UNITED
      STATES SECURITIES AND EXCHANGE COMMISSION


Washington,
      D.C. 20549





Form
      10-KSB





(Mark
      One)


x ANNUAL
      REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


For
      the
      fiscal year ended December 31, 2007





o TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE


SECURITIES
      EXCHANGE ACT OF 1934


For
      the
      transition period from ______________ to________________




Commission
      file number 333-136614





Russoil
      Corporation


(Name
      of
      small business issuer in its charter)





Nevada
            
            20-5022973(State
                or other jurisdiction of
            
            (I.R.S.
                Employer Identification No.)incorporation
                or organization)




Russoil
      Corporation


Vozdvizhenka
      Str. 4/7


103009
      Moscow, Russia


(Address
      of principal executive offices)


(Zip
      Code)





Issuer's
      telephone number Phone: 011-7-4812 6789 12




Securities
      registered under Section 12(b) of the Exchange Act:


Title
      of
      each class


None


Name
      of
      each exchange on which registered


N/A


Securities
      registered under Section 12(g) of the Exchange Act:


common
      stock, par value $0.00001


(Title
      of
      class)




Check
      whether the issuer (1) filed all reports required to be filed by Section 13
      or
      15(d) of the Exchange Act during the past 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
      if
      there is no disclosure of delinquent filers in response to Item 405 of
      Regulation S-B contained in this form, and no disclosure will be contained,
      to
      the best of registrant's knowledge, in definitive proxy or information
      statements incorporated by reference in Part III of this Form 10-KSB or any
      amendment to this Form 10-KSB. o





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





State
      issuer's revenues for its most recent fiscal year. $0.00





The
      aggregate market value of the voting and non-voting common equity held by
      non-affiliates computed by reference to the price at which the common equity
      was
      sold, or the average of the high and low prices of such common equity, as
      reported by NASDAQ, as of April 7, 2008, was $6,568,900.





As
      of
      April 10, 2008, we had outstanding 211,060,000 shares of common stock issued
      and
      outstanding.




Documents
      Incorporated By Reference: None





Transitional
      Small Business Disclosure Format (Check one): Yes o No x





*
      Explanatory Note: Effective January 16, 2008, the Issuer made an acquisition
      of a 51% interest in Gorstovoye LLC as discussed here.











TABLE
      OF
      CONTENTS







PageCautionary
                Statement for Forward Looking Information
            
            1PART
                IItem
                1.
            
            Description
                of Business
            
            2Item
                2.
            
            Description
                of Property
            
            21Item
                3.
            
            Legal
                Proceedings
            
            21Item
                4.
            
            Submission
                of Matters to a Vote of Security Holders
            
            21PART
                IIItem
                5.
            
            Market
                for Common Equity and Related Stockholder Matters
            
            21Item
                6.
            
            Management's
                Discussion and Analysis or Plan of Operation
            
            24Item
                7.
            
            Consolidated
                Financial Statements
            
            27Item
                8.
            
            Changes
                in and Disagreements with Accountants on Accounting and Financial
              Disclosure
            
            28Item
                8A.
            
            Controls
                and Procedures
            
            28Item
                8B.
            
            Other
                Information
            
            28PART
                IIIItem
                9.
            
            Directors,
                Executive Officers, Promoter and Control Persons; Compliance
              with
                Section 16(a) of the Exchange Act
            
            30Item
                10.
            
            Executive
                Compensation
            
            31Item
                11.
            
            Security
                Ownership of Certain Beneficial Owners and Management and Related
                Stockholder Matters
            
            32Item
                12.
            
            Certain
                Relationships and Related Transactions; Director Independence
            
            33Item
                13.
            
            Exhibits
            
            34Item
                14.
            
            Principal
                Accountant Fees and Services
            
            35SIGNATURES
            
            
            
            36





i




**INTRODUCTION**





In
      this
      Form 10-KSB, references to “us”, “we”, the “Company” are to Russoil Corporation,
      its wholly owned subsidiary OJSE Smolenergy and, when the context requires
      OJSE’s majority owned subsidiary, Gorstovoye.




**CAUTIONARY
      NOTICE REGARDING FORWARD LOOKING STATEMENTS**





This
      Annual Report on Form 10-KSB (the “Annual Report”) contains forward-looking
      statements within the meaning of Section 27A of the Securities Act of 1933,
      as
      amended (the “Securities Act”), Section 21E of the Securities Exchange Act of
      1934 (the “Exchange Act”) and the Private Securities Litigation Reform Act of
      1995. Forward-looking statements reflect the current view about future events
      and financial performance based on certain assumptions. They include opinions,
      forecasts, projections, guidance, expectations, beliefs or other statements
      that
      are not statements of historical fact. In some cases, forward-looking statements
      can be identified by words such as “may”, “can”, “should”, “could”, “expects”,
“hopes”, “believes”, “plans”, “anticipates”, “estimates”, “predicts”,
“projects”, “potential”, “intends”, “approximates” or the negative or other
      variation of such terms and other comparable expressions.





Forward-looking
      statements in this Annual Report may include, but not be limited to, statements
      about or based upon estimates of:





·
            future
                financial and operating results, including projections of revenues,
                income, expenditures, cash balances and other financial
                items;





·
            capital
                requirements and the need for additional
                financing;





·
            our
                ability to develop commercially productive oil
                wells;





·
            our
                success in locating commercially producing oil
                wells;





·
            growth,
                expansion and acquisition
                strategies;





·
            current
                and future economic and political
                conditions;





·
            overall
                industry and market performance;





·
            competition;





·
            management’s
                goals and plans for future operations;
                and





·
            other
                assumptions described in this Annual Report underlying or relating
                to any
                forward-looking statements.




1




The
      forward-looking statements in this Annual Report are only predictions. Actual
      results could and likely will differ materially from these forward-looking
      statements for many reasons, including the risks described under “Risk Factors”
and elsewhere in this Annual Report. No guarantee about future results,
      performance or achievements can be made. These forward-looking statements are
      made only as of the date hereof, and we undertake no obligation to update or
      revise the forward-looking statements, whether as a result of new information,
      future events or otherwise. The safe harbors for forward-looking statements
      provided by the Private Securities Litigation Reform Act are unavailable to
      issuers of a “penny stock”. Our shares may be considered a penny stock and, as a
      result, the safe harbors may not be available to us.




**DESCRIPTION
      OF BUSINESS**





**Overview**





Prior
      to
      our acquisition of a 51% interest in Gorstovoye LLC, a Russian Limited
      Liability Company ("Gorstovoye") in January 2008, both Russoil and OJSE
      Smolenergy had only nominal activities and should considered to be “shell”
corporations.





Upon
      closing of the Combination Agreement, as amended, the Company became the sole
      owner of OJSE Smolenergy, a Corporation formed under the laws of the Russian
      Federation (“Smolenergy”) on October 28, 2006, to invest in Russian oil and gas
      energy fields.





On
      January 16, 2008, the Company consummated its acquisition of a
      51% interest in Gorstovoye, formed in April 23, 2002 to invest in oil and
      petroleum assets. Gorstovoye has obtained licenses from the Federal Agency
      of
      the Ministry of Natural Resources of the Russian Federation (the “Ministry”) for
      the Gorstovoye oil field until:





·
            March
                18, 2014, conduct mineral exploration and production including oil
                and
                gas;


·
            December
                31, 2008, conduct oil and gas well operations, with an expected extension
                until March 18, 2004;


·
            December
                31, 2008, conduct mining
                operations.





The
      Gorstovoye oil field is situated in the Tomsk Region of the Western Siberian Lowland
      and, geographically, poses distinct difficulties as it is accessible to normal
      vehicular traffic from late December through late April. Other times it is
      accessible only via all terrain vehicles or helicopter. Smolenergy and
      Gorstovoye have sustained significant losses and have a significant accumulated
      deficit.




2




In
      April
      of 2007, the Ministry issued warnings to Gorstovoye that it was acting
      inconsistently with its Gorstovoye License Agreement as it had not submitted
      to
      the Ministry plans for (a) operation and maintenance of (as well as estimates
      of
      total oil reserves) and (b) remediation of occasional oil spills**. On**February 15, 2008, a Russian Federation surveyor visited
      the Gorstovoye
      oil field and advised that we were in compliance with three of the four element
      requirements of our license and the last element, the actual extraction of
      oil,
      we believe will be met with the planned drilling of several wells. We are
      expecting written verification of his statements.




**Gorst
      Oil Field**





Gorstovoye
      obtained the right to use the subsurface resource area that includes the Gorst
      oil field in August 2002 by the transfer of the license initially issued to
      the
      local government to Gorstovoye. After the license was transferred to Gorstovoye,
      it commenced work on developing design and estimation documents and obtaining
      permits to fulfill the conditions of the license agreement.





Gorstovoye
      was part of the Russian Federation’s Program for Geological Study of Subsurface
      Resources in this license area during 2003 through 2005.





Seismic
      exploration was conducted and completed in the fourth quarter of 2003 to learn
      the density of seismic lines in the northern portion of the field and revealed
      the structure of the northern portion of the Gorst field, and, in part, the
      southern portion, in significantly greater detail. This work was needed to
      refine the geological model of the structure of the northern part of the field.
      During 2003 and 2004, Gorstovoye began setting up oil production for the
      production testing stage in the priority (northern) part of the field and
      organized the work to comply with regulatory requirements in effect governing
      the development of oil fields in the Russian Federation. This work was a
      necessary prerequisite to move on to the design and implementation of production
      testing and the drilling of development wells.





Two
      development wells were drilled. One of them was abandoned on the basis of
      geophysicists’ findings that it was water-saturated. Because of this finding,
      other potential oil beds were not tested, despite some positive readings.
      Initially, the drilling results from this well discredited the significance
      of
      the Gorst oil field. Geologists could not understand why wells were water
      bearing at a level that they expected to be mineral viable. In 2005–2006,
      energy-information processing of satellite imaging of the field’s territory,
      nuclear-geochemical study of core material from another well, seismic lines
      studies and determination of the content of metal-containing minerals showed
      that the beds under another well were oil-saturated.





As
      a
      result of this studying of seismic lines and energy-information filtering
      through satellite imaging, the Company believes it will be able to efficiently
      locate an appraisal well to penetrate productive oil-bearing beds, and to
      construct a cluster for drilling productive development wells in the area in
      the
      future.





Due
      to
      the conclusions that were initially drawn about the negative results from
      drilling the first well, the second well was drilled in the direction of a
      third
      well. At present, this second well appears to be productive. Due to the lack
      of
      funding, the third well has not been completely tested.




3




On
      the
      whole, the Company believes the studies done by Gorstovoye have resulted in
      a
      clearer picture of the geological model of the Gorst field and made it possible,
      based on this model, to plan an efficient program of geological exploration
      and
      production testing that can prepare the field for development in approximately
      three years provided adequate financing is obtained, of which no assurance
      can
      be given.





In
      2003,
      Gorstovoye completed a “Design for Production Testing of the Gorst Field" and it
      was approved by the Ministry. A plan for the construction of Field Facilities
      for the Gorst Oil Field was prepared for the initial, northern part of the
      field
      in the production testing stage, which, in turn, includes the following
      designs:





·
            Construction
                of field facilities for part of the Northern oil
                field;


·
            Construction
                of field facilities for the oil treatment and pumping area with a
                gas
                recovery unit, a water treatment and separation
                facility(“TWSF”);


·
            Oil
                pipeline from the Gorst field to the TWSF;


·
            Construction
                of development wells; and


·
            Drilling
                of wells for domestic and drinking water supply in the territory
                of the
                Gorst Oil Field.





The
      designs for production testing and construction of field facilities have
      received affirmative findings from Russian Federation industrial safety reviews.
      The designs have been endorsed by the Russian Federation’s Regional Authority
      and the industrial safety findings have been appropriately
      registered.





**Site
      Preparation**





A
      foundation for the implementation of the Gorstovoye development plan by the
      construction of surface facilities for the Gorst field has been completed and
      includes:





·
            Oil
                treatment and pumping area with gas recovery
                unit;


·
            Custody
                transfer meter (“CTM”);


·
            Oil
                pipeline from the Gorst Oil Field’s TWSF to the Gorst CTM;


·
            Power
                supply;


·
            Water
                intake for domestic and drinking water supply, with water and power
                lines;


·
            Cluster
                of development wells and process service lines;
                and


·
            Office
                and service complex.




During
      2003 through 2005 the following site specific construction work was performed:





“ CLUSTER”
      One:


·
            a
                site was filled, and the cluster base was constructed;


·
            a
                well metering station with a control unit was
                installed;






4




·
            a
                package transformer substation was
                installed;


·
            an
                oil pipeline was constructed to the
                TWSF;


·
            an
                oil pipeline was constructed from the third well;


·
            planking
                was laid along the right-of-way road from the third well to Cluster
                One;


·
            planking
                was laid along the right-of-way road from Cluster One to the TWSF;
                and


·
            another
                well was drilled.





GORST –
      NORTH OIL PIPELINE:


·
            an
                oil pipeline from the Gorst TWSF to the CTW at the northern field
                was
                constructed.





OIL
      TREATMENT AND PUMPING AREA WITH GAS RECOVERY UNIT –TREATMENT
      AND WATER SEPARATION FACILITY (TWSF) :


·
            the
                area for the TWSF, with the pipeline route and the flare area (for
                the
                burning off of excess combustibles), was
                filled;


·
            two
                stock tanks were built, pressure-tested, treated for protection against
                corrosion and calibrated;


·
            a
                separation unit was installed;


·
            a
                pumphouse with two pumps was constructed for internal and external
                oil
                transfer pumping; and


·
            an
                emergency power generating unit, tank and storage facilities were
                prepared.





The
      Company believes that all of the necessary components are in place to begin
      oil
      production in a production testing mode, provided adequate financing is
      obtained. To finance the foregoing, it is estimated that the Company will
      initially require an estimated US$5,000,000 in investment capital with an
      approximate total of US$100,000,000 necessary to bring all projects to
      completion. There can be no assurance that such financing will be obtained
      on
      terms commercially reasonable to the Company, or at all.





**Limitations
      of Local Geography**





The
      Gorst
      oil field’s ground surface is very boggy, with individual dry ridges. Travel to
      the oil field by motor vehicle is possible for only four months out of the
      year:
      from the end of December until the end of April, after the streams and wetlands
      have frozen, on temporary winter roads. For the other eight months of the year,
      the only way to get to the Gorst oil field is by all-terrain vehicle or
      helicopter. There are no roads in the oil field itself.





As
      a
      consequence, there are two ways of delivering oil for sale. The first is to
      hold
      the oil in tanks at the TWSF during the warm portion of the year and use trucks
      to transport in the wintertime. This option can and should be fully used until
      the TWSF and the oil pipeline to the CTM are put into operation. When the
      pipeline is fully operational, truck transportation can be used to meet the
      Company’s own needs and the needs of small consumers that cannot access pipeline
      transportation.




5




Obviously,
      the second option is more efficient: transportation of oil through a pipeline.
      This option can be put into operation when all work will be completed on
      construction of the TWSF and CTM.





Initially,
      our plan is to produce dry oil. The oil is treated to market standards in two
      stages. The first stage of treatment is to be done in units at the Gorstovoye
      TWSF. Wells produce a mixture of gas and oil that is pumped through a pipeline
      to the Gorstovoye TWSF and is fed into the first- and second-stage gas-oil
      separators, separating gas from oil. Separated gas goes to the gas dryer (the
      “PGD”), then through gas lines to meet the Company’s own needs: boiler room,
      gas-piston power plant and two furnaces (to be constructed) for heating oil;
      the
      remainder of the gas is flared (burned off). From the second-stage separator,
      the oil is to go to holding tanks to accumulate and is periodically pumped
      through the pipeline to Gorst’s CTW, then it is to go through pipelines to the
      planned treatment and water separation facility to Severnoye, and then it is
      to
      be transferred by pipeline systems (i.e., to the oil treatment facility (the
      “OTF”)) at the Sovetskoye Central Tank Farm.





