninety one (91) days following the Issue Date and ending on the date which is one hundred twenty (120) days following the Issue Date, the Company shall have the right, exercisable on not less than three (3) Trading Days prior written notice to the Holder of CPN#11 to prepay the outstanding CPN#11 (principal and accrued interest), in full by making a payment to the Holder of an amount in cash equal to 140%, multiplied by the sum of: (w) the then outstanding principal amount of CPN#11 plus (x) accrued and unpaid interest on the unpaid principal amount of CPN#11 plus (y) Default Interest; (V) at any time during the period beginning the day which is one hundred twenty one (121) days following the Issue Date and ending on the date which is one hundred fifty (150) days following the Issue Date, the Company shall have the right, exercisable on not less than three (3) Trading Days prior written notice to the Holder of CPN#11 to prepay the outstanding CPN#11 (principal and accrued interest), in full by making a payment to the Holder of an amount in cash equal to 145%, multiplied by the sum of: (w) the then outstanding principal amount of CPN#11 plus (x) accrued and unpaid interest on the unpaid principal amount of CPN#11 plus (y) Default Interest; (VI) at any time during the period beginning the day which is one hundred fifty one (151) days following the Issue Date and ending on the date which is one hundred eighty (180) days following the Issue Date, the Company shall have the right, exercisable on not less than three (3) Trading Days prior written notice to the Holder of CPN#11 to prepay the outstanding CPN#11 (principal and accrued interest), in full by making a payment to the Holder of an amount in cash equal to 150%, multiplied by the sum of: (w) the then outstanding principal amount of CPN#11 plus (x) accrued and unpaid interest on the unpaid principal amount of CPN#11 plus (y) Default Interest; (VII) after the expiration of one hundred eighty (180) following the date of CPN#11, the Company shall have no right of prepayment. As of May 31, 2013, the Company accrued interest of $17

.

60

ASC DISCLOSURE

In accordance with ASC 470-20 Debt with Conversion and Other Options, the Company recorded total debt discounts of $379,486, and $-0- for the variable conversion feature of the convertible debts incurred during the fiscal year ended May 31, 2013 and year ended May 31, 2012, respectively. The discount will be amortized to debt discount over the term of the debentures using the effective interest method. The Company recorded $116,950 and $-0- of debt discount expense pursuant to the amortization of the convertible promissory note discounts during the fiscal year ended May 31, 2013 and May 31, 2012, respectively. The Company recorded $33,564 and $-0- of accrued interest payable for convertible promissory notes the during the fiscal year ended May 31, 2013 and May 31, 2012, respectively.

In accordance with ASC 815-15, the Company determined that the variable conversion feature and shares to be issued are not embedded derivative features, and these are included in Loan Payable on the balance sheet.

XML

Document and Entity Information (USD $)	12 Months Ended
	May 31, 2013	Sep. 16, 2013	Sep. 13, 2013
Document and Entity Information:
Entity Registrant Name	Xun Energy, Inc.
Document Type	S-1
Document Period End Date	May 31, 2013
Amendment Flag	false
Entity Central Index Key	0001435936
Current Fiscal Year End Date	--05-31
Entity Common Stock, Shares Outstanding			554,723,874
Entity Public Float		$ 292,763
Entity Filer Category	Smaller Reporting Company
Entity Current Reporting Status	No
Entity Voluntary Filers	Yes
Entity Well-known Seasoned Issuer	No
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	FY

XML

Note 15: Corporate Action (Details)	Aug. 03, 2010
Details
Forward Stock Split	510,416,000	[1]

[1] 6,380,200 common shares forward split 80:1

XML

Note 14: Fair Value of Financial Instruments

12 Months Ended

May 31, 2013

Notes

Note 14: Fair Value of Financial Instruments

o

f Financial Instruments|Tag=us-gaap:FairValueOfFinancialInstrumentsPolicy»

NOTE 14: FAIR VALUE OF FINANCIAL INSTRUMENTS

Under FASB ASC 820-10-5, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). The standard outlines a valuation framework and creates a fair value hierarchy in order to increase the consistency and comparability of fair value measurements and the related disclosures. Under GAAP, certain assets and liabilities must be measured at fair value, and FASB ASC 820-10-50 details the disclosures that are required for items measured at fair value.

The Company’s financial assets and liabilities are measured using inputs from the three levels of the fair value hierarchy. The three levels are as follows:

Level 1 - Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.

Level 2 - Inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates, yield curves, etc.), and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs).

Level 3 - Unobservable inputs that reflect our assumptions about the assumptions that market participants would use in pricing the asset or liability.

The Company estimates the fair value of financial instruments using the available market information and valuation methods. Considerable judgment is required in estimating fair value. Accordingly, the estimates of fair value may not be indicative of the amounts the Company could realize in a current market exchange.

As of May 31,2012 and 2011,the carrying value of accounts payable and loans approximated fair value due to the short-term nature and maturity of these instruments.

XML

Note 17: Executive and Board Compensation: 2013 Schedule of Executive Compensation (Tables)

12 Months Ended

May 31, 2013

Tables/Schedules

2013 Schedule of Executive Compensation

2013 Schedule of Executive Compensation
Name and Principal Position	Salary[2]	Bonus	Stock Award	Option Awards	Total Salary
Jerry G. Mikolajczyk, President/CEO/CFO	120000	0	0	0	120000
Wayne St. Cyr, Executive Vice President	120000	0	0	0	120000
Peter Matousek, VP-Investor Relations[1]	90000	0	0	0	90000
Dr. William D. Spier, Treasurer	29032	0	0	0	29032

XML

Note 17: Executive and Board Compensation: ScheduleOfBoardCompensation (Tables)

12 Months Ended

May 31, 2013

Tables/Schedules

ScheduleOfBoardCompensation

	Schedule of Board Compensation
Month		Board Shares Approved, Not Issued	Board Shares Issued	5 Day Average Share Closing Price	Cost Base
June		0	15,000	$0.03800	$570.00
July		0	15,000	$0.04400	$660.00
August		0	15,000	$0.03900	$585.00
Quarter Total		0	45,000	$0.04033	$1,815.00
September		0	15,000	$0.02320	$348.00
October		0	15,000	$0.00770	$115.60
November		0	15,000	$0.00590	$89.10
Quarter Total		0	45,000	$0.01228	$552.70
December		0	15,000	$0.00774	$116.10
January		0	15,000	$0.00982	$147.30
February		0	15,000	$0.01522	$228.30
Quarter Total		0	45,000	$0.01093	$491.70
March		0	15,000	$0.01392	$208.80
April		0	15,000	$0.01028	$154.20
May		0	15,000	$0.00680	$102.00
Quarter Total		0	45,000	$0.01033	$465.00
Year Total		0	180,000	$0.01846	$3,323.50

XML

Note 16: Commitments (Details) (USD $)	May 31, 2013
WayneStCyrOfficerMember
Commitments and Contingencies	$ 10,000	[1]
JerryGMikolajczykMember
Commitments and Contingencies	10,000	[1]
Peter Matousek
Commitments and Contingencies	7,500	[1]
DrWDSpierMember
Commitments and Contingencies	$ 7,500	[1]

[1] Monthly Fee