Pax Clean Energy (PXCE) 10QSB 2008 Q2 Quarterly report (small business)

U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-QSB

Quarterly Report under Section 12(b) or 12(g) of

The Securities Act of 1934

For the Period ended October 31, 2007

Commission File Number 333-145967

PAX BIOFUELS INC.

(Name of small business issuer in its charter)

DELAWARE	98-0543691
(State of incorporation)	(Employer ID Number)

1278 Laurel Road

North Saanich, B.C.

Canada V8L 5K8

(250) 655-3776

(Address and telephone number of principal executive offices)

Check whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x No o.

Check whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes x No o.

There were 10,713,000 shares of Common Stock, $.001 par value, outstanding as of December 10, 2007.

PAX BIOFUELS, INC.

(A Development Stage Company)

PART I.	FINANCIAL INFORMATION	1
ITEM 1.	Financial Information	1
	Balance Sheets	1
	Statement of Operations	2
	Statement of Cash Flows	3
ITEM 2.	Management’s Discussion and Analysis or Plan of Operation	5
ITEM 3.	Controls and Procedures	7
PART II.	OTHER INFORMATION	8
ITEM 1.	Legal Proceedings	8
ITEM 2.	Unregistered Sale of Securities	8
ITEM 3.	Default of Senior Securities	8
ITEM 4.	Submission of Matters to a Vote of Security Holders	8
ITEM 5.	Other Information	8
ITEM 6.	Exhibits and Reports on Form 8-K	9
SIGNATURES		10

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PART I.FINANCIAL INFORMATION

ITEM 1.Financial Information

PAX BIOFUELS INC.

(A Development Stage Company)

Balance Sheets

	October 31, 2007 (Unaudited)			April 30, 2007
ASSETS
Current Assets
Cash	$	8,022		$	23
Total Current Assets	$	8,022		$	23
Equipment, net		1,999			1,662
TOTAL ASSETS	$	10,021		$	1,685
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued liabilities	$	12,854		$	534
Due to related parties		53,177			18,021
Advances payable		3,000			-
Total Current Liabilities	$	69,031		$	18,555
STOCKHOLDERS' EQUITY
Common Stock
Authorized:
100,000,000 common shares authorized, with a $0.001 par value
Issued:
10,713,000 common shares issued and outstanding (October 31, 2007)		10,713			10,000
Subscriptions receivable		(253	)		126
Additional Paid-In capital		45,579			12,504
Total Common Stock	$	56,039		$	22,630
Deficit accumulated during the development stage		(115,049	)		(39,500	)
		(59,010	)		(16,870	)
TOTAL LIABILITIES AND STOCKHOLERS’ EQUITY	$	10,021		$	1,685

Accompanying Notes Are an Integral Part of the Financial Statements

1

Statement of Operations

(Unaudited)

	For the Three months Ended October 31, 2007			For the Six months Ended October 31, 2007			February 5, 2007 (Date of Inception) to October 31, 2007
Expenses
Amortization	$	162		$	162		$	162
Bank service charges		152			233			257
Management fees		18,888			37,025			53,689
Miscellaneous		98			98			98
Office supplies		-			632			860
Professional fees		17,791			36,080			37,060
Communications		-			264			264
Travel		-			828			22,788
Advertising		-			-			16
Foreign translation adjustment		237			227			(145	)
Net Loss	$	(37,328	)	$	(75,549	)	$	(115,049	)
Net Loss Per Share - Basic and Diluted	$	(0.00	)	$	(0.01	)
Weighted Average Shares Outstanding - Basic and Diluted		10,256,681			10,204,459

Accompanying Notes Are an Integral Part of the Financial Statements

2

Statement of Cash Flows

(Unaudited)

	For the Three months Ended October 31, 2007			For the Six months Ended October 31, 2007			February 5, 2007 (Date of Inception) to October 31, 2007
Cash Flows From Operating Activities
Net loss	$	(37,328	)	$	(75,549	)	$	(115,049	)
Add-back: Accumulated amortization		162			162			162
Change in operating assets and liabilities								-
Accounts payable and accrued liabilities		(410	)		12,320			12,854
Advances payable		3,000			3,000			3,000
Due to related parties		26,884			35,156			53,177
Net Cash Used In Operating Activities	$	(7,692	)	$	(24,911	)	$	(45,856	)
Cash Flows From Financing Activities
Proceeds from issuance of common stock		13,927			33,409			56,039
Net Cash Provided By Financing Activities	$	13,927		$	33,409		$	56,039
Cash Flows From Investing Activities
Purchase of equipment		-			(499	)		(1,163	)
Net Cash Used In Investing Activities		-		$	(499	)	$	(1,163	)
Increase (Decrease) in Cash	$	6,235		$	7,999		$	8,022
Cash - Beginning	$	1,787		$	23			-
Cash - Ending	$	8,022		$	8,022		$	8,022
Supplemental cash flow disclosures
Cash Paid For:
Interest		-			-			-
Income tax		-			-			-
		-			-			-

Accompanying Notes Are an Integral Part of the Financial Statements

3

Pax Biofuels Inc.