The
      second and final stage of oil treatment takes place at the OTF, and the oil
      is
      delivered through pipeline systems to the Aleksandrovskoye delivery and
      acceptance point (the “DAP”).





From
      there, the oil is transported and delivered to Russian refineries or for export.





**Necessary
      Future Development**





Two
      principle issues need to be addressed as prerequisites to meeting the basic
      objectives set by the plan of operation:





1. Conversion .
      Convert
      the greater part of the oil reserves from the current oil category to a higher
      category.





2. Production
      Testing .
      Intensive production testing for the purpose of determining the basic parameters
      needed to draw up design documents for development of the field. Also, field
      facilities and service lines need to be constructed.





In
      order
      to raise the category of oil and gas reserves in the Gorst field it is necessary
      to drill three vertical appraisal wells penetrating Paleozoic deposits to a
      depth of at least 100 meters. These wells should be located in the northern,
      central and southern parts of the field. The average depth of these wells is
      planned to be 2,600–2,700 meters. The highest priority is planned to be a well
      with a depth of 2,600 meters, to be drilled in the northern part of the field
      at
      the intersection of two seismic lines. The category of the reserves could be
      increased by further testing and also by recalculating the reserves for the
      whole field on the basis of new drilling data from wells and from previous
      and
      newly drilled wells.




6





The
      Company must conduct intensive, efficient production testing, which will not
      only make it possible to prepare the field for development, but to provide
      for
      production of oil in volumes sufficient for subsequent development of the field
      with the Company’s own revenues. At least three development wells need to be
      drilled in an initial cluster and gradually put into production testing, with
      at
      least two development wells that need to be drilled and put into production
      testing. In summary, it is necessary to construct and put into production
      testing one appraisal well and five development wells. It is also necessary
      to
      produce and test an existing well in 2008.





Upon
      receipt of $5,000,000 in financing, of which no assurance can be given, we
      expect to be able to have at least eight oil-producing wells in the
      field.





During
      the winter of 2006 - 2007 all of the necessary materials were brought in for
      construction of three wells in the first cluster, and also for appraisals.
      The
      development wells are being prepared for drilling. A similar operation to bring
      in materials for drilling three additional wells was carried out in the winter
      of 2007 - 2008.





**Mineral
      Trading**





During
      the second quarter of fiscal 2007, Smolenergy, for the first time, engaged
      in
      the bartering of petroleum products. No cash was received from customers nor
      paid to suppliers and a loss was sustained. The Company is unsure if it will
      engage in such activities in the future. Under Generally Accepted Accounting
      Principles in the United States (“US GAAP”), any such transactions are not
      recognizable as revenue.





**Competition**





We
      compete in a highly competitive industry. We encounter competition in all of
      our
      operations, including property acquisition, and equipment and labor required
      to
      operate and to develop our properties. Russoil competes with major oil
      companies, independent oil companies, and individual producers and operators.
      Many competitors have financial and other resources substantially greater than
      ours.





**Regulations
      Governing Russian Joint Stock Companies**





Russian
      joint stock companies are corporate entities with limited liability similar
      to
      corporations formed under United States laws. Shareholders of Russian joint
      stock companies generally are not liable for debts and obligations of the
      company. However, shareholders of a bankrupt joint stock company may be held
      liable for debts and obligations of the bankrupt company if they have exercised
      their authority to undertake an action knowing that bankruptcy would be the
      result of their actions. In closed joint stock companies, i.e. companies with
      a
      limited number of shareholders, such as Smolenergy, any transfer of shares
      by a
      shareholder to a third party is subject to the pre-emptive right of the other
      shareholders to acquire such shares at the price offered to a third
      party.




7




Under
      Russian law, a simple majority of voting shares is sufficient to control
      adoption of most resolutions. Resolutions concerning amendment of the company
      charter, reorganizations (including mergers), liquidation, any increase in
      authorized shares, or certain "large" transactions require the approval of
      the
      shareholders holding 75% of the outstanding shares.





A
      Russian
      joint stock company has no obligation to pay dividends to the holders of common
      shares. Any dividends paid to shareholders must be recommended by the board
      of
      directors and then approved by a majority vote at the general meeting of
      shareholders. Dividends may be paid every quarter of a year.





**Environmental
      Regulation**





The
      government of the Russian Federation, Ministry of Natural Resources, and other
      agencies establish special rules, restrictions and standards for enterprises
      conducting activities affecting the environment. The general principle of
      Russian environmental law is that any environmental damage must be fully
      compensated. Under certain circumstances, top officers of the entity causing
      substantial environmental damage may be subject to criminal
      liability.





The
      law
      of the Russian Federation on subsoil requires that all users of subsoil ensure
      safety of works related to the use of subsoil and comply with existing rules
      and
      standards of environment protection. Failure to comply with such rules and
      standards may result in termination or withdrawal of the Smolenergy
      license.





**Taxation**





As
      a
      Russian resident entity i.e., Smolenergy/Gorstovoye is subject to all applicable
      Russian taxes, many of which currently impose a significant burden on profits.
      The most significant Russian taxes and duties are, including, but not limited
      to:





·
            20%
                value added tax (established pursuant to Chapter 21 of the Tax Code
                of
                Russia), applicable only to domestic sale of goods in Russia and
                the
                Ukraine. No value added tax is payable on goods exported to the West
                from
                Russia;





·
            20
                to 24% profit tax which includes 6% federal profit tax, 12 to 16%
                regional
                profit tax and 2% local tax (in accordance with Chapter 25 of the
                Tax Code
                of Russia). Russian law allows the carry forward and use of losses,
                subject to limitations;





·
            Income
                tax on dividends payable to Smolenergy shareholders. The tax must
                be
                withheld by Smolenergy from the amount distributed to each shareholder.
                The current rate of tax on dividends payable to corporate foreign
                shareholders is 15%. However, dividends payable to Russoil, a United
                States resident company, are subject to regulations contained in
                the
                United States - Russia tax treaty which limits the tax on dividends
                payable to Russoil to 5% (as long as Russoil holds more than a 10%
                interest in Smolenergy);




8




·
            Tax
                on production of minerals applicable to all subsoil users producing
                minerals, including crude oil. After expiration of the temporary
                tax rate
                period, the tax will apply at the rate of 16.5% of the value of the
                oil
                produced by the taxpayer;





·
            Unified
                social tax (established pursuant to Chapter 24 of the Tax Code of
                Russia)
                at the rate of up to 35.6% of the
                payroll;





·
            Transport
                tax (established pursuant to Chapter 28 of the Tax Code of Russia)
                payable
                by owners of motor vehicles at the rate established by regional
                authorities based on the type and capacity of the vehicle. The maximum
                amount of tax payable by an owner of a motor car per year is RUR
                150 (ca.
                USD 4.78) per horsepower;





·
            Oil
                export duty, currently in the amount of US$ 25.9 per ton of crude
                oil
                being exported;





·
            Regional
                property tax payable annually at 2% of the value of assets of the
                entity.





New
      tax
      laws including those setting forth rules for application of the value-added
      tax,
      profit tax, and tax on the production of minerals were enacted within the past
      years. The cost of legal and accounting advice to keep up with changes in the
      Russian tax laws may be significant and penalties for violations, even
      inadvertent ones, may be steep. If revisions impose confiscatory taxes, our
      profitability will be adversely affected.





**Employees**





We
      currently have 17 full time employees, including three executive officers,
      three
      administrative and clerical persons and 11 oil field workers. We also utilize
      the services of independent contractors on an as-needed basis.




**RISK
      FACTORS**





**Risk
      Factors Relating to Smolenergy’s Continued Ownership of an Interest in
      Gorstovoye.**





As
      a
      Foreign (to Russia) Corporation we have encountered difficulties in
      communicating with our Siberian based operations. Translation delays and errors
      can result in misunderstandings that could trigger unusual events and reporting
      inaccuracies. This is exacerbated by having personnel and land use license
      rights located in Siberia. We have encountered delays in sending and receiving
      information. The Company believes that the communication difficulties are waning
      but have not yet been solved.




9




**Potential
      Voidability of the Transaction and Potential Violations of Russian
      Law.**





·
            Russian
                law requires that a Russian LLC may not have another legal entity
                as its
                sole holder. This was breached when 100% of the interests in Gorstovoye
                were sold to Ariust. As a consequence, the transfer to Ariust may
                be
                voided by a Russian court within 3 years. In this instance, until
                January
                17, 2009. Ariust may also be obliged to return all 100% of its interests
                in Gorstovoye to Tomskpodvodtruboprovodstvoy (“TPTPS”) and TPTPS would
                return the consideration to Ariust.





·
            Smolenergy
                keeps its own register of shareholders; that register may not be
                kept in
                strict compliance with Russian law.





·
            The
                Company’s agreement with Smolenergy provided for the surrender and
                cancellation of all of Smolenergy’s then issued and outstanding shares.
                However, no consideration was provided to the holders of Smolenergy’s
                shares. An absence of reciprocal consideration may constitute a reason
                for
                a Russian court to require that the Company return the shares to
                Ariust
                and to compensate Smolenergy for any
                losses.





·
            Smolenergy’s
                acquisition of 51% of Gorstovoye is subject to a pledge of those
                interests
                in favor of Ariust. If the pledge is not released, under Russian
                law, this
                may be considered to be a non-fulfillment of Smolenergy’s payment
                obligations allowing Ariust to seek cancellation of the Combination
                Agreement. But as the pledge is a document not recordable in Russia,
                and
                upon Ariust receiving the 110,000,000 shares of the Company’s common
                stock, Ariust may have difficulties in enforcing its
                rights.





·
            The
                Russian equivalent of United States anti-trust and anti-competition
                statutes requires a notification to or the prior consent of the
                appropriate authorities. No notice has been given nor consent obtained.
                If
                the transactions among the Company, Smolenergy and Gorstovoye were
                found
                to violate the Russian Anti-Competition laws, they could be voided.
                The
                Company believes this most unlikely but it may be subject to a
                fine.




·
            The
                Resolutions of Ariust and Smolenergy authorizing the sale of Gorstovoye
                from Ariust to Smolenergy appear to lack the specificity required
                by
                Russian law.





**We
      have incurred significant losses. We expect future losses and we may never
      become profitable.**





We
      have
      incurred significant losses and a substantial accumulated deficit. We expect
      to
      continue to incur net losses until our development work is completed, and we
      produce oil in sufficient quantities of sales that generate sufficient revenues
      to fund our continuing operations. We may fail to produce oil, or produce
      quantities insufficient to achieve significant revenues from sales or achieve
      or
      sustain profitability. There can be no assurance of when, if ever, we will
      be
      profitable or be able to maintain profitability.




10




**Potential
      Loss of Licenses**





In
      April
      of 2007, the Federal Agency of the Ministry of Natural Resources of the Russian
      Federation (the “Ministry”) issued warnings to Gorstovoye that it was acting
      inconsistently with its Gorstovoye License Agreement as it had not submitted
      to
      the Ministry plans for (a) operation and maintenance of (as well as estimates
      of
      total oil reserves) and (b) remediation of occasional oil spills. Gorstovoye
      had
      until December of 2007 to eliminate these infractions. A Russian Federation
      surveyor visited the Gorstovoye oil field and advised that we were in compliance
      with three of the four element requirements of our license and the last 
element, the actual extraction of oil, we believe will be met with the planned
      drilling of several wells. We are expecting written verification of the
      foregoing.





At
      present, in connection with reception results in the course of drilling the
      wells 100, 101, greatly differing from the results, on which was founded issue
      to licenses TOM 11289 NE, subsoil users on the grounds of conclusions of the
      addition to license agreement from May 10, 2006 arranges project documentation
      with provision for elaborated requirements.





At
      February 2008 commission meeting of the appropriate territorial department
      of
      the Russian Federation and members of the commission presented remarks and
      recommendations on optimization of the project to test usage and recommended
      that mining hydrocarbon cheese in Gorstovoye oil field was initially to take
      place at the end of March or at the beginning April 2008.


We
      have
      offered a new plan to that department to develop the Grostovoye oil field and
      that plan is being considered by that department’s upper management..




If
      our
      new plan is accepted, we intend to start drilling four wells, in accordance
      with
      this new plan. After drilling the wells, (to the presence of the hydrocarbon
      cheese,) we intend to begin development of the wells and thereafter mining
      hydrocarbon cheese. **We
      have only a limited operating history.**





Gorstovoye
      was organized in April 2002 and Smolenergy was organized in October 2006.





Since
      2002, Gorstovoye has been engaged in the exploration of oil and gas in the
      Gorst
      oil field in the face of its poor geographical location and a lack of funding.
      We will be subject to the general business risk factors that similar young
      companies experience with the responsibilities and complexities attendant to
      any
      such organization, including (i) the ability to attract and maintain competent
      and experienced management and operating personnel, (ii) the ability to secure
      appropriate debt and equity capital to finance desired growth, and (iii) the
      efficient management and performance of everyday operations.




11




**Our
        Independent Auditors Have Expressed Substantial Doubt About Our Ability to
        Continue As a Going Concern, Which May Hinder Our Ability to Obtain Future
        Financing.**
  In
        their
        report dated April 14, 2008, our independent auditors stated that our financial
        statements for the year ended December 31, 2007 were prepared assuming that
        we
        would continue as a going concern, and that they have substantial doubt about
        our ability to continue as a going concern. Our auditors’ doubts are based on
        our incurring net losses of $1,272,801 and a lack of revenues and
        operations from our inception through December 31, 2007. We continue to
        experience net operating losses. Our ability to continue as a going concern
        is
        subject to our ability to generate a profit and/or obtain necessary funding
        from
        outside sources, including by the sale of our securities or obtaining loans
        from
        financial institutions, where possible. Our continued net operating losses
        and
        our auditors’ doubts increase the difficulty of our meeting such goals and our
        efforts to continue as a going concern may not prove successful.
  **If
        we are unable to obtain additional funding our business operations will
        cease.**





Our
      assets are insufficient to meet our operating expenses and capital expenditures
      through the end of fiscal year 2008. We do not know if additional financing
      will
      be available when needed, or if it is available, if it will be available on
      commercially reasonable terms. Insufficient funds may prevent us from
      implementing our business strategy or may require us to delay, scale back or
      cease operations.





**Dependence
      on and Transactions with an Affiliated Company** .





TPTPS
      performs approximately 60% of the construction work in Gorstovoye oil fields.
      Viktor Ekimov, the General Director and sole stockholder of TPTPS, holds a
      controlling interest in Ariust and owns approximately 52% of the Company’s
      voting securities. TPTPS owned Gorstovoye prior to its sale to Ariust. In August
      2005, TPTPS increased Gorstovoye’s capital by approximately 230 million Russian
      Rubles (approximately US$9,332,000), from 30 million Russian Rubles
      (approximately US$1,217,000). TPTPS paid its capital contribution by issuing
      approximately 40 demand promissory notes. Gorstovoye used the promissory notes
      to meet its financial obligations to TPTPS and other suppliers and service
      providers with the balance being returned to TPTPS.





**Litigation:
      Costs and Expenses; Potential Loss of Suppliers and Service Providers;
      Bankruptcy.**





Gorstovoye
      constantly lacks funds to fulfill its payment obligations for goods, works
      and
      services. Creditors have demanded payment in arbitration court even for minor
      amounts. Almost all court cases are lost by Gorstovoye. In January 2007, a
      judgment by a Moscow court was entered against Gorstovoye in favor of a service
      provider for approximately 4,160,000 Russian Rubles (approximately US$169,000)
      and has commenced collection proceedings. If this debt remains uncollected,
      the
      claimant could commence bankruptcy proceedings. The same service provider has
      commenced another proceeding in the Moscow courts against Gorstovoye in the
      approximate amount of 6,810,000 Russian Rubles (approximately US$276,000).
      Not
      only have these lawsuits caused Gorstovoye to incur litigation costs and fees,
      but also divert management’s time and attention away from Gorstovoye’s proposed
      business. Also, suppliers and service providers can become antagonistic, and
      refuse or be reticent in providing goods and services to Gorstovoye and, as
      a
      result, substantially diminish and even eliminate its ability to
      operate.




