| ** **                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                | **UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

Washington, D.C. 20549

** **                | ** **                                                                                |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------|
| ** **                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                | ** **                                                                                                   | **FORM 10-Q**

** **                                                                 | ** ** | ** ** |
| (Mark One)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                | ** **                                                                                                   | ** **                                                                                | ** ** | ** ** |
| x  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF  THE SECURITIES EXCHANGE ACT OF 1934 

 

For the quarterly  period ended March 31, 2011

** **                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| ** **                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                | ** **                                                                                                   | OR

** **                                                                            | ** ** | ** ** |
| o  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF  THE SECURITIES EXCHANGE ACT OF 1934  For the transition period from __________ to  ___________ 

** **                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| ** **                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                | ** **                                                                                                   | **Commission File Number 333-141993**

** **                                         | ** ** | ** ** |
| ** **                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                | ** **                                                                                                   | **PETROCORP INC.**

(Name of small  business issuer in its charter)                       | ** ** | ** ** |
| **Delaware**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | ** **                                                                                                   | **20-5134664**                                                                            |
| (State or other jurisdiction of 

incorporation or organization) 

	                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | (I.R.S. Employer  Identification No.)                                                                        |
| ** **                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                | **1065 Dobbs Ferry Road**

**White Plains, New York  10607**

(Address of principal  executive offices) | ** **                                                                                |
| ** **                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                | ** **                                                                                                   |  

**(914) 674-4373**

(Issuer's telephone  number, including area code)

** ** | ** ** | ** ** |
| Indicate by check mark 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

 

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

 

        	Large accelerated filer		o  Accelerated filer		o  Non-accelerated	Filer		o  Smaller reporting company x

 

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

  |
| State the number of shares  outstanding of each of the issuer’s classes of common equity, as of the  latest practicable date: 22,680,000 shares of common stock, par value $.0001  per share, as of April 30, 2011.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |                                                                                                              |                                                                                           |  |  |  |  |  |

** **

1

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**PETROCORP INC.**

**REPORT ON FORM 10-Q**

** **

** **
|           |   |                                                           | Page   |
|----------------|--------|----------------------------------------------------------------|--------|
|           |   |                                                           |   |
| PART I         | -      | FINANCIAL INFORMATION                                          | 3      |
|   Item 1  | -      | Financial Statements                                           | 3      |
|   Item 2  | -      | Management’s Discussion and Analysis or Plan of Operation | 8      |
|   Item 3  | -      | Quantitative and Qualitative Disclosures About Market Risk     | 11     |
|   Item 4T | -      | Controls and Procedures                                        | 11     |
|           |   |                                                           |   |
| PART II        | -      | OTHER INFORMATION                                              | 14     |
|   Item 1  | -      | Legal Proceedings                                              | 14     |
|   Item 2  | -      | Unregistered Sales of Equity Securities and Use of  Proceeds   | 14     |
|   Item 3  | -      | Defaults Upon Senior Securities                                | 14     |
|   Item 4  | -      | Submission of Matters to a Vote of Security Holders            | 14     |
|   Item 5  | -      | Other Information                                              | 14     |
|   Item 6  | -      | Exhibits                                                       | 14     |

 

2

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**PART I – FINANCIAL INFORMATION**