(A Development Stage Company)

Notes to the Financial Statements

October 31, 2007

(Unaudited)

Note 1. Basis of Presentation

Unaudited Interim Financial Statements

The accompanying unaudited interim financial statements have been prepared in accordance with United States generally accepted accounting principles for interim financial information and with the instructions to Form 10-QSB of Regulation S-B. They may not include all information and footnotes required by United States generally accepted accounting principles for complete financial statements. However, except as disclosed herein, there have been no material changes in the information disclosed in the notes to financial statements for the period ended April 30, 2007 included in the Company’s registration statement on Form SB-2 filed with the Securities and Exchange Commission. The interim unaudited financial statements should be read in conjunction with those financial statements included in the registration statement on Form SB-2. In the opinion of management, all adjustments considered necessary for a fair presentation, consisting solely of normal recurring adjustments, have been made. Operating results for the six months ended October 31, 2007 are not necessarily indicative of the results that may be expected for the year ending April 30, 2008.

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ITEM 2. Management’s Discussion and Analysis or Plan of Operation

The following discussion and analysis of the financial condition and results of our operations should be read in conjunction with our financial statements and the notes thereto. The results shown herein are not necessarily indicative of the results to be expected for any future periods.

You should read the following discussion and analysis in conjunction with the Consolidated Financial Statements filed with our registration statement on Form SB-2 (the “SB-2”), which was filed with the Securities and Exchange Commission (the “SEC”) on September 10, 2007, and the Notes thereto, and the other financial data appearing elsewhere on this quarterly report on Form 10-QSB.  The information set forth in Management’s Discussion and Analysis or Plan of Operations (“MD&A”) contains certain “forward-looking statements,” including, among others (i) expected changes in the Company’s revenues and profitability, (ii) prospective business opportunities and (iii) the Company’s strategy for financing its business. Forward-looking statements are statements other than historical information or statements of current condition. Some forward-looking statements may be identified by use of terms such as “believes,” “anticipates,” “intends” or “expects.” These forward-looking statements relate to the plans, objectives and expectations of the Company for future operations. Although we believe that our expectations with respect to the forward-looking statements are based upon reasonable assumptions within the bounds of our knowledge of our business and operations, in light of the risks and uncertainties inherent in all future projections, the inclusion of forward-looking statements in this report should not be regarded as a representation by the Company or any other person that our objectives or plans will be achieved.

Plan of Operations

Pax Biofuels, Inc. (the “Company”, “Pax Biofuels”, “we” or “us”) was formed on February 5, 2007, in the state of Delaware. We intend to be in the business of producing and distributing biodiesel fuel. We intend to construct and operate a 30,000 metric ton per year biodiesel processing plant to be fed with a rapeseed oil crushing plant which we also intend to construct and operate. Our plant will be located in Serbia, formerly part of Yugoslavia. We do not expect to generate any revenue until we begin operating the proposed biodiesel plant.

We anticipate that our primary source of revenue will be the sale of biodiesel, both in blended and unblended forms with petroleum-based diesel fuel. We intend to produce and sell biodiesel fuel primarily to wholesalers who purchase pure biodiesel (known as B100) or blended fuel such as B20 (which is a blend of 20 percent biodiesel, and petrodiesel). Our sales will be dependent on the volume and price of the biodiesel fuel we sell in the future. The selling prices we realize in the future for our biodiesel will be closely linked to market prices of petroleum-based diesel fuel, the supply and demand for biodiesel, as well as the tax incentives offered by governments of Serbia and other European countries for the production and blending of alternative fuels.

During the next 12 months we anticipate raising sufficient capital through private placements to be able to finance our plan of operations. Once finalized, we anticipate acquiring land for our plant through discussions and negotiations with local municipalities in Serbia. We anticipate this process will take two months and cost approximately $15,000. At that time, we will then contract for land development, plant construction and request proposals from contractors. We anticipate that this process will take two to three months. Our estimated costs are $125,000.

We will also request proposals from equipment suppliers at this point and would anticipate placing firm orders within three months of the private placements.

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Following the establishment of firm timelines for commencing operations at the plant we anticipate being ready to execute contracts with customers and suppliers. Our management anticipates spending considerable time meeting with various farmer cooperatives in order to negotiate contracts for supplies of raw materials as well as re-activating contacts with buyers and commodity brokers to solicit firm orders. We anticipate our costs in this regard will be approximately $75,000.

As of the date of this quarterly report, we have not yet commenced any of these activities and there can be no assurance that we will be able to do so on the proposed schedule or at all.

Liquidity and Capital Resources

We have limited capital resources as, among other things, we are a development stage company with no operating history. We have not generated any revenues. We may not be able to generate sufficient revenues to become profitable. In addition, we may never secure the funding necessary to begin or complete construction of our biodiesel production facilities and our facilities may never commence significant operations. We have no agreements, commitments or understandings to secure this funding. If we do complete the construction of our biodiesel production facility, we may not be able to generate sufficient revenues to become profitable. We anticipate our company will experience substantial growth involving the construction and start-up of operations of the plant and the hiring of employees. This period of growth and the start-up of the plant are likely to be a significant challenge to us.