12




**Our
      planned business depends on the level of activity in the oil industry, which
      is
      significantly affected by volatile oil prices.**





Our
      planned business depends on the level of activity in oil exploration,
      development and production in markets worldwide. Oil prices, market expectations
      of potential changes in these prices and a variety of political and economic
      factors significantly affect this level of activity. Oil prices are extremely
      volatile and are affected by numerous factors, including, but not limited
      to:





o
            worldwide
                demand for oil and gas;


o
            the
                ability of the Organization of Petroleum Exporting Countries, commonlycalled
                "OPEC," to test and maintain production levels and
                pricing;


o
            the
                level of production in non-OPEC
                countries;


o
            the
                policies of the various governments regarding exploration and developmentof
                their oil and gas reserves;


o
            advances
                in exploration and development technology;
                and


o
            the
                political environment of oil-producing
                regions.





**The
      oil and gas business involves many operating risks that can cause substantial
      losses. Insurance may not be adequate to protect against all these
      risks.**





The
      oil
      and gas business involves a variety of operating risks, including, but not
      limited to:





-
            fire;


-
            explosion;


-
            blow-out;


-
            uncontrollable
                flows of oil, gas, or well fluids;


-
            natural
                disasters;


-
            pipe
                failure;


-
            casing
                collapse;


-
            stuck
                tools;


-
            abnormally
                pressured formations; and


-
            environmental
                hazards such as oil spills, gas leaks, pipeline ruptures and discharges
                of
                toxic gases.





If
      any of
      these events occur, we could incur substantial losses as a result
      of:





-
              injury
                  or loss of life;


-
                severe
                    damage to and destruction of property, natural resources and
                    equipment;


-
                pollution
                    and other environmental
                    damage;


-
            clean-up
                responsibilities;


-
            regulatory
                investigation and penalties; and


-
            suspension
                of operations.




13





If
      we
      experience any of these problems, it could affect wellbores, platforms,
      gathering systems and processing facilities, which could adversely affect our
      ability to conduct operations.





**If
      oil and natural gas prices decrease, we may be required to take write-downs
      of
      any carrying values of our oil and natural gas properties.**





Accounting
      rules require that we review periodically the carrying value of our oil and
      natural gas properties for possible impairment. Based on specific market factors
      and circumstances at the time of the prospective impairment reviews, and the
      continuing evaluation of development plans, production data, economics and
      other
      factors, we may be required to write down any carrying value of our oil and
      natural gas properties. A write-down constitutes a non-cash charge to earnings.
      We may incur impairment charges in the future, which could have a material
      adverse effect on our results of operations in the periods taken. Our
      international operations involve additional risks not associated with domestic
      operations.





**Subsoil
      Use License**





The
      Company believes Smolenergy has a satisfactory right to use Gorstovoye, in
      the
      form of a Subsoil Use License (expiring in March 2014). The interests owned
      or
      to be acquired by Gorstovoye may be subject to one or more royalty, overriding
      royalty and other outstanding interests customary in the industry. The interests
      may additionally be subject to burdens such as net profits interests, overriding
      royalty interests, back-ins, liens incident to operating agreements, current
      taxes, development obligations under oil and natural gas leases and other
      encumbrances, easements and restrictions, any or all of which may detract
      substantially from the value of interests or materially interfere with
      Gorstovoye’s operations or projected profits.





**Exploration
      is a high-risk activity and the seismic and other advanced technologies we
      use
      are expensive, require experienced personnel, and cannot eliminate exploration
      risk.**





Exploration
      activities are substantially more risky than development or exploitation
      activities. We use seismic data and other advanced technologies to reduce our
      risk, but exploratory drilling remains a speculative activity. Even when
      extensively used and properly interpreted, seismic data and visualization
      techniques only assist geoscientists in identifying subsurface structures and
      hydrocarbon indicators. They do not conclusively allow the interpreter to know
      if hydrocarbons are present or if they are economically producible. The use
      of
      seismic data and certain other technologies also requires greater pre-drilling
      expenditures than traditional drilling strategies. Gorstovoye could incur losses
      as a result of such expenditures. Poor results from our exploration activities
      could have a material adverse effect on our future results of operations and
      financial condition. Western Siberia is a highly competitive area and our
      success there will depend on our ability to attract and retain experienced
      geoscientists and other professional staff.




14




**Oil
      and gas operations are subject to extensive environmental and other governmental
      regulation, which can affect the cost, manner, or feasibility of doing
      business.**





Development,
      production and sale of oil and gas are subject to extensive environmental and
      other governmental regulation. We have made and expect to make substantial
      expenditures to comply with environmental and other governmental regulations.
      These regulations could change in ways that might substantially increase our
      costs. Those changes have in the past significantly altered the marketing of
      oil
      and gas, and the effect of these changes on our ability to market our oil and
      gas at reasonable prices is uncertain. Environmental regulations could impose
      liability for pollution clean up and damages and require cessation of operations
      in affected areas. Any such costs, damages, suspension or termination could
      materially and adversely affect our financial condition and operations. We
      are
      subject to regulations that impose permitting, reclamation, land use,
      conservation, and other restrictions on our ability to drill and
      produce.





**Gorstovoye
      and other properties that we may acquire an interest in, or acquire outright,
      may not perform as we projected, and we may not be able to discover liabilities
      carried with the properties or obtain protection from sellers against
      them.**





The
      successful acquisition of producing properties requires assessments of many
      factors which are inherently inexact and may be inaccurate, including, but
      not
      limited to:





-
            the
                amount of recoverable reserves;


-
            future
                oil and gas prices;


-
            estimates
                of operating costs;


-
            estimates
                of future development costs; and


-
            potential
                environmental and other
                liabilities.





Our
      review will not reveal all existing or potential problems, nor will it permit
      us
      to become familiar enough with the properties to assess fully their deficiencies
      and capabilities. We may not inspect every well, platform or pipeline. We cannot
      necessarily observe structural and environmental problems, such as pipeline
      corrosion or groundwater contamination, when an inspection is made. We may
      not
      be able to obtain contractual indemnities from the seller for liabilities they
      created. We may be required to assume the risk of the physical condition of
      the
      properties in addition to the risk that the properties may not perform in
      accordance with our expectations.




15




**We
      plan to operate in a highly competitive industry which may adversely affect
      our
      planned operations.**





We
      operate in a highly competitive environment. Competition is particularly intense
      with respect to the acquisition of desirable undeveloped crude oil and natural
      gas properties. The principal competitive factors in the acquisition of such
      undeveloped crude oil and natural gas properties include the staff and data
      necessary to identify, investigate and purchase such properties, and the
      financial resources necessary to acquire and develop such properties. We compete
      with major and independent crude oil and natural gas companies for properties
      and the equipment and labor required to develop and operate such properties.
      Many of these competitors have financial and other resources substantially
      greater than ours.





The
      principal resources necessary for the exploration and production of crude oil
      and natural gas are leasehold prospects under which crude oil and natural gas
      reserves may be discovered, drilling rigs and related equipment to explore
      for
      such reserves and knowledgeable personnel to conduct all phases of crude oil
      and
      natural gas operations. We must compete for such resources with both major
      crude
      oil and natural gas companies and independent operators. We cannot assure you
      that such materials and resources will be available to us.





Our
      principal competitors would include major integrated oil companies and their
      marketing affiliates and national and local gas gatherers, brokers, marketers
      and distributors of varying sizes, financial resources and experience. Certain
      such competitors, such as major crude oil and natural gas companies, have
      capital resources and control supplies of natural gas substantially greater
      than
      we have. Smaller local distributors may enjoy a marketing advantage in their
      immediate service areas.





We
      will
      be competing against other companies in the natural gas processing business
      both
      for supplies of natural gas and for customers to which they will sell their
      products. Competition for natural gas supplies is based primarily on location
      of
      natural gas gathering facilities and natural gas gathering plants, operating
      efficiency and reliability and ability to obtain a satisfactory price for
      products recovered. Competition for customers is based primarily on price and
      delivery capabilities.





**Reserve
      estimates are inherently uncertain and depend on many assumptions that may
      turn
      out to be untrue.**





The
      process of estimating oil and gas reserves is complex and inherently uncertain.
      It requires various assumptions, including assumptions required by the SEC
      relating to oil and gas prices, drilling and operating expenses, capital
      expenditures, taxes and availability of funds. We must project production rates
      and timing of development expenditures. We need to analyze available geological,
      geophysical, production and engineering data, and the extent, quality and
      reliability of this data can vary. Oil and gas reserve engineering is a
      subjective process of estimating accumulations of oil and gas that cannot be
      measured in an exact manner. Estimates from other engineers might differ
      materially from those shown. The accuracy of any reserve estimate is a function
      of the quality and quantity of available data, engineering and geological
      interpretation and judgment.




16




Actual
      future production, oil and gas prices, revenues, taxes, development
      expenditures, operating expenses and quantities of recoverable oil and gas
      reserves most likely will vary from our estimates. Any significant variance
      could materially affect the estimated quantities and present value of reserves
      shown herein. In addition, we may adjust estimates of proved reserves to reflect
      production history, results of exploration and development, prevailing oil
      and
      gas prices and other factors, many of which are beyond our control.





Recovery
      of undeveloped reserves generally requires significant capital expenditures
      and
      successful drilling operations.





**Ability
      to manage growth and achieve business strategy.**





The
      Company expects to experience significant growth as a result of the acquisition
      of a 51% interest in Gorstovoye and the drilling and workovers contemplated
      herein.





Gorstovoye’s
      anticipated growth will place a significant strain on the Company’s financial,
      technical, operational and administrative resources. Neither Gorstovoye’s chief
      accountant, nor its chief geologist, have visited the oil field during
      approximately the last two years. Our ability to grow will depend upon a number
      of factors, including, but not limited to, its ability to develop Gorstovoye
      sites, its ability to retain and attract skilled personnel, the results of
      its
      drilling program, oil and gas prices, access to capital and other factors.
      There
      can be no assurance that the Company will be successful in achieving growth
      or
      any other aspect of its business strategy or that we will be successful in
      managing its growth.





**We
      will have substantial risks in making acquisitions.**





The
      Company seeks to purchase additional properties and explore for oil and natural
      gas. The successful acquisition of producing properties requires an assessment
      of recoverable reserves, future oil and natural gas prices, operating costs,
      potential environmental and other liabilities and other factors. Such
      assessments are necessarily imprecise, and their accuracy is inherently
      uncertain. In connection with such an assessment, the Company will need to
      perform a review of the subject properties that it believes to be generally
      consistent with industry practices, which includes on-site inspections and
      the
      review of reports filed with various regulatory entities. Such a review,
      however, will not reveal all existing or potential problems nor will it permit
      a
      buyer to become sufficiently familiar with the properties to fully assess their
      deficiencies and capabilities. Inspections may not always be performed on every
      well, and structural and environmental problems are not necessarily observable
      even though an inspection is undertaken. Even when problems are identified,
      the
      seller may be unwilling or unable to provide effective contractual protection
      against all or part of such problems. There can be no assurances that any
      acquisition can be made at acceptable prices or acceptable terms or will be
      successful in producing economically recoverable reserves or derive a profit
      to
      the Company. There can be no assurance that the condition of the properties
      acquired or the circumstances relating to such properties (such as the viability
      of the site to produce hydrocarbons, the ability of the Company to profitably
      develop the property or the liability of the Company with respect to the
      acquired property) will not materially change from the time when such properties
      were acquired.




17




**Uncertainty
      in Enforcing United States Judgments.**





All
      of
      the Company’s directors and executive officers reside outside of the United
      States and service of process upon such persons may be difficult to effect
      in
      the United States upon all such directors and officers.





All
      of
      the Company’s assets are and will be located outside of the United States, in
      the Russian Federation, and any judgment obtained in the United States may
      not
      be enforced in that jurisdiction. There is substantial doubt as to the
      enforceability in the Russian Federation of actions to enforce judgments of
      the
      United States’ courts arising out of or based on the civil liability provisions
      of United States federal or state securities laws or otherwise.





**Risks
      Related to Our Common Stock; Liquidity Risks**





**We
      have no plans to issue dividends.**





We
      have
      no present intention of paying any dividends on our capital stock in the
      foreseeable future, as we intend to use earnings, if any, to generate increased
      growth. The payment of dividends in the future, if any, rests solely within
      the discretion of the Board of Directors and will depend upon, among other
      things, earnings, capital requirements and financial condition, as well as
      other
      factors deemed relevant by the Board of Directors. Although dividends are
      not limited currently by any agreements, it is anticipated that future
      agreements, if any, with institutional lenders or others may also limit the
      ability to pay dividends.





**The
      price of our Common Stock may fluctuate significantly, which could lead to
      losses for stockholders.**





Stock
      of
      public companies can experience extreme price and volume fluctuations. These
      fluctuations often have been unrelated or out of proportion to the operating
      performance of such companies. We expect our stock price to be similarly
      volatile. Broad market fluctuations may continue and could harm our stock price.
      Any negative change in the public’s perception of the prospects of our Company
      or companies in our market could also depress our stock price, regardless of
      our
      actual results. Factors affecting the trading price of our Common Stock may
      include:




·
            variations
                in operating results;





·
            recruitment
                or departure of key personnel;




18




·
            litigation,
                legislation, regulation or technological developments that adversely
                affect our business;





·
            changes
                in the estimates of operating results or changes in recommendations
                by any
                securities analyst that elect to follow our common stock; and





·
            market
                conditions in oil and gas
                industries.




**Certain
      financial statements attached as exhibits to this Report have not been
      audited.**





Certain
      of the financial statements attached hereto are unaudited. No assurance can
      be
      given that if such financial statements were audited, they would not be
      materially different.





**You
      may lose your investment in the Shares.**




An
      investment in the shares involves a high degree of risk. An investment in the
      shares is suitable only for investors who can bear a loss of their entire
      investment.




**The
      issuance of preferred stock may have the effect of preventing a change of
      control and could dilute the voting power of our Common Stock and reduce the
      market price of our Common Stock.**




Our
      authorized capital stock includes 5,000,000 shares of preferred stock, of which
      all 5,000,000 shares is blank check preferred stock. Our Board of Directors
      is
      authorized to designate such stock with preferences and relative, participating,
      optional or other special rights and qualifications, limitations or restrictions
      as they deem advisable without shareholder approval. The effect of designating
      and issuing shares of preferred stock over the rights of our common shareholders
      cannot be stated until our board of directors determines the specific rights
      of
      such preferred stock. However, the effects might include, among other things,
      restricting dividends on the common stock, diluting the voting power of the
      common stock, reducing the market price of the common stock, or impairing the
      liquidation rights of the common stock, without further action by our
      shareholders. The designation and issuance of preferred stock could also have
      the effect of making it more difficult or time consuming for a third party
      to
      acquire a majority of our outstanding voting stock or otherwise effect a change
      of control. Shares of preferred stock may be sold to third parties that indicate
      that they would support our board of directors in opposing a hostile takeover
      bid. Our blank check preferred stock is not intended to be an anti-takeover
      measure, and we are not aware of any present third party that plans to gain
      control of us. Although we may consider issuing preferred stock in the future
      for purposes of raising additional capital or in connection with acquisition
      transactions, it currently has no binding agreements or commitments with respect
      to the issuance of any shares of preferred stock.




19




**Our
      common stock is quoted on the OTC Bulletin Board and the limited reported
      quotations and volume of shares have been volatile.**




Our
      common stock is quoted on the Over-the-Counter Bulletin Board (“OTCBB”) under
      the symbol “RUSO.” Trading in our common stock has been limited and volatile.
      There can be no assurance that a stable market for our shares will exist, or
      if
      it exists, it will be sustained.




