Pax Clean Energy (PXCE) 10QSB 2008 Q3 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 EXCHANGE ACT OF 1934

For the Quarterly Period ended January 31, 2008

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, BC

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 þ No o

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

Yes þ No o

There were 10,713,000 shares of Common Stock, $.001 par value, outstanding as of March 14, 2008.

Transitional Small Business Disclosure Format: Yes oNo þ

PAX BIOFUELS, INC.

(A Development Stage Company)

Table of Contents

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

1

PART I.FINANCIAL INFORMATION

ITEM 1.           Financial Information

Index to the Financials

Balance Sheets (Unaudited)	F–1
Statements of Operations (Unaudited)	F–2
Statements of Cash Flows (Unaudited)	F–3
Notes to the Financial Statements	F–4

1

PAX BIOFUELS INC.

(A Development Stage Company)

Balance Sheets

(Unaudited)

	January 31,			April 30,
	2008			2007
	$			$
ASSETS
Current Assets
Cash		5,986			23
		5,986			23
Equipment, net		1,837			1,662
		7,823			1,685
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities
Accounts payable and accrued liabilities		31,476			534
Due to related parties		78,769			18,021
Advances payable		3,000			-
		113,245			18,555
STOCKHOLDERS' DEFICIT
Common Stock
Authorized:
100,000,000 common shares authorized, with a $0.001 par value
Issued and oustanding:
10,713,000 common shares (January 31, 2008 - 10,663,000)		10,713			10,663
Subscriptions receivable		(25,261	)		(53,670	)
Additional paid-in capital		70,587			65,637
Deficit Accumulated During the Development Stage		(161,461	)		(39,500	)
		(105,422	)		(16,870	)
		7,823			1,685

The Accompanying Notes Are an Integral Part of these Financial Statements

F-1

PAX BIOFUELS INC.

(A Development Stage Company)

Statement of Operations

(Unaudited)

							Cumulative from
	For The			For The			February 5,
	Three Months			Nine Months			2007
	Ended			Ended			(inception) to
	January 31,			January 31,			January 31,
	2008			2008			2008
	$			$			$
EXPENSES
Advertising		-			-			16
Amortization		162			324			324
Communications		-			264			264
Foreign exchange (gain) loss		(318	)		(92	)		(464	)
Interest and bank charges		315			556			580
Management fees		19,891			56,916			73,580
Miscellaneous		17			108			108
Office supplies		123			756			984
Printing and reproduction		875			875			875
Professional fees		19,871			55,951			56,931
Travel		5,476			6,303			28,263
NET LOSS		46,412			121,961			161,461
NET LOSS PER SHARE - BASIC AND DILUTED		0.00			0.01			0.02
WEIGHTED AVERAGE SHARES OUTSTANDING - BASIC AND DILUTED		9,419,365			10,204,459			10,126,300

The Accompanying Notes Are an Integral Part of these Financial Statements

F-2

PAX BIOFUELS INC.

(A Development Stage Company)

Statement of Cash Flows

(Unaudited)

				Cumulative from
	For The			February 5,
	Nine Months			2007
	Ended			(inception) to
	January 31,			January 31,
	2008			2008
	$			$
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss		(121,961	)		(161,461	)
Add-back: Amortization		324			324
Change in non-cash working capital items:					-
Accounts payable and accrued liabilities		30,942			31,476
Advances payable		3,000			3,000
Due to related parties		60,748			78,769
Net Cash Used In Operating Activities		(26,947	)		(47,892	)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock		33,409			56,039
Net Cash Provided By Financing Activities		33,409			56,039
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of equipment		(499	)		(2,161	)
Net Cash Used In Investing Activities		(499	)		(2,161	)
NET INCREASE (DECREASE) IN CASH		5,963			5,986
CASH - BEGINNING		23			-
CASH - ENDING		5,986			5,986
Supplemental cash flow information Cash Paid For:
Interest		-			-
Income tax		-			-
		-			-

The Accompanying Notes Are an Integral Part of these Financial Statements

F-3

Pax Biofuels Inc.

(A Development Stage Company)

Notes to the Financial Statements

January 31, 2008

(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 nine months ended January 31, 2008 are not necessarily indicative of the results that may be expected for the year ending April 30, 2008.

F-4

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 “Registration Statement”), 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 in this quarterly report on Form 10-QSB. The information set forth in Management’s Discussion and Analysis or Plan of Operations contains certain “forward-looking statements,” including, among others (i) expected changes in our revenues and profitability, (ii) prospective business opportunities, and (iii) our strategy for financing our 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 our plans, objectives and expectations 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 us 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.

2

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 that we 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 is 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 Nine-Month Periods Ended January 31, 2008

We did not earn any revenues during the nine-month period ended January 31, 2008.

We incurred operating expenses in the amount of $121,961 for the nine-month period ended January 31, 2008 and $46,412 for the three month period ended January 31, 2008. Operating expenses are comprised of general and administrative expenses, management fees, professional fees and travel expenses. General and administrative expenses decreased to $1,174 for the three-month period ended January 31, 2008, as compared to $649 for the three-month period ended October 31, 2007. Management fees increased to $19,891 for the three-month period ended January 31, 2008, as compared to $18,888 for the three-month period ended October 31, 2007. Professional fees increased to $19,871 for the three-month period ended January 31, 2008, as compared to $17,791 for the three-month period ending October 31, 2007. Travel expenses increased to $5,476 for the three-month period ended January 31, 2008, as compared to $0 for the three-month period ended October 31, 2007. The professional and management fees were primarily incurred in connection with the preparation and filing of our Registration Statement. There are no comparable results for the prior year or nine-month periods as we had not yet commenced operations.

Our net loss for the nine-month period ended January 31, 2008 was $121,961, as compared to $75,549 for the six-month period ended October 31, 2007 and $38,755 for the three-month period ended July 31, 2007. There are no comparable results for the prior-year or nine-month periods as we had not yet commenced operations.

3

At January 31, 2008, we had total assets of $7,823, consisting of cash of $5,986 and equipment of $1,837. 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 at October 31, 2007 is a result of private placements we undertook during the three months ended October 31, 2007, pursuant to which we issued 40,000 shares of common stock for total cash proceeds of $4,000. The decrease in cash from November 1, 2007 to January 31, 2008 of $2,036 was a result of reducing accounts payable.

At January 31, 2008 we had liabilities of $113,245 consisting of accounts payable and accrued liabilities of $31,476, advances payable of $3,000 and amounts due to related parties of $78,769. 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 from October 31, 2007 to January 31, 2008 of $44,214 is a result of an increase in amounts due to Hammond Management Corporation of $20,659, increase in amounts due to Scientific Biofuel Solutions Ltd. of $4,933, and an increase in our professional fees payable relating to the filing of our Registration Statement and the review of our quarterly filings in the amount of $16,649.

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.

4

PART II. OTHER INFORMATION

ITEM 1.           Legal Proceedings

None.

ITEM 2.           Unregistered Sale of Securities

No unregistered sales were made during the three-month period ended January 31, 2008.

ITEM 3.           Default of Senior Securities

None.

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

None.

ITEM 5.           Other Information

None.

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
32.1	Sec. 906 Certification of Principal Executive Officer, Financial Officer & Accounting Officer

5

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: March 17, 2008	By:	/s/ Paul Leslie Hammond
		Paul Leslie Hammond Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer, President and Director

6

EXHIBIT INDEX

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

7