AAA ENERGY INC. (AN EXPLORATION STAGE COMPANY) FINANCIAL STATEMENTS APRIL 30, 2008 BALANCE SHEETS STATEMENTS OF OPERATIONS STATEMENTS OF CASH FLOWS NOTES TO THE FINANCIAL STATEMENTS AAA ENERGY INC. (An Exploration Stage Company) BALANCE SHEETS (unaudited) <TABLE> <CAPTION> <S> <C> <C> April 30, July 31, 2008 2007 ASSETS Current Cash $23,252 $114,425 Prepaid expenses (Note 2) 40,131 - $63,383 $114,425 LIABILITIES Current Accounts payable and accrued liabilities $49,684 $46,333 Convertible note (Note 3) 191,095 58,063 Total Liabilities 240,779 104,396 STOCKHOLDERS' (DEFICIT) EQUITY Common Stock Authorized: 100,000,000 common shares $0.001 par value Issued: 34,272,000 common shares (July 31, 2007 - 34,272,000 shares) 34,272 34,272 Additional Paid-in Capital 334,535 334,535 Deficit Accumulated During the Exploration Stage (546,203) (258,778) Total Stockholders' (Deficit) Equity (177,396) 10,029 Total Liabilities and Stockholders' (Deficit) Equity $63,383 $114,425 </TABLE> The accompanying notes are an integral part of these financial statements. AAA ENERGY INC. (An Exploration Stage Company) STATEMENTS OF OPERATIONS (unaudited) <TABLE> <CAPTION> <S> <C> <C> <C> <C> <C> Cumulative From May 26, 2004 Three months ended Nine months ended (Inception) to April 30, April 30, April 30, 2008 2007 2008 2007 2008 EXPENSES Accounting and audit fees $10,108 $3,221 $23,686 $9,094 $60,697 Bank charges 140 31 393 120 967 Consulting fees 18,100 10,500 47,126 31,651 106,509 Filing and transfer agent fees - 275 250 1,749 7,748 Interest expense (Note 3) 53,121 16,104 133,032 18,177 180,402 Investor relation - 10,000 - 10,000 19,350 Legal fees - 10,000 2,500 10,000 19,530 Mineral property costs - - 5,000 - 17,500 Mineral property exploration costs 7,788 - 18,793 - 18,793 Office expenses 8,388 1,471 18,371 3,661 26,632 Travel and promotion 11,778 21,385 38,274 44,233 88,075 NET LOSS $(109,423) $(72,987) $(287,425) $(128,685) $(546,203) BASIC AND DILUTED LOSS PER SHARE $(0.00) $(0.00) $(0.01) $(0.00) WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING - 34,272,000 34,272,000 34,272,000 34,272,000 BASIC AND DILUTED </TABLE> The accompanying notes are an integral part of these financial statements. AAA ENERGY INC. (An Exploration Stage Company) STATEMENTS OF CASH FLOWS (unaudited) <TABLE> <CAPTION> <S><C> <C> <C> <C> Cumulative From May 26, 2004 Nine months ended (Inception) to April 30, April 30, 2008 2007 2008 CASH FLOWS USED IN OPERATING ACTIVITIES Net loss $(287,425) $(128,685) $(546,203) Non cash items: Interest expense 133,032 18,177 180,402 Shares issued for mineral property costs - - 500 Change in non-cash working capital item: Accounts payable and accrued liabilities 3,351 22,142 49,684 Prepaid expenses (40,131) - (40,131) NET CASH USED IN OPERATIONS (191,173) (88,366) (355,748) CASH FLOWS FROM FINANCING ACTIVITIES Capital stock issued for cash - - 94,000 Proceeds from issuance of Convertible note 100,000 150,000 285,000 NET CASH FROM FINANCING ACTIVITIES 100,000 150,000 379,000 INCREASE (DECREASE) IN CASH (91,713) 61,634 23,252 CASH, BEGINNING 114,425 60,910 - CASH, ENDING OF PERIOD $23,252 $122,544 $23,252 Supplemental Cash Flow Disclosures: Cash paid for: Interest - - - Income taxes - - - Non cash item: Shares issued for acquisition of mineral property - - 500 </TABLE> The accompanying notes are an integral part of these financial statements. AAA ENERGY INC. (An Exploration Stage Company) NOTES TO THE FINANCIAL STATEMENTS April 30, 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 ("US GAAP") for interim financial information and with the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with US GAAP have been ondensed or omitted pursuant to such rules and regulations. However, except as disclosed herein, there has been no material change in the information disclosed in the notes to the financial statements for the year ended July 31, 2007 included in the Company's annual report filed with the Securities and Exchange Commission. The interim unaudited financial statements should be read in conjunction with those financial statements included in the Form 10-KSB. 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 April 30, 2008 are not necessarily indicative of the results that may be expected for the year ending July 31, 2008. Note 2 Mineral Properties On February 12, 2008, the Company entered into a Memo of Understanding with Guangdong Da Hua Mine Enterprise Limited ("Da Hua"), in the People's Republic of China, for investing RMB25,000,000 RMB (US$3,576,580) in the two molybdenum properties in which Da Hua has working interests. The Company will acquire 48% shares of a newly-formed company ("Newco") with its RMB25,000,000 RMB investment. The Company can acquire another 27% of Newco's shares for RMB15,000,000 RMB (US$2,173,913). As of April 30, 2008, a formal agreement has not been executed. FORWARD LOOKING STATEMENTS This quarterly report contains forward-looking statements that involve risks and uncertainties. We use words such as anticipate, believe, plan, expect, future, intend and similar expressions to identify such forward-looking statements. You should not place too much reliance on these forward-looking statements. Our actual results are likely to differ materially from those anticipated in these forward-looking statements for many reasons, including the risks faced by us described in this Risk Factors section and elsewhere in this annual report. PLAN OF OPERATION We commenced operations as a company involved in the acquisition and exploration of resource properties. During the fiscal year ended July 31, 2005, we held a 100% interest in five mineral claims comprising the BA property. During the fiscal year ended July 31, 2006, our interest in the BA property lapsed. We are continuing to review potential acquisitions in the resource sector. Currently, we are in the process of completing due diligence investigation of various opportunities in the base and precious metals sectors in China Specifically, during the quarter, the Company undertook various due diligence trips to China to field visit