**In
      the event that we fail to timely file any periodic report filings with the
      SEC,
      our Common Stock may be removed from the Over-The-Counter Bulletin Board.**




Pursuant
      to the OTCBB rules relating to the timely filing of periodic reports with the
      SEC, any OTCBB issuer which fails to file a periodic report (Form 10-QSB's
      or
      10-KSB's) by the due date of such report (not withstanding any extension granted
      to the issuer by the filing of a Form 12b-25), three (3) times during any
      twenty-four (24) month period is automatically removed from the OTCBB. In the
      event an issuer is removed, such issuer would not be eligible to return to
      the
      OTCBB for a period of one-year, during which time any subsequent late filing
      would reset the one-year period of removal. We filed our Form 10-QSB for the
      periods ended June and September 30, 2007 late. If we are late in our filings
      two more times in the twenty-four (24) month period and removed from the OTCBB,
      the market value of our common stock could be reduced significantly and sales
      of
      shares of our common stock may be difficult.




**Principal
      Beneficial Shareholder Controls the Company.**





The
      principal beneficial shareholder of Russoil, Victor Ekimov, is the beneficial
      owner of, in the aggregate, 110,000,000 shares of our common stock
      (approximately 52%) Accordingly, Mr. Ekimov could have control over matters
      requiring a vote of our shareholders. This concentration of ownership could
      also
      have the effect of delaying or preventing a change in control or discouraging
      a
      potential acquirer from attempting to obtain control of us, which in turn could
      have a material adverse effect on the market price of the our common stock
      or
      prevent our shareholders from realizing a premium over the market price for
      their shares of our common stock.





**Our
      Common Stock are subject to Penny Stock Rules, which could affect
      trading.**




Broker-dealer
      practices in connection with transactions in “penny stocks” are regulated by
      certain rules adopted by the SEC. Penny stocks generally are equity securities
      with a price of less than $5.00, subject to exceptions. The rules require that
      a
      broker-dealer, prior to a transaction in a penny stock not otherwise exempt
      from
      the rules, deliver a standardized risk disclosure document that provides
      information about penny stocks and the risks in the penny stock market. The
      broker-dealer also must provide the customer with current bid and offer
      quotations for the penny stock, the compensation of the broker-dealer and its
      salesperson in connection with the transaction and monthly account statements
      showing the market value of each penny stock held in the customer’s account. In
      addition, the rules generally require that prior to a transaction in a penny
      stock 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 liquidity of penny stocks. Our common stock is subject
      to
      the penny stock rules, and investors acquiring shares of our common stock may
      find it difficult to sell their shares of our common stock.




20




**Item
      2. Description of Properties** ****





Gorstovoye
      leases offices in Moscow (approximately 1,080 square feet) and Smolensk
      (approximately 1,030 square feet), Russia, at an annual aggregate cost of
      approximately US$80,000. We believe that our current office space and facilities
      are sufficient to meet our present needs.




**Item
      3. Legal Proceedings**





In
      January 2007, a judgment by a Moscow court (case #A40-67467/06-4-487) was
      entered against Gorstovoye in favor of a service provider for approximately
      4,160,000 Russian Rubles (approximately US$169,000). Gorstovoye is also a
      defendant in a proceeding before the Moscow Arbitration court (case
      #A40-3752/07-50-38). The claimant, LLC “Insider” is seeking to hold Gorstovoye
      responsible for an alleged debt of JSC “Tomsktruboprovodsroy” in the total
      amount of RUB 6.8 million (approximately US$290,000 at the CBR exchange rate
      as
      of April 14, 2008). Allegedly, Gorstovoye signed an agreement to pay this
      debt. Gorstovoye’s defense is that it has never agreed to assume this obligation
      and the signature on the agreement is a forgery. The
      Company is unable to predict the extent of its ultimate liability with respect
      to these matters. However, the Company's management estimates the probability
      of
      overcoming this litigation is significantly adverse to the Company. The
      costs and other effects of these matters, including settlements, judgements
      and
      changes in the matters could have a material effect on the Company's financial
      condition and operating results.





**Item
      4. Submission of Matters to a Vote of Security Holders**





There
      was
      no matter submitted to a vote of security holders during the fiscal quarter
      ended December 31, 2007.





**PART
      II**





**Item
      5. Market for our Securities and Related Stockholder
      Matters**





**Market
      Information**





Russoil’s
      common stock had been quoted on the OTC Bulletin Board under the symbol
“CASD.OB” from December 2006 until our symbol was changed to "RUSO.OB" on August
      20, 2007. The high and low bid quotations of our common stock for the periods
      indicated below are:


**For
                  the following periods of time**
              
              **High**
              
              **Low**2nd
                  Quarter 2007*
              
              $
              1.82
              
              $
              0.18from
                  May 31, 20073rd
                  Quarter 2007
              
              $
              0.26
              
              $
              0.104th
                  Quarter 2007
              
              $
              0.13
              
              $
              0.04
  *From
        February 2007 until May 31, 2007 quotations were offered but no transactions
        were reported.
  21


The
      foregoing reflects inter-dealer prices, without retail mark-up, mark-down or
      commissions and may not represent actual transactions.





**Record
      Holders**





As
      of
      April 10, 2008, we had approximately three holders of record of our common
      stock. We are uncertain of the number of beneficial owners who own our shares
      of
      common stock.





**Transfer
      Agent**





Russoil’s
      transfer agent is Island Stock Transfer, 100 Second Avenue South, Suite 104N,
      St. Petersburg, Florida 33701, telephone number 727-289-0010.





**Sales
      of Unregistered Securities**





In
      June
      2006, Russoil issued 228,000,000 shares of our common stock to Kimberly A.
      Hennessey, then Russoil’s President, Chief Executive Officer, Chief Financial
      Officer and a Director, and 14,250,000 shares of our common stock to Nicole
      Gagne, Russoil’s Secretary, in consideration for services in connection with the
      founding of Russoil. Russoil’s Board of Directors determined the fair value of
      the shares at a per share amount equal to the par value of our common stock,
      $0.0001 per share. As a result the fair value of the shares issued to Ms.
      Hennessey was $800 and the fair value of the shares issued to Ms. Gagne was
      $50.
      The shares were issued pursuant to Section 4(2) of the Securities Act of 1933,
      as amended (the “Securities Act”).





In
      June
      2006 Russoil issued 14,250,000 shares of common stock to 41 investors in a
      private placement. In that private placement, Russoil sold 12,825,000 shares
      of
      common stock to 40 investors who were non-US persons (as defined under SEC
      Regulations) pursuant to the exemption from the registration requirements of
      the
      Securities Act provided by Regulation S, and Russoil sold 1,425,000 shares
      of
      common stock to one investor pursuant to an exemption under Section 4(2) of
      the
      Securities Act. Russoil conducted the private placement without any general
      solicitation or advertisement and a Securities Act restrictive legend was placed
      on the certificates for said shares. Effective April 25, 2007, Silvestre
      Hutchinson, Mss. Hennessey and Gagne sold their shares of the Company’s common
      stock to Silvestre Hutchinson for $50,000 in the aggregate. In connection
      therewith, Mss. Hennessey and Gagne resigned as officers and/or directors of
      the
      Company and Mr. Hutchinson became its sole officer and director. All of the
      foregoing numbers of shares give effect to a 28.5 for 1 stock split effected
      on
      April 30, 2007.




22




In
      August
      and November 2007, Russoil received subscriptions for 660,000 shares and 400,000
      shares from entities believed to be not presently otherwise affiliated with
      Russoil and Bluewater, respectively, at a price of fifty cents ($0.50) per
      share
      ($330,000 from one entity and $200,000 from Bluewater). The subscriptions have
      been accepted by Russoil but issuance of certificates for the 400,000 shares
      remains pending the receipt by our transfer agent of certain identifying
      information from the purchaser. Except for the financial statements included
      in
      this Report, the foregoing shares have been included in the calculations of
      issued and outstanding shares of Russoil’s common stock set forth in this
      Report.





Pursuant
      to a Share Exchange Agreement dated August 31, 2007 (the “Combination
      Agreement”), by and among Russoil, Smolenergy and the Stockholders of Smolenergy
      (the “Stockholders”), Russoil was to have received all of the issued and
      outstanding capital stock of Smolenergy from the Stockholders in exchange for
      approximately 52% of the issued and outstanding capital stock of Russoil. The
      initial Combination Agreement was terminated after Smolenergy was found to
      be
      indebted to Victor Ekimov, the person who transferred 51% of the equity
      interests in Gorstovoye, LLC, Smolenergy’s majority owned subsidiary, and
      operational base, to Smolenergy for approximately $26,000,000 on or about May
      25, 2007. As a result, the initial Combination Agreement was terminated and
      a
      second Combination Agreement was entered into on August 31, 2007 with Mr. Viktor
      Ekimov, canceling all indebtedness of Smolenergy, relating to Gorstovoye, to
      him
      in exchange for 110,000,000 shares of Russoil’s common stock while Smolenergy’s
      shareholders surrendered their holdings in Smolenergy to Russoil and,
      simultaneously, Mr. Silvestre Hutchinson, previously Russoil’s sole Executive
      Officer and Director, cancelled 242,000,000 shares of the Company owned by
      him.
      As later amended, the Combination Agreement permits the transfer of the shares
      to ZAO Ariust (“Ariust”). Ariust is believed to be owned and controlled by
      Viktor Ekimov. Pursuant to the Combination Agreement, the owners
      of Gorstovoye exchanged a 51% interest in Gorstovoye for 110,000,000 share
      of the Company's common stock, representing approximately 52% of the Company's
      outstanding common stock, after the return to treasury of and retirement of
      242,000,000 shares of the Company's common stock held by certain Company
      shareholders. As
      a
      result of the consummation of the Combination Agreement, there was a change
      in
      control of Russoil. In accordance with SFAS No. 141, Gorstovoye was the
      accounting acquiring entity. While the transaction is accounted for using the
      purchase method of accounting, in substance the Agreement is a recapitalization
      of Gorstovoye’s capital structure. The
      transfer of the 51% interest in Gorstovoye to the Company pursuant to
      the amended Combination Agreement was consummated on January
      16, 2008. In connection with the foregoing. The persons identified in Item
      9.
“Directors, Executive Officers, Promoters and Control Persons, Compliance with
      Section 16(a) of the Securities Exchange Act of 1934” as the Company’s Officers
      and Directors undertook the positions and titles stated therein and Mr.
      Hutchinson resigned as an officer of the Company. Mr. Hutchinson resigned as
      a
      Director of the Company in January 2008.





**Purchases
      of Our Equity Securities**





Neither
      the Company nor any of our affiliates purchased any equity securities from
      our
      stockholders during our fiscal quarter ended December 31, 2007.





**Securities
      Authorized for Issuance under Equity compensation Plans**





We
      do not
      have any compensation plan under which equity securities are authorized for
      issuance.




23




**Item
      6. Management’s Discussion and Analysis or Plan of
      Operation**





The
      following discussion of our financial condition and results of operations should
      be read in conjunction with the financial statements and the related notes
      thereto included elsewhere in this Form 10-KSB. The matters discussed herein
      contain forward-looking statements within the meaning of Section 21E of the
      Securities Exchange Act of 1934, as amended, and Section 27A of the Securities
      Act of 1933, as amended, which involve risks and uncertainties. All statements
      other than statements of historical information provided herein may be deemed
      to
      be forward-looking statements. Without limiting the foregoing, the words
      "believes", "anticipates", "plans", "expects" and similar expressions are
      intended to identify forward-looking statements. Factors that could cause actual
      results to differ materially from those reflected in the forward-looking
      statements include, but are not limited to, those discussed under the heading
      "Business – Risk Factors" and elsewhere in this Report and the risks
      discussed in our other filings with the SEC. Readers are cautioned not to place
      undue reliance on these forward-looking statements, which reflect management's
      analysis, judgment, belief or expectation only as of the date hereof. We
      undertake no obligation to publicly revise these forward-looking statements
      to
      reflect events or circumstances that arise after the date hereof.





Overview





We
      were
      incorporated under Nevada law on June 7, 2006 under the corporate name Cassidy
      Media, Inc. On April 25, 2007, there was a change of control, which was followed
      by the filing of a Certificate of Change with the Secretary of State of Nevada
      to effect a 28.5-for-1 forward stock split of our common stock. We have also
      merged into our newly-formed wholly-owned subsidiary, Russoil Corporation,
      and
      have changed our corporate name to Russoil Corporation.




Year
      ended December 31, 2007 Compared to Year Ended December 31,
      2006





**Revenues**





We
      have
      generated no operating revenues from operations from our inception. We believe
      we will begin earning revenues from operations in 2008 from actual operation
      as we transition from a development stage company to that of an active
      growth stage company. Accordingly, the comparison of current period operating
      results with those of prior periods is not meaningful.





**Costs
      and Expenses**





From
      our
      inception through December 31, 2007, we have not generated any revenues and
      have
      incurred cumulative losses of $1,272,801. In addition, a significant part of
      the
      overall remaining costs are associated principally with compensation to
      employees and consultants and professional services rendered. Selling,
      general and administrative (“SG&A”) expenses for year ended 2007 increased
      from $100,365 in 2006 to $960,552 in 2007, or $860,187. SG&A expenses
      consisted of accounting, legal, consulting, public relations, startup and
      organizational expenses. respectively. As a result of the above-mentioned
      expenses, net losses increased from $ 100,954 in 2006 to $1,171,847 in 2007,
      or
      $1,070,893.





24





Capital
      Structure





Effective
      April 30, 2007, the Company amended its Articles of Incorporation for the
      purpose of effecting a one for twenty-eight and a half (1 for 28.5) forward
      split of its common stock. In addition, the authorized common stock was
      increased from five hundred million (500M) shares, $.0001 par value, to fourteen
      and a quarter billion (14.25B) shares, $.00001 par value. All share and per
      share data have been given retroactive effect to reflect this
      recapitalization.




**Liquidity
      and Capital Resources**





As
      of
      December 31, 2007, we had $3,000 in cash. We incurred a net loss of
      $1,272,801 for the period June 7, 2006 (date of inception) to December 31,
      2007.
      In addition, we had a working capital deficit of $816,703 as of December 31,
      2007.





While
      we
      have raised capital to meet our working capital and financing needs in the
      past,
      additional financing is required within the next 6 months in order to meet
      our
      current and projected cash flow deficits from operations and development. We
      have sufficient funds to conduct our operations for several months, but not
      for
      6 months or more. There can be no assurance that financing will be available
      in
      amounts or on terms acceptable to us, if at all.




By
      adjusting our operations and development to the level of capitalization, we
      believe we have sufficient capital resources to meet projected cash flow
      deficits. However, if during that period or thereafter, we are not successful
      in
      generating sufficient liquidity from operations or in raising sufficient capital
      resources, on terms acceptable to us, this could have a material adverse effect
      on our business, results of operations liquidity and financial
      condition.




Our
      registered independent certified public accountants have stated in their report
      dated April 14, 2008, that we have incurred operating losses since our inception
      , and that we are dependent upon management's ability to develop profitable
      operations. These factors among others may raise substantial doubt about our
      ability to continue as a going concern.




25




Going
      Concern Consideration




The
      consolidated financial statements contained in this Report have been prepared
      on
      a ‘going concern’ basis, which contemplates the realization of assets and the
      satisfaction of liabilities in the normal course of business. For the reasons
      discussed in this Report, there is a significant risk that we will be unable
      to
      continue as a going concern, in which case, you would suffer a total loss on
      your investment in our Company.




Inflation





It
      is the
      opinion of the Company that inflation has not had a material effect on its
      operations.





Off-Balance
      Sheet Arrangements





None





**Foreign
      Currency Fluctuations**





Currently
      we do not have significant transactions in currencies other than the U.S.
      dollar.





We
      currently do not engage in hedging. However, we may do so in the
      future.


Currency
        Consideration
 
 The
        Company translates the foreign currency financial statements of its Chinese
        subsidiary in accordance with the requirements of Statement of Financial
        Accounting Standards No. 52, "Foreign Currency Translation." Assets and
        liabilities are translated at the rates of exchange at the balance sheet
        date,
        and related revenue and expenses are translated at average monthly exchange
        rates in effect during the period. Resulting translation adjustments are
        recorded as a separate component in stockholders' equity. Foreign currency
        transaction gains and losses are included in the statement of
        income.