While we have sufficient funds on hand to commence business operations, our cash reserves are not sufficient to meet our obligations for the next 12-month period. As a result, we will need to seek additional funding in the near future. We currently do not have a specific plan of how we will obtain such funding; however, we anticipate that additional funding will be in the form of equity financing from the sale of our common stock. At this time, we cannot provide investors with any assurance that we will be able to raise sufficient funding from the sale of our common stock to meet our obligations over the next 12 months. We do not have any arrangements in place for any future equity financing.

Results of Operations for the Three-Month and Six-Month Periods Ended July 31, 2007 and October 31, 2007

We did not earn any revenues during the six-month period ended October 31, 2007.

We incurred operating expenses in the amount of $75,549 for the six-month period ended October 31, 2007, as compared to $37,328 for the three-month period ended July 31, 2007. Operating expenses are comprised of general and administrative expenses, management fees, professional fees and travel expenses. General and administrative expenses increased to $1,616 for the three-month period ended October 31, 2007, as compared to $649 for the three-month period ended July 31, 2007. Management fees increased to $37,025 for the three-month period ended October 31, 2007, as compared to $18,888 for the three-month period ended July 31, 2007. Professional fees increased to $36,080 for the three-month period ended October 31, 2007, as compared to $17,791 for the three-month period ending July 31, 2007. Travel expenses increased to $828 for the three-month period ended October 31, 2007, as compared to $0 for the three-month period ended July 31, 2007. The professional and management fees were primarily incurred in connection with the preparation and filing of our SB-2. There are no comparable results for the prior-year or six-month periods as we had not yet commenced operations.

Our net loss for the six-month period ended October 31, 2007 was $75,549, as compared to $37,328 for the three-month period ended July 31, 2007. There are no comparable results for the prior-year or six-month periods as we had not yet commenced operations.

6

At October 31, 2007, we had total assets of $10,021, consisting of cash of $8,022 and equipment of $1,999. At July 31, 2007, we had total assets of $3,949, consisting of cash of $1,787 and equipment of $2,162. The increase in cash is a result of private placements we undertook during the three months ended October 31, 2007, pursuant to which we issued 40,000 common shares for total cash proceeds of $4,000.

At October 31, 2007, we had liabilities of $69,031, consisting of accounts payable and accrued liabilities of $12,854, advances payable of $3,000, and amounts due to related parties of $53,177. At July 31, 2007, we had liabilities of $40,092 consisting of accounts payable and accrued liabilities of $3,373 and amounts due to related parties of $36,719. The increase in our liabilities is a result of an increase in amounts due to Hammond Management Corporation of $16,458, accruals of $2,500 for the review of our October 31, 2007 financial statements, advances from unrelated parties of $3,000 and an increase in our legal costs relating to the filing of our SB-2 in the amount of $6,981.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements.

ITEM 3. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we have conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934, as of the end of the period covered by this report. Based on this evaluation, our principal executive officer and principal financial officer concluded as of the evaluation date that our disclosure controls and procedures were effective such that the material information required to be included in our SEC reports is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms relating to our company, particularly during the period when this report was being prepared.

Additionally, there were no significant changes in our internal controls or in other factors that could significantly affect these controls subsequent to the evaluation date. We have not identified any significant deficiencies or material weaknesses in our internal controls, and therefore there were no corrective actions taken.

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PART II.OTHER INFORMATION

ITEM 1. Legal Proceedings

None.

ITEM 2. Unregistered Sale of Securities

For the three months ended October 31, 2007 we sold 40,000 shares of common stock at a price of $0.10 for total consideration of $4,000.

We relied upon Section 4(2) of the Securities Act of 1933, as amended for the above issuances. We believed that Section 4(2) was available because:

· None of these issuances involved underwriters, underwriting discounts or commissions;

· We placed restrictive legends on all certificates issued;

· No sales were made by general solicitation or advertising; and

· The distributions were made only to investors who were accredited as defined in Regulation D or investors who qualified for solicitation under Regulation S.

ITEM 3. Default of Senior Securities

None.

ITEM 4. Submission of Matters to a Vote of Security Holders

None.

ITEM 5. Other Information

None.

8

ITEM 6. Exhibits and Reports on Form 8-K

EXHIBITS

No.	Description
31.1	Sec. 302 Certification of Principal Executive Officer, Financial Officer & Accounting Officer
31.2	Sec. 906 Certification of Principal Executive Officer, Financial Officer & Accounting Officer

There were no reports filed on Form 8-K during the quarter ended October 31, 2007.

9

SIGNATURES

Pursuant to the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	PAX BIOFUELS INC.
Date: December 14, 2007	By:	/s/ Paul Leslie Hammond
	Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer, President and Director

10

EXHIBIT INDEX

No.	Description
31.1	Sec. 302 Certification of Principal Executive Officer, Financial Officer & Accounting Officer
31.2	Sec. 906 Certification of Principal Executive Officer, Financial Officer & Accounting Officer