and commence negotiations on various molybdenum prospects located in the Guangdong Province. However, there is no guarantee that we will be able to reach any agreement to acquire such assets. During the quarter, the Company entered into an Earn-in Agreement with Da Hua Mining Enterprise Limited ("Da Hua"). Under the terms of the agreement, the Company can acquire an initial 48% undivided equity interest in the Lechang Shanmudong Mine ("The Property") located in the Guangdong Province by completing within a 2-year period an investment of RMB25 million (approximately US$3.4 million) in a newly-formed Chinese company ("Newco") that will hold the exploration and production licenses underlying the Property. Of the total RMB25 million invested, RMB10 million will be expended towards the approval by the Guangdong Provincial Bureau of Geology and Mineral Resources and transfer of a 30-year exploration and production license underlying the Property into Newco. The balance of RMB15 million will be utilized by Newco towards exploration, production and development expenditures on the Property. Upon the completion of the initial earn-in investment, the Company can acquire an additional 27% interest, for a total of 75% interest, by paying Da Hua an additional RMB15 million (approximately US$2 million) in cash or, at the option of Da Hua, the equivalent value in common shares of the Company. We anticipate spending an additional $35,000 on administrative fees, including fees we will incur in complying with reporting obligations. The Company has previously announced that it was proceeding with the sale of up to $1,000,000 in convertible debentures to finance potential acquisition of natural and mineral resource projects and for working capital requirements, including administrative expenses and costs incurred in connection with our review of potential projects. Although upon the completion of the convertible debenture financing, we will have sufficient funds for any immediate working capital needs, additional funding may still be required in the form of equity financing from the sale of our common stock. However, we do not have any arrangements in place for any future equity financing. RESULTS OF OPERATIONS FOR PERIOD ENDING APRIL 30, 2008 We did not earn any revenues during the nine-month period ending APRIL 30, 2008. We incurred operating expenses in the amount of $109,423 for the nine-month period ending APRIL 30, 2008. Our operating expenses were comprised of travel and promotion costs of $11,778, consulting fees of $18,100, mineral property exploration costs of $7,788, accounting and audit fees of $10,108, office expenses of $8,388, interest expense of $53,121, and bank charges of $140. At April 30, 2008, we had total assets of $63,383 consisting of cash of $23,252, advance of $40,131 and due from related parties of $8,397 and $240,779 in liabilities consisting of accounts payable and accrued liabilities of $49,684 and $191,095 pursuant to a convertible note. ITEM 3: CONTROLS AND PROCEDURES EVALUATION OF DISCLOSURE CONTROLS Our management evaluated the effectiveness of our disclosure controls and procedures as of the end of our fiscal quarter on APRIL 30, 2008. This evaluation was conducted by Siu Man Kwan, our chief executive officer and principal accounting officer. Disclosure controls are controls and other procedures that are designed to ensure that information that we are required to disclose in the reports we file pursuant to the Securities Exchange Act of 1934 is recorded, processed, summarized and reported. LIMITATIONS ON THE EFFECTIVE OF CONTROLS Our management does not expect that our disclosure controls or our internal controls over financial reporting will prevent all error and fraud. A control system, no matter how well conceived and operated, can provide only reasonable, but no absolute, assurance that the objectives of a control system are met. Further, any control system reflects limitations on resources, and the benefits of a control system must be considered relative to its costs. These limitations also include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of a control. A design of a control system is also based upon certain assumptions about potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost- effective control system, misstatements due to error or fraud may occur and may not be detected. CONCLUSIONS Based upon his evaluation of our controls, our chief executive officer and principal accounting officer have concluded that, subject to the limitations noted above, the disclosure controls are effective providing reasonable assurance that material information relating to us is made known to management on a timely basis during the period when our reports are being prepared. There were no changes in our internal controls that occurred during the quarter covered by this report that have materially affected, or are reasonably likely to materially affect our internal controls. PART II- OTHER INFORMATION Item 1. Legal Proceedings We are not a party to any pending legal proceeding. Management is not aware of any threatened litigation, claims or assessments. Item 2. Changes in Securities The Company did not issue any securities during the quarter ended April 30, 2008. Item 3. Defaults Upon Senior Securities None. Item 4. Submission of Matters to a Vote of Security Holders None. Item 5. Other Information None. Item 6. Exhibits and Report on Form 8-K Exhibits 31.1 Certification pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934 31.2 Certification pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934 32.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 32.2 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 Current Reports on Form 8-K We did not file any current reports on Form 8-K during the period. SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. DATED: June 13, 2008 AAA Energy, Inc. /s/ Siu Man Kwan ------------------------------ Siu Man Kwan, President /s/ Siu Man Kwan Siu Man Kwan Principal accounting officer and principal financial officer </TEXT> </DOCUMENT>