Critical
      Accounting Policies and Estimates





We
      prepare our financial statements in accordance with accounting principles
      generally accepted in the United States, and make estimates and assumptions
      that
      affect our reported amounts of assets, liabilities, revenue and expenses. We
      base our estimates on historical experience and other assumptions that we
      believe are reasonable in the circumstances. Actual results may differ from
      these estimates.





The
      following critical accounting policies affect our more significant estimates
      and
      assumptions used in preparing our consolidated financial
      statements.





Our
      financial statements have been prepared on the going concern basis, which
      assumes the realization of assets and liquidation of liabilities in the normal
      course of operations. If we were not to continue as a going concern, we would
      likely not be able to realize on our assets at values comparable to the carrying
      value or the fair value estimates reflected in the balances set out in the
      preparation of our financial statements. There can be no assurances that we
      will
      be successful in generating additional cash from equity or other sources to
      be
      used for operations. Our financial statements do not include any adjustments
      to
      the recoverability of assets and classification of assets and liabilities that
      might be necessary should we be unable to continue as a going
      concern.




26




**Item
      7. Consolidated****Financial Statements**





The
      following Consolidated Financial Statements are included in this Annual
      Report.


RUSSOIL
        CORPORATION
 INDEX
          TO CONSOLIDATED FINANCIAL STATEMENTS




Reports
                of Independent Registered Public Accounting Firms
            
            F-1
                to F2Consolidated
                Balance Sheets as of December 31, 2007 and 2006
            
            F-3Consolidated
                Statements of Operations for the years ended December 31, 2007 and
                2006
                and the Period June 7, 2006 (date of inception) through December
                31,
                2007
            
            F-4Consolidated
                Statement of Deficiency in Stockholders' Equity for the period June
                7,
                2006 (date of inception) through December 31, 2007
            
            F-5Consolidated
                Statements of Cash Flows for the years ended December 31, 2007 and
                2006
                and the Period June 7, 2006 (date of inception) through December
                31,
                2007
            
            F-6Notes
                to Consolidated Financial Statements
            
            F-7
                to - F - 14





27


REPORT
        OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
  Board
        of
        Directors and Stockholders
 Russoil
        Corporation
 (formerly
        Cassidy Media, Inc.)
 
 We
        have
        audited the accompanying consolidated balance sheet of Russoil Corporation,
        formerly Cassidy Media, Inc. (a Development Stage Company) (“the Company”) as of
        December 31, 2007 and the related consolidated statements of operations,
        deficiency in stockholders’ equity and cash flows for the year ended December
        31, 2007. 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. The
        financial statements of the Company as of December 31, 2006 and for the period
        June 7, 2006 (date of inception) through December 31, 2006 also included in
        the cumulative amounts from June 7, 2006 (date of inception) through December
        31, 2006 are audited by other auditors whose report dated March 22, 2007,
        on
        those statements included an explanatory paragraph that described substantial
        doubt about the Company’s ability to continue as a going concern due to
        operating losses and lack of revenues and operations.
 
 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 misstatements. 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 our audit
        provide 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 the Company at December 31,
        2007,
        and the results of its operations and its cash flows for the year ended December
        31, 2007 in conformity with accounting principles generally accepted in the
        United States of America. We express no opinion on the cummulative period
        from
        June 7, 2006 (date of inception) through December 31, 2006.
 
 The
        accompanying financial statements have been prepared assuming the Company
        will
        continue as a going concern. As discussed in Note 9 to the financial statements,
        the Company has incurred operating losses from its inception , has had no
        revenues and has not commenced planned principal operations. These factors
        raise
        substantial doubt about the Company’s ability to continue as a going concern.
        Management’s plans regarding those matters are also described in Note 9. The
        financial statements do not include any adjustments that might result from
        the
        outcome of this uncertainty.
  s/s
                      RBSM LLPRBSM
                      LLP
  New
        York,
        New York
 April
        14,
        2008
 
 F-1
  REPORT
        OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
  Board
        of
        Directors and Stockholders
 Russoil
        Corporation
 (formerly
        Cassidy Media, Inc. )
 
 We
        have
        audited the accompanying balance sheet of Russoil Corporation, formerly Cassidy
        Media, Inc. (a Development Stage Company) (“the Company”) as of December 31,
        2006 and the related statements of operations, stockholders’ deficiency and cash
        flows for the period June 7, 2006 (inception) to December 31, 2006. 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 the standards of the Public Company
        Accounting Oversight Board (United States). 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. Also, an audit includes
        examining, on a test basis, evidence supporting the amounts and disclosures
        in
        the financial statements, 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 the Company at December 31,
        2006,
        and the results of its operations and its cash flows for the period June
        7, 2006
        (inception) to December 31, 2006 in conformity with accounting principles
        generally accepted in the United States of America.
 
 The
        accompanying financial statements have been prepared assuming the Company
        will
        continue as a going concern. As discussed in Note 9 to the financial statements,
        the Company has incurred an operating loss for the period June 7, 2006
        (inception) to December 31, 2006, has had no revenues and has not commenced
        planned principal operations. These factors raise substantial doubt about
        the
        Company’s ability to continue as a going concern. Management’s plans regarding
        those matters are also described in Note 9. The financial statements do not
        include any adjustments that might result from the outcome of this
        uncertainty.
  WOLINETZ,
        LAFAZAN & COMPANY, P.C.
  Rockville
        Centre, New York
 March
        22,
        2007
  F-2
 
 **RUSSOIL
        CORPORATION**
 **(FORMERLY
        CASSIDY MEDIA, INC.)**
 **(A
        DEVELOPMENT STAGE COMPANY)**
 **CONSOLIDATED
        BALANCE SHEETS**
 **DECEMBER
        31, 2007 AND 2006**
 
 2007
              
              2006ASSETSCurrent
                  assets:Cash
                  and cash equivalents
              
              $
              3,000
              
              $
              -Other
                  current assets
              
              
              1,000
              
              
              -Total
                  current assets:
              
              
              4,000
              
              
              -Property,
                  plant and equipment, net
              
              
              2,000
              
              
              -Other
                  assets:Advance
                  to related party
              
              
              200,000
              
              
              -Total
                  assets
              
              $
              206,000
              
              $
              -LIABILITIES
                  AND DEFICIENCY IN STOCKHOLDERS' EQUITYCurrent
                  liabilities:Accounts
                  payable and accrued liabilities
              
              $
              244,856
              
              $
              8,856Convertible
                  note payable, related party
              
              
              200,000
              
              
              -Advances
                  from related parties
              
              
              358,847Notes
                  payable, related parties - current
              
              
              17,000
              
              
              -Total
                  current liabilities
              
              
              820,703
              
              
              8,856Notes
                  payable, related parties
              
              
              384,000
              
              
              17,000Commitments
                  and contingenciesDeficiency
                  in stockholders' equity:Preferred
                  stock, $0.0001 par value; 5,000,000 shares authorized; none issued
                  and
                  outstanding
              
              
              -
              
              
              -Common
                  stock, $0.00001 par value; 14,250,000,000 shares authorized; 210,000,000
                  shares issued and outstanding at December 31, 2007 and 342,000,000
                  shares
                  at December 31, 2006
              
              
              2,100
              
              
              3,420Additional
                  paid in capital
              
              
              276,998
              
              
              71,678Deficit
                  accumulated during development stage
              
              
              (1,272,801
              )
              
              (100,954
              )Cumulative
                  other comprehensive income (loss)
              
              
              (5,000
              )
              
              -Total
                  deficiency in stockholders' equity
              
              
              (998,703
              )
              
              (25,856
              )Total
                  liabilities and deficiency in stockholders' equity
              
              $
              206,000
              
              $
              -
 
 See
        the
        accompanying notes to the consolidated financial statements
  F-3
 
 **RUSSOIL
        CORPORATION**
 **(FORMERLY
        CASSIDY MEDIA, INC.)**
 **(A
        DEVELOPMENT STAGE COMPANY)**
 **CONSOLIDATED
        STATEMENT OF OPERATIONS**
 
 From June 7, 2006(date of inception)Year ended December 31,
              
              Through2007
              
              2006
              
              December 31, 2007Operating
                  expenses:Selling,
                  general and administrative
              
              $
              960,552
              
              $
              100,365
              
              $
              1,060,917Total
                  operating expenses
              
              
              960,552
              
              
              100,365
              
              
              1,060,917NET
                  LOSS FROM OPERATIONS
              
              
              (960,552
              )
              
              (100,365
              )
              
              (1,060,917
              )Other
                  income (expense):Interest
                  income (expense), net
              
              
              (211,295
              )
              
              (589
              )
              
              (211,884
              )Net
                  loss before provision for income taxes
              
              
              (1,171,847
              )
              
              (100,954
              )
              
              (1,272,801
              )Income
                  taxes (benefit)
              
              
              -
              
              
              -
              
              
              -NET
                  LOSS
              
              $
              (1,171,847
              )
              $
              (100,954
              )
              $
              (1,272,801
              )Net
                  loss per common shareBasic
                  and fully diluted
              
              $
              (0.00
              )
              $
              (0.00
              )Weighted
                  average number of common shares outstandingBasic
                  and fully diluted
              
              
              301,495,890
              
              
              295,618,986Comprehensive
                  losses:Net
                  loss
              
              $
              (1,171,847
              )
              $
              (100,954
              )
              $
              (1,272,801
              )Foreign
                  currency transaction loss
              
              
              (5,000
              )
              
              -
              
              
              (5,000
              )Comprehensive
                  Loss
              
              $
              (1,176,847
              )
              $
              (100,954
              )
              $
              (1,277,801
              )
 
 See
        the
        accompanying notes to the consolidated financial statements
 F-4
  **RUSSOIL
        CORPORATION**
 **(FORMERLY
        CASSIDY MEDIA, INC.)**
 **(A
        DEVELOPMENT STAGE COMPANY)**
 **CONSOLIDATED
        STATEMENT OF DEFICIENCY IN STOCKHOLDERS' EQUITY**
 **FOR
        THE PERIOD FROM JUNE 7, 2006 (DATE OF INCEPTION) THROUGH DECEMBER 31,
        2007**
 
 DeficitOther
              
              AccumulatedPreferred stock
              
              Common stock
              
              Additional
              
              Comprehensive
              
              during developmentShares
              
              Amount
              
              Shares
              
              Amount
              
              Paid in capital
              
              Income (Loss)
              
              stage
              
              TotalJune
                  7, 2006, date of inception
              
              
              -
              
              $
              -
              
              
              -
              
              $
              -
              
              $
              -
              
              $
              -
              
              $
              -
              
              $
              -Common
                  stock issued in June 2006 to founders for services rendered
              
              
              -
              
              
              -
              
              
              242,250,000
              
              
              2,423
              
              
              (1,573
              )
              
              -
              
              
              -
              
              
              850Sale
                  of common stock in June 2006 for cash at $.00001 per share
              
              
              -
              
              
              -
              
              
              14,250,000
              
              
              142
              
              
              9,858
              
              
              -
              
              
              -
              
              
              10,000Sale
                  of common stock, net of costs for cash at $.00001 per
                  share
              
              
              -
              
              
              -
              
              
              85,500,000
              
              
              855
              
              
              63,393
              
              
              -
              
              
              -
              
              
              64,248Net
                  loss
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (100,954
              )
              
              (100,954
              )Balance,
                  December 31, 2006
              
              
              -
              
              
              -
              
              
              342,000,000
              
              
              3,420
              
              
              71,678
              
              
              -
              
              
              (100,954
              )
              
              (25,856
              )Beneficial
                  conversion feature relating to convertible debenture
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              200,000
              
              
              -
              
              
              -
              
              
              200,000Issuance
                  of common shares in September 2007 under a Share Exchange Agreement
                  to
                  acquire OJSC Smolenergy, net (See Note 2, 7 and 10)
              
              
              -
              
              
              -
              
              
              110,000,000
              
              
              1,100
              
              
              2,900
              
              
              -
              
              
              -
              
              
              4,000Cancellation
                of common shares in September 2007 under a Share Exchange Agreement
                to
                acquire OJSC Smolenergy (See Note 2, 7 and 10)
              
              
              -
              
              
              -
              
              
              (242,000,000
              )
              
              (2,420
              )
              
              2,420
              
              
              -
              
              
              -
              
              
              -Net
                  loss
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (5,000
              )
              
              (1,171,847
              )
              
              (1,176,847
              )Balance,
                  December 31, 2007
              
              
              -
              
              $
              -
              
              
              210,000,000
              
              $
              2,100
              
              $
              276,998
              
              $
              (5,000
              )
              $
              (1,272,801
              )
              $
              (998,703
              )
 
 See
        the
        accompanying notes to the consolidated financial statements
  F-5
 
 **RUSSOIL
        CORPORATION**
 **(FORMERLY
        CASSIDY MEDIA, INC.)**
 **(A
        DEVELOPMENT STAGE COMPANY)**
 **CONSOLIDATED
        STATEMENT OF CASH FLOWS**
 
 From June 7, 2006(date of inception)Year ended December 31,
              
              through2007
              
              2006
              
              December 31, 2007Cash
                  flows from operating activities:Net
                  loss
              
              $
              (1,171,847
              )
              $
              (100,954
              )
              $
              (1,272,801
              )Adjustments
                  to reconcile net loss to net cash used in operating
                  activities:Acquisition
                cost
              
              
              378,000
              
              
              -
              
              
              378,000Common
                  stock issued for services rendered
              
              
              -
              
              
              850
              
              
              850Beneficial
                  conversion feature relating to convertible debenture
              
              
              200,000
              
              
              -
              
              
              200,000Decrease
                  (increase) in:Supplies
                  and prepaid expenses
              
              
              (1,000
              )
              
              
              
              
              (1,000
              )Increase
                  (decrease) in:Accounts
                  payable and accrued liabilities
              
              
              240,000
              
              
              8,856
              
              
              248,856Net
                  cash used in operating activities:
              
              
              (354,847
              )
              
              (91,248
              )
              
              (446,095
              )Cash
                  flows from investing activities:Cash
                  received from acquisition
              
              
              4,000
              
              
              -
              
              
              4,000Advance
                  to related party
              
              
              (200,000
              )
              
              -
              
              
              (200,000
              )Net
                  cash used in investing activities
              
              
              (196,000
              )
              
              -
              
              
              (196,000
              )Cash
                  flows from financing activities:Proceeds
                  from advances, net (related parties)
              
              
              358,847
              
              
              -
              
              
              358,847Proceeds
                  from convertible debentures
              
              
              200,000
              
              
              -
              
              
              200,000Proceeds
                  from note payable ( related parties)
              
              
              -
              
              
              17,000
              
              
              17,000Proceeds
                  from sale of common stock
              
              
              -
              
              
              100,000
              
              
              100,000Payments
                  of deferred offering costs
              
              
              -
              
              
              (25,752
              )
              
              (25,752
              )Net
                  cash provided by financing activities:
              
              
              558,847
              
              
              91,248
              
              
              650,095Effect
                  of currency change on cash
              
              
              (5,000
              )
              
              -
              
              
              (5,000
              )Net
                  increase (decrease) in cash and cash equivalents
              
              
              3,000
              
              
              -
              
              
              3,000Cash
                  and cash equivalents, beginning of period
              
              
              -
              
              
              -
              
              
              -Cash
                  and cash equivalents, end of period
              
              $
              3,000
              
              $
              -
              
              $
              3,000Supplemental
                  Disclosures of Cash Flow Information:Cash
                  paid during period for interest
              
              $
              -
              
              $
              -
              
              $
              -Cash
                  paid during period for taxes
              
              $
              -
              
              $
              -
              
              $
              -Supplemental
                  Disclosures of Non Cash Transactions:Acquisition
                of OJSC
                Smolenergy:Non
                current assets acquired
              
              $
              2,000
              
              $
              -
              
              $
              -Liabilities
                assumed
              
              $
              384,000
              
              $
              -
              
              $
              -
 
 See
        the
        accompanying notes to the consolidated financial statements
 
 F-6
  **RUSSOIL
        CORPORATION**
 **(FORMERLY,
        CASSIDY MEDIA, INC.)**
 **(A
        DEVELOPMENT STAGE COMPANY)**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **DECEMBER
        31, 2007**
 
 **NOTE
        1 - SUMMARY OF ACCOUNTING POLICIES**
 
 A
        summary
        of the significant accounting policies applied in the presentation of the
        accompanying financial statements follows:
 
 Basis
        of Presentation
 
 Russoil
        Corporation, formerly Cassidy Media, Inc. ( the “Company”) , was formed under
        the laws of the State of Nevada in June, 2006. The consolidated financial
        statements include the accounts of the Company and its wholly owned subsidiary,
        OJSC Smolenergy (“Smolenergy”), an entity formed under the laws of the Russian
        Federation and organized for the purpose of exploring and developing oil
        and gas
        properties wells in South Western Siberia. Smolenergy had no material assets
        or
        significant operations.. All significant intercompany balances and transactions
        have been eliminated in consolidation (see Note 10).
 
 The
        Company is in the development stage, as defined by Statement of Financial
        Accounting Standards No. 7 ("SFAS No. 7") and has not commenced planned
        principal operations. To date, the Company not generated revenues, has incurred
        expenses and has sustained losses. Consequently, its operations are subject
        to
        all the risks inherent in the establishment of a new business enterprise.
        For
        the period from inception through December 31, 2007, the Company has accumulated
        losses of $1,272,801.
  Stock
        Based Compensation
  In
        December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
        Compensation-Transition and Disclosure-an amendment of SFAS 123." This statement
        amends SFAS No. 123, "Accounting for Stock-Based Compensation," to provide
        alternative methods of transition for a voluntary change to the fair value
        based
        method of accounting for stock-based employee compensation. In addition,
        this
        statement amends the disclosure requirements of SFAS No. 123 to require
        prominent disclosures in both annual and interim financial statements about
        the
        method of accounting for stock-based employee compensation and the effect
        of the
        method used on reported results. The Company has chosen to continue to account
        for stock-based compensation using the intrinsic value method prescribed
        in APB
        Opinion No. 25 and related interpretations. Accordingly, compensation expense
        for stock options is measured as the excess, if any, of the fair market value
        of
        the Company's stock at the date of the grant over the exercise price of the
        related option. The Company has adopted the annual disclosure provisions
        of SFAS
        No. 148 in its financial reports for the year ended December 31, 2006 and
        for
        the subsequent periods. The Company did not issue employee options as
        stock-based compensation from date of inception through December 31, 2007
        therefore has no unrecognized stock compensation related liabilities ended
        December 31, 2007.
  On
        January 1, 2006, the Company adopted the fair value recognition provisions
        of
        Financial Accounting Standards Board ("FASB") Statement of Financial Accounting
        Standards ("SFAS") No. 123, Accounting for Stock Based Compensation, to account
        for compensation costs under our stock option plans. We previously utilized
        the
        intrinsic value method under Accounting Principles Board Opinion No. 25,
        Accounting for Stock Issued to Employees (as amended) ("APB 25"). Under the
        intrinsic value method prescribed by APB 25, no compensation costs were
        recognized for our employee stock options because the option exercise price
        equaled the market price on the date of the grant. Prior to January 1, 2006
        we
        only disclosed the pro forma effects on net income and earnings per share
        as if
        the fair value recognition provisions of SFAS 123(R) had been
        utilized.
  In
        adopting SFAS No. 123(R), the Company elected to use the modified prospective
        method to account for the transition from the intrinsic value method to the
        fair
        value recognition method. Under modified prospective method, compensation
        cost
        is recognized from the adoption date forward for all new stock options granted
        and for any outstanding unvested awards as if the fair value method had been
        applied to those awards as of the date of the grant. In the years ended December
        31, 2007 and 2006; the Company did not grant any employee stock options.
 
 F-7
 
 Revenue
        Recognition
 
 Revenues
        are recognized in the period that services are provided. For revenue from
        product sales, the Company recognizes revenue in accordance with Staff
        Accounting Bulletin No. 104, REVENUE RECOGNITION ("SAB104"), which superseded
        Staff Accounting Bulletin No. 101, REVENUE RECOGNITION IN FINANCIAL STATEMENTS
        ("SAB101"). SAB 101 requires that four basic criteria must be met before
        revenue
        can be recognized: (1) persuasive evidence of an arrangement exists; (2)
        delivery has occurred; (3) the
        selling price is fixed and determinable; and (4) collectability is reasonably
        assured. Determination of criteria (3) and (4) are based on
        management's judgments regarding the fixed nature of the selling prices of
        the
        products delivered and the collectability of those amounts. Provisions for
        discounts and rebates to customers, estimated returns and allowances, and
        other
        adjustments are provided for in
        the
        same period the related sales are recorded. The Company defers any revenue
        for
        which the product has not been delivered or is subject to refund until such
        time
        that the Company and the customer jointly determine that the product has
        been
        delivered or no refund will be required. At September 30, 2007 the Company
        did
        not have any deferred revenue.
 
 SAB
        104
        incorporates Emerging Issues Task Force 00-21 (“EITF 00-21”), MULTIPLE
        DELIVERABLE REVENUE ARRANGEMENTS. EITF 00-21 addresses accounting for
        arrangements that may involve the delivery or performance of multiple products,
        services and/or rights to use assets. The effect of implementing EITF 00-21
        on
        the Company’s financial position and results of operations was not
        significant.
 
 Concentrations
        of Credit Risk
 
 Financial
        instruments and related items which potentially subject the Company to
        concentrations of credit risk consist primarily of cash and cash equivalents.
        The Company places its cash and temporary cash investments with credit quality
        institutions. At times, U.S. investments may be in excess of the FDIC insurance
        limit.
  Use
        of
        Estimates
 
 The
        preparation of the financial statements in conformity with accounting principles
        generally accepted in the United States of America requires management to
        make
        estimates and assumptions that effect 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 periods. Actual results could differ from those
        estimates.
 
 Comprehensive
        Income (Loss)
 
 The
        Company adopted Statement of Financial Accounting Standards No. 130; “Reporting
        Comprehensive Income” (SFAS) No. 130 establishes standards for the reporting and
        displaying of comprehensive income and its components. Comprehensive income
        is
        defined as the change in equity of a business during a period from transactions
        and other events and circumstances from non-owners sources. It includes all
        changes in equity during a period except those resulting from investments
        by
        owners and distributions to owners. SFAS No. 130 requires other comprehensive
        income (loss) to include foreign currency translation adjustments and unrealized
        gains and losses on available for sale securities.
 
 Foreign
        Currency Translation
 
 The
        Company translates the foreign currency financial statements into US Dollars
        using the year end or average exchange rates in accordance with the regulations
        of SFAS No. 52, “Foreign Currency Translation” *.* Assets,
        liabilities and equity of these subsidiaries were translated at exchange
        rates
        as of the balance sheet date. Revenues, expenses and retained earnings are
        translated at average rates in effect for the periods presented. The cumulative
        translation adjustment is included in the accumulated other comprehensive
        gain
        (loss) within shareholders’ equity.
 
 Liquidity
 
 As
        shown
        in the accompanying consolidated financial statements, the Company incurred
        net
        loss of $1,171,847 for the year ended December 31, 2007. The Company's current
        liabilities exceeded its current assets by $816,703 as of December 31,
        2007.
 
 F-8
 
 Impairment
        of Long-Lived Assets
 
 The
        Company follows Statement of Financial Accounting Standards No. 144, “Accounting
        for the Impairment or Disposal of Long-Lived Assets” (“SFAS No. 144”). SFAS No.
        144 requires that long-lived assets and certain identifiable intangibles
        held
        and used by the Company be reviewed for impairment whenever events or changes
        in
        circumstances indicate that the carrying amount of an asset may not be
        recoverable. Events relating to recoverability may include significant
        unfavorable changes in business conditions, recurring losses, or a forecasted
        inability to achieve break-even operating results over an extended period.
        The
        Company evaluates the recoverability of long-lived assets based upon forecasted
        discounted cash flows. Should impairment in value be indicated, the carrying
        value of the long-lived assets and certain identifiable intangibles will
        be
        adjusted, based on estimates of future discounted cash flows resulting from
        the
        use and ultimate disposition of the asset. SFAS No. 144 also requires assets
        to
        be disposed of be reported at the lower of the carrying amount or the fair
        value
        less disposal costs.
  Income
        taxes
 
 The
        Company follows SFAS No. 109, “Accounting for Income Taxes” (SFAS No. 109) for
        recording the provision for income taxes. Deferred tax assets and liabilities
        are computed based upon the difference between the financial statement and
        income tax basis of assets and liabilities using the enacted marginal tax
        rate
        applicable when the related asset or liability is expected to be realized
        or
        settled. Deferred income tax expenses or benefits are based on the changes
        in
        the asset or liability during each period. If available evidence
        suggests that it is more likely than not that some portion or all of the
        deferred tax assets will not be realized, a valuation allowance is required
        to
        reduce the deferred tax assets to the amount that is more likely than not
        to be
        realized. Future changes in such valuation allowance are included in the
        provision for deferred income taxes in the period of change. Deferred income
        taxes may arise from temporary differences resulting from income and expense
        items reported for financial accounting and tax purposes in different periods.
        Deferred taxes are classified as current or non-current, depending on the
        classification of assets and liabilities to which they relate. Deferred taxes
        arising from temporary differences that are not related to an asset or liability
        are classified as current or non-current depending on the periods in which
        the
        temporary differences are expected to reverse.
  Net
        Loss Per Share
 
 Basic
        loss per share is computed by dividing net loss by the weighted average number
        of outstanding shares of common stock. Diluted loss per share, if any, is
        computed by dividing net loss by the weighted average number of shares adjusted
        for the potential dilution that could occur if stock options, warrants and
        other
        convertible securities were exercised or converted into common stock. Net
        loss
        per share excludes the dilutive effect of 2,000,000 shares that are issuable
        upon conversion of the convertible note payable principal and interest
        outstanding, as such shares would reduce the loss per share.
  New
        Accounting Pronouncements
  F-9
  In
        September 2006 the FASB issued SFAS No. 157, “Fair Value Measurements”. SFAS No.
        157 defines fair value, establishes a framework for measuring fair value
        in
        generally accepted accounting principles (GAAP), and expands disclosures
        about
        fair value measurements. SFAS No. 157 applies under other accounting
        pronouncements that require or permit fair value measurements, the Board
        having
        previously concluded in those accounting pronouncements that fair value is
        the
        relevant measurement attribute. Accordingly, SFAS No. 157 does not require
        any
        new fair value measurements. However, for some entities, the application
        of SFAS
        No. 157 will change current practice. SFAS 157’s effective date is for fiscal
        years beginning after November 15, 2007. The Company does not expect adoption
        of
        this standard will have a material impact on its financial position, operations
        or cash flows.
  In
        September 2006 the FASB issued its SFAS No. 158 “Employers’ Accounting for
        Defined Benefit Pension and Other Postretirement Plans”. SFAS No. 158 improves
        financial reporting by requiring an employer to recognize the overfunded
        or
        underfunded status of a
 defined
        benefit postretirement plan (other than a multiemployer plan) as an asset
        or
        liability in its statement of financial position and to recognize changes
        in
        that funded status in the year in which the changes occur through comprehensive
        income of a business entity or changes in unrestricted net assets of a
        not-for-profit organization. SFAS No. 158 also improves financial reporting
        by
        requiring an employer to measure the funded status of a plan as of the date
        of
        its year-end statement of financial position, with limited exceptions. The
        effective date for an employer with publicly traded equity securities is
        as of
        the end of the fiscal year ending after December 15, 2006. The Company does
        not
        expect adoption of this standard will have a material impact on its financial
        position, results of operations or cash flows as the Company does not have
        any
        defined benefit pension and other post retirement plans as of December 31,
        2007.
 
 In
        December 2006, the FASB issued FSP EITF 00-19-2, “Accounting for Registration
        Payment Arrangements” (" FSP
        00-19 -2")
        which addresses accounting for registration payment arrangements. FSP
        00-19 -2
        specifies that the contingent obligation to make future payments or otherwise
        transfer consideration under a registration payment arrangement, whether
        issued
        as a separate agreement or included as a provision of a financial instrument
        or
        other agreement, should be separately recognized and measured in accordance
        with
        FASB Statement No. 5, Accounting for Contingencies. FSP
        00-19 -2
        further clarifies that a financial instrument subject to a registration payment
        arrangement should be accounted for in accordance with other applicable
        generally accepted accounting principles without regard to the contingent
        obligation to transfer consideration pursuant to the registration payment
        arrangement. For registration payment arrangements and financial instruments
        subject to those arrangements that were entered into prior to the issuance
        of
        EITF 00-19-2, this guidance shall be effective for financial statements issued
        for fiscal years beginning after December 15, 2006 and interim periods within
        those fiscal years. The Company adopted FSP 00-19-2 in the preparation of
        the
        financial statements (see Note 1).
 
 In
        February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
        Financial Assets and Financial Liabilities.” SFAS No. 159 permits entities to
        choose to measure many financial instruments, and certain other items, at
        fair
        value. SFAS No. 159 applies to reporting periods beginning after November
        15,
        2007. The adoption of SFAS 159 is not expected to have a material impact
        on the
        Company’s financial position, results of operations, or cash flows.
 
 In
        June 2007, the Accounting Standards Executive Committee issued Statement of
        Position 07-1, “Clarification of the Scope of the Audit and Accounting Guide
        Investment Companies and Accounting by Parent Companies and Equity Method
        Investors for Investments in Investment Companies” (“SOP 07-1”). SOP 07-1
        provides guidance for determining whether an entity is within the scope of
        the
        AICPA Audit and Accounting Guide Investment Companies (the “Audit Guide”). SOP
        07-1 was originally determined to be effective for fiscal years beginning
        on or
        after December 15, 2007, however, on February 6, 2008, FASB issued a
        final Staff Position indefinitely deferring the effective date and prohibiting
        early adoption of SOP 07-1 while addressing implementation issues.
 
 In
        June
        2007, the FASB ratified the consensus in EITF Issue No. 07-3, “Accounting
        for Nonrefundable Advance Payments for Goods or Services to be Used in Future
        Research and Development Activities” (EITF 07-3), which requires that
        nonrefundable advance payments for goods or services that will be used or
        rendered for future research and development (R&D) activities be deferred
        and amortized over the period that the goods are delivered or the related
        services are performed, subject to an assessment of recoverability.
        EITF 07-3 will be effective for fiscal years beginning after
        December 15, 2007. The Company does not expect that the adoption of
        EITF 07-3 will have a material impact on our consolidated financial
        position, results of operations or cash flows.
  F-10
  In
        December 2007, the FASB issued SFAS No. 141(R), *"Business
        Combinations"* ("SFAS No. 141(R)"), which establishes principles and
        requirements for how an acquirer recognizes and measures in its financial
        statements the identifiable assets acquired, the liabilities assumed, and
        any
        noncontrolling interest in an acquiree, including the recognition and
        measurement of goodwill acquired in a business combination. SFAS No. 141(R)
        is
        effective as of the beginning of the first fiscal year beginning on or after
        December 15, 2008. Earlier adoption is prohibited and the Company is
        currently evaluating the effect, if any, that the adoption will have on its
        financial position, results of operations or cash flows.
 
 In
        December 2007, the FASB issued SFAS No. 160, *"Noncontrolling
        Interest in Consolidated Financial Statements, an amendment of ARB
        No. 51"* ("SFAS
        No. 160"), which will change the accounting and reporting for minority
        interests, which will be recharacterized as noncontrolling interests and
        classified as a component of equity within the consolidated balance sheets.
        SFAS
        No. 160 is effective as of the beginning of the first fiscal year beginning
        on
        or after December 15, 2008. Earlier adoption is prohibited and the Company
        is currently evaluating the effect, if any, that the adoption will have on
        its
        financial position, results of operations or cash flows.
 
 In
        December 2007, the FASB ratified the consensus in EITF Issue No. 07-1,
“Accounting for Collaborative Arrangements” (EITF 07-1). EITF 07-1
        defines collaborative arrangements and requires collaborators to present
        the
        result of activities for which they act as the principal on a gross basis
        and
        report any payments received from (made to) the other collaborators based
        on
        other applicable authoritative accounting literature, and in the absence
        of
        other applicable authoritative literature, on a reasonable, rational and
        consistent accounting policy is to be elected. EITF 07-1 also provides for
        disclosures regarding the nature and purpose of the arrangement, the entity’s
        rights and obligations, the accounting policy for the arrangement and the
        income
        statement classification and
 amounts
        arising from the agreement. EITF 07-1 will be effective for fiscal years
        beginning after December 15, 2008, which will be the Company’s fiscal year
        2009, and will be applied as a change in accounting principle retrospectively
        for all collaborative arrangements existing as of the effective date. The
        Company has not yet evaluated the potential impact of adopting EITF 07-1 on
        our consolidated financial position, results of operations or cash
        flows.
 
 Other
        recent accounting pronouncements issued by the FASB (including its Emerging
        Issues Task Force), the AICPA, and the SEC did not, or are not believed by
        management to, have a material impact on the Company’s present or future
        consolidated financial statements .
 
 **NOTE
        2- ACQUISITION**
 
 On
        September 10, 2007, we completed the acquisition of Smolenergy , a company
        formed under the Russian Federation. While the Company was not required to
        compensate the Smolenergy shareholders in exchange for their shares, the
        former
        Smolenergy shareholders were appointed to the Company’s Board of Directors
 
 The
        acquisition of Smolenergy was accounted for using the purchase method in
        accordance with SFAS 141. The results of operations for Smolenergy have been
        included in the Consolidated Statements of Operations since the date of
        acquisition.
 
 In
        accordance with SFAS No. 141, the total purchase price was allocated to the
        estimated fair value of assets acquired and liabilities assumed. The estimate
        of
        fair value of the assets acquired was based on management’s estimates.
        Smolenergy had no material assets or significant operations. The total purchase
        price was allocated to the assets and liabilities acquired as
        follows:
 Current
                    assets acquired
                
                $
                4,000Non
                    current assets acquired
                
                
                2,000Liabilities
                
                
                (384,000
                )Purchase
                    price
                
                
                -Total
                    acquisition costs
                
                $
                (378,000
                )
  The
        Company charged the excess of the liabilities assumed of $ 378,000 to operations
        in 2007
  Since
        the
        Company and Smolenegy were inactive with no material assets or significant
        operations, unaudited pro forma results of operations for the years ended
        December 31, 2007 and 2006 assuming that the acquisition of Smolenegy occurred
        on January 1, 2006 have not been provided
  F-11
  **NOTE
        3 – RELATED PARTY TRANSACTIONS**
 
 Advances
        to Related parties
 
 In
        July
        2007, the Company advanced $200,000 to Gorstovoe LLC, a privately held company
        organized under the laws of the Russian Federation, that the Company merged
        with
        in January 2008 (see Note 10).
 
 Advances
        From Related Parties
 
 Entities
        controlled by Company shareholders and consultants have advanced funds to
        the
        Company for working capital purposes during the year ended December 31, 2007.
        No
        formal repayment terms or arrangements exist. The amount of the advances
        due the
        entities at December 31, 2007 and 2006 were $358,847 and $ 0,
        respectively.
 
 Notes
        Payable to Related Parties
  Notes
        payable to Company shareholders, entities controlled by Company shareholders
        and
        consultants as of December 31, 2007 and 2006 are as follows:
 2007
              
              2006Note
                  payable , unsecured and due July 5, 2008 ; interest payable monthly
                  at 8%
                  per annum
              
              $
              17,000
              
              $
              17,000Note
                  payable , unsecured and due August 1, 2017 ; non-interest bearing
              
              
              384,000
              
              
              -401,000
              
              
              17,000Less
                  current portion
              
              
              (17,000
              )
              
              -$
              384,000
              
              $
              17,000
  Maturities
        of long-term debt are as follows:
 
 Year
                  Ended2009
              
              $
              -2010
              
              
              -2011
              
              
              -2012
              
              
              -2013
                  and beyond
              
              
              384,000$
              384,000
  **NOTE
        4 – CONVERTIBLE NOTE PAYABLE**
 
 On
        July
        3, 2007, the Company issued a $200,000 convertible promissory note to a related
        party, due on demand with interest accruing at 10% per annum. The note is
        convertible at any time, at the holder’s option, at $0.10 per share. The
        conversion price is subject to certain anti-dilutive adjustments.
  In
        accordance with Emerging Issues Task Force Issue 98-5, Accounting for
        Convertible Securities with a Beneficial Conversion Features or Contingently
        Adjustable Conversion Ratios (“EITF 98-5”), the Company recognized an imbedded
        beneficial conversion feature present in the Convertible Note. The Company
        allocated a portion of the proceeds equal to the intrinsic value of that
        feature
        to additional paid-in capital. The Company recognized and measured an aggregate
        of $200,000 of the proceeds, which is equal to the intrinsic value of the
        imbedded beneficial conversion feature, to additional paid-in capital and
        a
        discount against the Convertible Note. The debt discount attributed to the
        beneficial conversion feature is charged to current period earnings.
  F-12
  **NOTE
        5** **–** **INCOME TAXES**
 
 At
        December 31, 2007, the Company has available for U.S. federal income tax
        purposes a net operating loss carryforward of approximately $900,000, expiring
        in the year 2027, that may be used to offset future taxable income. The Company
        has provided a valuation reserve against the full amount of the net operating
        loss benefit, since in the opinion of
        management based upon the earnings history of the Company; it is more likely
        than not that the benefits will not be realized. Due to significant changes
        in
        the Company's ownership, the future use of its existing net operating losses
        may
        be limited. Components of the deferred tax asset as of December 31, 2007
        are as
        follows:
 
 Non
                  current:Net
                  operating loss carryforward
              
              $
              315,000Valuation
                  allowance
              
              
              (315,000
              )Net
                  deferred tax asset
              
              $
              —
  Due
        to
        the acquisition (See Note 2) and change of ownership in 2007 and subsequent
        reverse merger (See Note 10), use of net operating losses of the past may
        be
        limited or unavailable.
  **NOTE
        6-LOSS PER SHARE**
 
 The
        following table presents the computation of basic and diluted losses per
        share:
 **For the Year Ended**
                
                **For the Period Ended****December 31, 2007**
                
                **December 31, 2006**Loss
                    available for common shareholders
                
                $
                (1,171,847
                )
                $
                (100,954
                )Basic
                    and fully diluted loss per share
                
                $
                (0.00
                )
                $
                (0.00
                )Weighted
                    average common shares outstanding
                
                
                301,495,890
                
                
                295,618,986
  Net
        loss
        per share is based upon the weighted average of shares of common stock
        outstanding, which exclude 2,000,000 shares issuable upon conversion of the
        convertible note payable principal and interest outstanding, as such shares
        would dilute the loss per share.
 
 **NOTE
        7 – CAPITAL STOCK**
 
 Preferred
        stock
 
 The
        Company is authorized to issue 5,000,000 shares, $0.0001 par value, of preferred
        stock. There are no issued or outstanding shares of preferred stock
 
 Common
        Stock
 
 The
        Company is authorized to issue 14,250,000,000 shares, $0.00001 par value,
        of its
        common stock. As of December 31, 2007, there are 210,000,000 shares issued
        and
        outstanding (See Note 1).
 
 Effective
        April 30, 2007 the Company amended its Articles of Incorporation for the
        purpose
        of effecting a one for twenty-eight and a half (1 for 28.5) forward split
        of its
        common stock. In addition, the authorized common stock was increased from
        five
        hundred million (500,000,000) shares, $.0001 par value, to fourteen and a
        quarter billion (14,250,000,000) shares, $.00001 par value. All share and
        per
        share data have been given retroactive effect to reflect this
        recapitalization.
 
 In
        June
        2006, the Company issued 242,250,000 shares of common stock valued at $850
        to
        the Founders of the Company for services.
 
 In
        July
        2006, the Company sold 14,250,000 shares of common stock for $10,000 to private
        investors.
 
 On
        October 15, 2006, The Company closed its offering to the public of up to
        a
        maximum of 85,500,000 shares of its common stock. The Company sold 85,500,000
        shares in the Offering for gross proceeds of $90,000. Expenses of the Offering
        were $25,752 and the Company netted $64,248.
 
 In
        September 2007, pursuant to the Combination Agreement, the Company issued
        110,000,000 shares of common stock and additionally canceled 242,000,000
        shares
        in conjunction with the Company’s acquisition of a 51% interest in Gorstovoye
        LLC which was consummated in January 2008 (see Note 10)
  F-13
  **NOTE
        8 – COMMITMENTS AND CONTINGENCIES**
  Litigation
 
 The
        Company is subject to other legal proceedings and claims, which arise in
        the
        ordinary course of its business. Although occasional adverse decisions or
        settlements may occur, the Company believes that the final disposition of
        such
        matters should not have a material adverse effect on its financial position,
        results of operations or liquidity.
 
 **NOTE
        9 – GOING CONCERN MATTERS**
 
 The
        accompanying financial statements have been prepared on a going concern basis,
        which contemplates the realization of assets and the satisfaction of liabilities
        in the normal course of business. As shown in the accompanying financial
        statements during the period June 7, 2006 (date of inception) through
        December 31, 2007, the Company incurred a loss of $1,272,801. These factors
        among others may indicate that the Company will be unable to continue as
        a going
        concern for a reasonable period of time.
 
 The
        Company's existence is dependent upon management's ability to develop profitable
        operations and there can be no assurance that the Company's efforts will
        be
        successful. However, the planned principal operations have not commenced
        and no
        assurance can be given that management's actions will result in profitable
        operations or the resolution of its liquidity problems. The accompanying
        statements do not include any adjustments that might result should the Company
        be unable to continue as a going concern.
 
 In
        order
        to improve the Company's liquidity, the Company's management is actively
        pursuing additional equity financing through discussions with investment
        bankers
        and private investors. There can be no assurance the Company will be successful
        in its effort to secure additional equity financing
 
 **NOTE
        10 – SUBSEQUENT EVENTS**–**ACQUISITION AND CORPORATE
        RESTRUCTURE**
  Pursuant
        to the Share Exchange Agreement dated May 31, 2007, as amended, during the
        year
        ended December 31, 2007, the Company issued 110,000,000 shares of its common
        stock to the owner of Gorstovoe LLC, “Gorstovoye”
        an oil and gas exploration company organized under the laws of the Russian
        Federation in consideration for a 51% controlling interest in Gorstovoye.
 
 As
        a
        result of delays in the obtaining approvals from Russian government ministries
        to effect the transfer and the Company obtaining satisfactory evidence of
        the
        seller’s ownership of the 51% interest in Gorstovoye, the acquisition of the 51%
        in Gorstovoye by the Company was not consummated until January 2008, and
        accordingly, shall be accounted for in 2008. As a result of the consummation
        of
        the Combination Agreement, there was a change in control of Russoil. In
        accordance with SFAS No. 141, Gorstovoye was the accounting acquiring entity.
        While the transaction is accounted for using the purchase method of accounting,
        in substance the Agreement is a recapitalization of Gorstovoye’s capital
        structure. 
 For
          accounting purposes, Russoil shall account for the transaction as a reverse
          acquisition and Gorstovoye is the surviving entity. The Company shall not
          recognize goodwill or any material intangible assets in connection with
          the
          consummated transaction.
  F-14




**Item
      8. Changes in and Disagreements with Accountants on Accounting and Financial
      Disclosure.**





On
      August
      15, 2007, Wolinetz, Lafazan and Company, P.C., resigned as the independent
      auditor for Russoil.





Wolinetz,
      Lafazan and Company, P.C. had served as the independent auditor of Russoil’s
      annual financial statements from Russoil’s inception. From the date on which
      Wolinetz, Lafazan and Company, P.C. was engaged until the date they resigned,
      there were no disagreements with Wolinetz, Lafazan and Company, P.C. 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 Wolinetz, Lafazan and Company, P.C., would have caused Wolinetz,
      Lafazan and Company, P.C. to make reference to the subject matter of the
      disagreements in connection with any reports it would have issued, and there
      were no “reportable events” as that term is defined in Item 304(a)(1)(iv) of
      Regulations S-K. For the period from Russoil’s inception to December 31, 2006,
      Wolinetz, Lafazan and Company, P.C. did express a concern about Russoil’s
      ability to continue as a going concern.





Russoil
      provided Wolinetz, Lafazan and Company P.C. with a copy of the foregoing
      disclosure, and Wolinetz, Lafazan and Company, P.C. has furnished Russoil with
      a
      letter, dated September 21, 2007, addressed to the Securities and Exchange
      Commission, stating that it agrees with such disclosure to the extent that
      it
      pertains to Wolinetz, Lafazan and Company CPA, P.C.


*New
        independent registered public accounting firm*
 
 On
        August
        22, 2007 (the “Engagement Date”), the Company engaged RBSM LLP (“New Auditor”)
        as its independent registered public accounting firm for the Company’s fiscal
        year ended December 31, 2007. The decision to engage the New Auditor as the
        Company’s independent registered public accounting firm was approved by the
        Company’s Board of Directors.
 
 During
        the two most recent fiscal years and through the Engagement Date, the Company
        has not consulted with the New Auditor regarding either:
 
 1.
              the
                  application of accounting principles to any specified transaction,
                  either
                  completed or proposed, or the type of audit opinion that might
                  be rendered
                  on the Company’s financial statements, and neither a written report was
                  provided to the Company nor oral advice was provided that the New
                  Auditor
                  concluded was an important factor considered by the Company in
                  reaching a
                  decision as to the accounting, auditing or financial reporting
                  issue;
                  or
 
 2.
              any
                  matter that was either subject of disagreement or event, as defined
                  in
                  Item 304(a)(1)(iv)(A) of Regulation S-k and the related instruction
                  to
                  Item 304 of Regulation S-K, or a reportable event, as that term
                  is
                  explained in Item 304(a)(1)(v)(A) of Regulation
                  S-K.


**Item
      8A (T). Controls and Procedures**





Disclosure
      controls and procedures are controls and other procedures that are designed
      to
      ensure that information required to be disclosed by us in the reports that
      we
      file or submit under the Exchange Act is recorded, processed, summarized and
      reported, within the time periods specified in the Securities and Exchange
      Commission's rules and forms. Disclosure controls and procedures include,
      without limitation, controls and procedures designed to ensure that information
      required to be disclosed by us in the reports that we file under the Exchange
      Act is accumulated and communicated to our management, including our principal
      executive and financial officers, as appropriate to allow timely decisions
      regarding required disclosure.





Evaluation
      of Disclosure Controls and Procedures





Our
      disclosure controls and procedures are designed to ensure that information
      required to be disclosed in reports that we file or submit under the Securities
      Exchange Act of 1934 is recorded, processed, summarized and reported within
      the
      time periods specified in the rules and forms of the United States Securities
      and Exchange Commission. Our principal executive officer, principal financial
      officer, and principal accounting officer have reviewed the effectiveness of
      our
      "disclosure controls and procedures" (as defined in the Securities Exchange
      Act
      of 1934 Rules 13a-14(c) and 15d-14(c)) within the end of the period covered
      by
      this Annual Report on Form 10-KSB




28





Based
      on
      this evaluation, because of the Company’s limited resources and limited number
      of employees, our management concluded that, as of December 31, 2007, our
      disclosure controls and procedures are not effective to provide reasonable
      assurance that information required to be disclosed by us in the reports that
      we
      file or submit under the 1934 Act is recorded, processed, summarized, and
      reported within the time periods specified in the SEC’s rules and forms and to
      provide reasonable assurance that such information is accumulated and
      communicated to our management, including our principal executive officer and
      principal financial officer, as appropriate to allow timely decisions regarding
      required disclosures. Our
      management is in the process of identifying deficiencies with respect to our
      disclosure controls and procedures and implementing corrective measures, which
      includes the establishment of new internal policies related to financial
      reporting.





**Evaluation
      of and Report on Internal Control over Financial Reporting**





Management
      is responsible for establishing and maintaining adequate internal control over
      financial reporting of the Company. Management, with the participation of our
      principal executive officer and principal financial officer, has evaluated
      the
      effectiveness of our internal control over financial reporting as of
      December 31, 2007 based on criteria established in Internal
      Control—Integrated Framework issued by the Committee of Sponsoring Organizations
      of the Treadway Commission. Based on this evaluation, management concluded
      that,
      as of December 31, 2007, our internal control over financial
      reporting is  effective in providing reasonable assurance regarding
      the reliability of financial reporting and the preparation of financial
      statements for external purposes in accordance with U.S. generally accepted
      accounting principles. A
      control system, no matter how well conceived and operated, can provide only
      reasonable, not absolute, assurance that the objectives of the control system
      are met. Because of the inherent limitations in all control systems, no
      evaluation of controls can provide absolute assurance that all control issues
      and instances of fraud, if any, within the Company have been
      detected.





This
      annual report does not include an attestation report of the Company’s
      independent registered public accounting firm regarding internal control over
      financial reporting. Management’s report was not subject to attestation by the
      Company’s independent registered public accounting firm pursuant to temporary
      rules of the SEC that permit the Company to provide only management’s report in
      this annual report.





Changes
      in Internal Controls over Financial Reporting





There
      have been no changes in the Company's internal control over financial reporting
      during the last quarterly period covered by this report that have materially
      affected, or are reasonably likely to materially affect, the Company's internal
      control over financial reporting.





29




**PART
      III**




**Item
      9. Directors, Executive Officers, Promoters and Control Persons; Compliance
      with
      Section 16(a) of the Exchange Act**





The
      names
      of our current officers and directors are set forth below:


**Name**
              
              **Age**
              
              **Position(s)**Evgeny
                  Bagay
              
              58
              
              Chief
                  Executive Officer and a DirectorEvgeny
                  Fedosov
              
              57
              
              Chief
                  Financial Officer and a DirectorViktor
                  Ekimov
              
              55
              
              DirectorElias
                  Kamennoy
              
              22
              
              Director





Set
      forth
      below is biographical information concerning each of our executive officers
      and
      directors based on information supplied by them.





**Evgeny
      Bagay** ,
      age 58,
      is the Company’s Chief Executive Officer and a Director. He has been a Deputy
      General Director of Smolenergy since 2006. From 2001 until joining Smolenergy,
      he had been Deputy General of Mikasoil, a petroleum refinery.





**Evgeny
      Fedosov** ,
      age 57,
      is the Company’s Chief Financial Officer and a Director. Mr. Evgeny has been the
      Financial Director and Chairman of the Board of Directors of Smolenergy since
      June 2006. For more than five years before joining Smolenergy, he was the
      General Director of JSC Slavneft – Moscow, an oil construction and
      reconstruction firm.





**Viktor
      Ekimov** ,
      age 55,
      is a Director of the Company. Mr. Ekimov for more than the past five years
      has
      been the General Director and sole stockholder of OJSE UC
      Tomskpodvodtraboprovodstroy. He is currently a Deputy of the State Duma for
      the
      Tomskoy and Councilman of the Directors of OAO Commercial Bank in Tomsk. He
      is
      the author of scientific articles addressing the problems of welding devices
      for
      mineral pipelines.





**Elias
      Kamennoy** ,
      age 22,
      is a Director of the Company. He is a student at Moscow State
      University.





There
      are
      no family relationships among our directors and officers.





All
      directors hold office until the next annual meeting of stockholders or the
      election and qualification of their successors, or their earlier death,
      resignation or removal. Vacancies in the existing board are filled by a majority
      of the remaining directors. All officers hold office until their respective
      successors are elected and qualified, or until their earlier resignation or
      removal.




30




We
      do not
      have any long-term compensation plans or stock option plans.





**No
      Code of Ethics; Financial Expert**





We
      do not
      have a Code of Ethics applicable to our principal executive, financial and
      accounting officers. We do not have an audit committee ,nominating committeeor
      a
      financial expert. We plan to search for an independent financial expert to
      join
      our Board of Directors. Until January 2008, the Company had no operations and
      does not perceive the need for such committee or expert until it begins to
      generate revenues and derive sufficient income to make the necessary
      expenditures to establish such committee or engage any such expert.





**Compliance
      with Section 16(a) of the Exchange Act**





Section
      16 of the Securities Exchange Act requires our directors and executive officers
      and persons who own more than 10% of a registered class of our equity securities
      to file various reports with the Securities and Exchange Commission concerning
      their holdings of, and transactions in, our securities. Copies of these filings
      must be furnished to us.





Based
      on
      a review of the copies of such forms furnished to us, we believe that during
      2007 the following officers, directors and greater than 10% stockholders did
      not
      comply with all applicable Section 16(a) filing requirements, as identified
      below.





Evgeny
      Bagay, a Director and our Chief Executive Officer, Evgeny Fedosov, a Director
      and our Chief Financial Officer, Viktor Ekimov, a Director and beneficial owner
      of more than 10% of our equity securities (a “Principal Stockholder”) and Elias
      Kamennoy, a Director, who assumed their officerships and became Directors on
      or
      about September 28, 2007, did not file their respective Form 3s until the dates
      indicated below:




Mr.
                  Bagay
              
              December
                  4, 2007Mr.
                  Fedosov
              
              December
                  4, 2007Mr.
                  Kamennoy
              
              December
                  4, 2007Mr.
                  Ekimov
              
              February
                  29, 2008




Mr.
      Ekimov became a principal stockholder as of January 16, 2008 and filed a Form
      4
      with respect thereto on February 29, 2008.




**Item
      10. Executive Compensation**





**Summary
      Compensation**





Neither
      Russoil nor Smolenergy paid cash compensation to their respective current
      executive officers during the years ended December 31, 2006 and 2007.




31




We
      do not
      have a Stock Option, Stock Grant, Phantom Stock or other similar plans. We
      may
      adopt such plans in the future.





**No
      Employment Agreements**





We
      have
      not entered into employment agreements with our executive officers as of the
      date of this Annual Report on Form 10-KSB. We may enter into employment
      agreements with certain of our executive officers in the future. No assurance
      can be given when, if ever, such agreements will be entered into or the terms
      thereof.





**Outstanding
      Equity Awards**





None
      of
      the individuals who served as our executive officers during 2007 held at
      December 31, 2007, received options, warrants or other right to purchase shares
      of our common stock, or unvested shares of common stock, granted or awarded
      to
      them, for services rendered.





**Compensation
      of Directors**





Mr.
      Hutchinson had been paid $12,000 assumedly for his services as a Director for
      12
      months. Except for Mr. Hutchinson, our directors do not receive any compensation
      for their services as members of the Board of Directors, but are entitled to
      reimbursement for expenses incurred in connection with their attendance at
      Board
      of Directors’ meetings.





**Item
      11. Security Ownership of Certain Beneficial Owners and
      Management**





The
      following table sets forth certain information, as giving after effect to the
      Share Exchange Agreement and the transactions contemplated thereby, regarding
      the beneficial ownership of our Common Stock by (i) each person who, to our
      knowledge, beneficially owns more than 5% of our common stock; (ii) each of
      our
      directors and executive officers; and (iii) all of our executive officers and
      directors as a group: ****


**Approximate****Name
                  and address of Beneficial Owner****(2)**
              
              **Amount
                  (1)**
              
              **Percento****f
                  Class****Directors
                  and Named Executive Officers:**Viktor
                  Ekimov (3) (4)
              
              
              110,000,000
              
              
              52
              %Evgeny
                  Fedosov (3)
              
              
              0
              
              
              *Evengy
                  Bagay (3)
              
              
              0
              
              
              *Elias
                  Kamennoy (3)
              
              
              0
              
              
              *All
                  directors and named executive officers as agroup
                  (4 persons)
              
              
              110,000,000
              
              
              52
              %




32




*
      Less
      than 1%.





(1)
            Beneficial
                ownership is calculated based on 211,060,000 shares of common stock
                outstanding. Beneficial ownership is determined in accordance with
                Rule
                13d-3 of the SEC.





(2)
            The
                address for the above named directors and executive officers
                is:





c/o
      OJSE
      Smolenergy


Nagerezhnaya
      Tarasa Schevchenko 1⁄2


Building
      27


121059
      Moscow





(3)
            Messrs.
                Fedosov, Bagay, Ekimov and Kamennoy are Directors of the Company
                and
                Messrs. Bagay and Fedosov are our Chief Executive and Chief Financial
                Officers, respectively.





(4)
            The
                owner of record is Mr. Ekimov. However, he has advised the Company
                and the
                Company intends to allow Viktor Ekimov to transfer his shares to
                Ariust.





**Item
      12. Certain Relationships and Related Transactions: Director
      Independence**





On
      April
      23, 2007, Silvestre Hutchinson acquired control of Russoil by purchasing from
      Kimberly A. Hennessey, our then President, Chief Executive Officer, Chief
      Financial Officer, and Sole Director, 228,000,000 shares of Russoil’s common
      stock owned by Ms. Hennessey pursuant to and in accordance with a stock purchase
      agreement, dated April 25, 2007, between Mr. Hutchinson and Ms. Hennessey.
      Mr.
      Hutchinson also purchased 14,250,000 shares from Nicole Gagne, who was Russoil’s
      Secretary. In connection with that Stock Purchase Agreement, these prior
      officers and directors resigned from their positions with Russoil and Mr.
      Hutchinson was appointed as the President, Chief Executive Officer, and Chief
      Financial Officer, Secretary and a Director of Russoil.





The
      founders of Gorstovoye were OAO Tomskneftegasgeologiya VNK (“Tomsk VNK”) (51%)
      and TPTPS (49%). On or about October 21, 2002, Tomsk VNK sold its interests
      in
      Gorstovoye to TPTPS and TPTPS became Gorstovoye’s sole shareholder. In January
      2006 TPTPS sold 100% of its shares in Gorstovoye to Ariust (also, a fully owned
      subsidiary of TPTPS). During its fiscal years ended December 31, 2006 and 2007,
      Gorstovoye paid TPTPS the approximate sums of $532,000 and $120,000,
      respectively.





All
      of
      the officers and directors of Smolenergy reside in the Russian Federation.
      Mr.
      Mikle Vax has facilitated transactions among the parties, by among other things,
      acting as a liaison between Smolenergy, its accountants, and representatives
      and
      Russoil, its attorneys and representatives.




33




Myron
      Gushlak of Bluewater previously acted as an advisor to Russoil and previously
      acted as a liaison between Mr. Hutchinson, Russoil’s attorneys and accountants
      and representatives of Smolenergy. Mr.
      Gushlak should be deemed an affiliate of Bluewater and Bluewater is a
      shareholder of Russoil.  On
      July
      6, 2007, the Company issued its $200,000 convertible promissory notes (the
“notes”) in the aggregate principal amount of $230,000 in consideration for that
      same amount from Bluewater. That note bears interest at 10% per annum and is
      payable on demand. At the option of Bluewater, principal and accrued interest
      may be converted into common stock of Russoil at the rate of one (1) share
      for
      each $0.10 (ten cents) of the indebtedness. That conversion price is subject
      to
      certain anti-dilutive adjustments. See also “Sales of Unregistered Securities”.





In
      July
      2007, Russoil advanced $200,000 to Gorstovoye through Smolenergy.





**Item
      13. Exhibits**




**Exhibit Number**
              
              **Exhibit
                Description**3.1
              
              Articles
                  of Incorporation (1)3.1(a)
              
              Changes
                  to Articles of Incorporation (2)3.1(b)
              
              Articles
                  of Merger (2)3.2
              
              By-Laws
                  (1)10.1
              
              Share
                  Exchange Agreement dated as of May 31, 2007 among Registrant, OJSE
                  Smolenergy and its stockholders. (3)10.2
              
              Termination
                  of Share Exchange Agreement (Exhibit 10.1) dated as of August 31,
                  2007.
                  (4)10.3
              
              Share
                  Exchange Agreement dated as of August 31, 2007 among OJSE Smolenergy
                  and
                  Viktor Ekimov and Amendment No. 1 thereto. (4)10.4
              
              Voting
                  Agreement dated as of August 31, 2007 by and between Silvestre
                  Hutchinson
                  and Viktor Ekimov. (4)10.5
              
              Cancellation
                  (of Shares) Agreement dated as of August 31, 2007, by and between
                  Registrant and Silvestre Hutchinson. (4)10.6
              
              Registrant’s
                  Convertible Promissory Note issued to Bluewater Partners, S.A.
                  (4)10.7
              
              (Further)
                  Amendment to the Share Exchange Agreement.*31.1
              
              Certification
                  of the Chief Executive Officer pursuant to Section 302 of the
                  Sarbanes-Oxley Act of 2002 (Rule 13a-14(a)).*31.2
              
              Certification
                  of chief financial Officer pursuant to Section 302 of the Sarbanes-Oxley
                  Act of 2002 (Rule 13a-14(a)).*32.1
              
              Certification
                  of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350,
                  as
                  adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
                  (Rule
                  13a-14(b)).*32.2
              
              Certification
                  of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350,
                  as
                  adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
                  (Rule
                  13a-14(b)).*




34




(1)
      Filed
      as an exhibit to our Form SB-2 Registration Statement, filed on August 14,
      2006
      and incorporated herein by reference.





(2)
      Filed
      as an exhibit to our Current Report on Form 8-K, filed May 10, 2007, and
      incorporated herein by reference.





(3)
      Filed
      as an exhibit to our Current Report on Form 8-K, filed on June 1, 2007, and
      incorporated herein by reference.





(4)
      Filed
      as an exhibit to our Current Report on Form 8-K, filed on September 10, 2007,
      and incorporated herein by reference.





(5)
      Filed
      as an exhibit to our Current Report on Form 8-K/A, filed on February 8, 2008
      and
      incorporated by reference herein.





*
      Filed
      herewith.





**Item
      14. Principal Accountant Fees and Services**





Our
      principal outside accountant for 2007 is RBSM LLP. Our principal outside
      accountant was Wolinetz, Lafazan and Company, P.C. for 2006. Set forth below
      are
      the fees and expenses for RBSM LLP and Wolinetz, Lafazan and Company, P.C.
      for
      the following services provided to us in 2007 and 2006,
      respectively.


2007
              
              2006Annual
                  Audit and Quarterly Review Fees
              
              $
              47,350
              
              $
              20,000Audit-Related
                  Fees (1)
              
              $
              -
              
              $
              -Tax
                  Fees (2)
              
              $
              -
              
              $
              -Total
                  Fees
              
              $
              47,350
              
              $
              20,000




(1)
            Audit-related
                service fees include fees for issuance of consents and comfort letters,
                audit and accounting assistance with respect to our financing
                arrangements, equity transactions and acquisitions during the
                year.





(2)
            Tax
                return preparation, quarterly estimates, tax planning and tax-related
                research.





Our
      Board
      of Directors approves each non-audit engagement or service with or
      by


our
      independent auditor. Prior to approving any such non-audit engagement or
      service, the Board first receives information regarding the engagement or
      service that is detailed as to the specific engagement or service to enable
      the
      Board to make a well-reasoned assessment of the impact of the engagement or
      service on the auditor’s independence. The Board approved all non-audit
      engagements with, and services provided by, our auditors during
      2007.




*[Remainder
      of page intentionally left blank.]*





35


**SIGNATURES**





Pursuant
      to the requirements of the Securities Exchange Act of 1934, the registrant
      has
      duly caused this report to be signed on its behalf by the undersigned, thereunto
      duly authorized.


**RUSSOIL
                    CORPORATION**Date:
                    April 15, 2008
                
                By:
                /s/
                  Evgeny BagayName:
                Evgeny
                    BagayTitle:
                Chief
                    Executive Officer(Principal
                    Executive Officer)Date:
                    April 15, 2008
                
                By:
                /s/
Evgeny
                  FedosovName:
                Evgeny
                    FedosovTitle:
                Chief
                    Financial Officer(Principal
                    Financial andAccounting
                    Officer)




36