##  

## Item 1 – Financial Statements

** **

** **

| **PETROCORP INC.**                                                                                                                                                                                                                                                                                                                                                             |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **(An Exploration Stage Company)**                                                                                                                                                                                                                                                                                                                                             |
| **Consolidated Balance Sheets**                                                                                                                                                                                                                                                                                                                                                |
|                                                                                                                                                                                                                                                                                                                                                                           |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                           |
|                                                                                                                                                                                                                                                                                                                                                                           |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                           |   |   | March 31, |   | December 31, |
|                                                                                                                                                                                                                                                                                                                                                                           |   |   | 2011 |   | 2010 |
|                                                                                                                                                                                                                                                                                                                                                                           |   |   | (Unaudited) |   |   |   |
|                                             **                ASSETS**  |   |   |   |   |   |   |   |
| Current assets:                                                                                                                                                                                                                                                                                                                                                                |   |   |   |   |   |   |   |
|   Cash                                                                                                                                                                                                                                                                                                                                                                    |   |   | $ |     29,750 |   | $ |        29,404 |
|   Revenue receivables                                                                                                                                                                                                                                                                                                                                                     |   |   |   |           902 |   |   |         2,958 |
|      Total current assets                                                                                                                                                                                                                                                                                                                                  |   |   |   |        30,652 |   |   |        32,362 |
|                                                                                                                                                                                                                                                                                                                                                                           |   |   |   |   |   |   |   |
| Oil and gas properties  (successful efforts method):                                                                                                                                                                                                                                                                                                                           |   |   |   |   |   |   |   |
|   Unproved acreage                                                                                                                                                                                                                                                                                                                                                        |   |   |   |      327,500 |   |   |      327,500 |
|    Less depletion,  depreciation and amortization                                                                                                                                                                                                                                                                                                                    |   |   |   |       (61,250) |   |   |      (56,250) |
|                                                                                                                                                                                                                                                                                                                                                                           |   |   |   |      266,250 |   |   |      271,250 |
|                                                                                                                                                                                                                                                                                                                                                                           |   |   |   |   |   |   |   |
| Total assets                                                                                                                                                                                                                                                                                                                                                                   |   |   | $ |      296,902 |   | $ |      303,612 |
| ** **                                                                                                                                                                                                                                                                                                                                                                     |   |   |   |   |   |   |   |
| ** **                                                                                                                                                                                                                                                                                                                                                                     |   |   |   |   |   |   |   |
| **LIABILITIES AND STOCKHOLDERS' DEFICIT**                                                                                                                                                                                                                                                                                                                                      |
| Current liabilities:                                                                                                                                                                                                                                                                                                                                                           |   |   |   |   |   |   |   |
|   Accrued expenses                                                                                                                                                                                                                                                                                                                                                        |   |   | $ |        26,500 |   | $ |        17,377 |
|   Notes payable to majority  stockholder                                                                                                                                                                                                                                                                                                                                  |   |   |   |      949,950 |   |   |      949,950 |
|      Total current  liabilities                                                                                                                                                                                                                                                                                                                            |   |   |   |      976,450 |   |   |      967,327 |
|                                                                                                                                                                                                                                                                                                                                                                           |   |   |   |   |   |   |   |
| Stockholders' deficit:                                                                                                                                                                                                                                                                                                                                                         |   |   |   |   |   |   |   |
|   Preferred stock; $.0001  par value; 1,000,000 shares                                                                                                                                                                                                                                                                                                                    |   |   |   |   |   |   |   |
|     authorized; none issued  or outstanding                                                                                                                                                                                                                                                                                                                     |   |   |   |                - |   |   |                - |
|   Common stock; $.0001 par  value; 100,000,000 shares                                                                                                                                                                                                                                                                                                                     |   |   |   |   |   |   |   |
|     authorized; 22,680,000  shares issued and outstanding                                                                                                                                                                                                                                                                                                       |   |   |   |         2,268 |   |   |         2,268 |
|   Additional paid-in  capital                                                                                                                                                                                                                                                                                                                                             |   |   |   |   2,323,509 |   |   |   2,279,259 |
|   Deficit accumulated  during the exploration stage                                                                                                                                                                                                                                                                                                                       |   |   |   |  (3,005,325) |   |   |  (2,945,242) |
|                                                                                                                                                                                                                                                                                                                                                                           |   |   |   |    (679,548) |   |   |    (663,715) |
| ** **                                                                                                                                                                                                                                                                                                                                                                     |   |   |   |   |   |   |   |
| Total liabilities and stockholders' deficit                                                                                                                                                                                                                                                                                                                                    |   |   | $ |      296,902 |   | $ |      303,612 |
|                                                                                                                                                                                                                                                                                                                                                                           |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                           |   |   |   |   |   |   |   |
| * See accompanying notes to the consolidated  financial statements.*                                                                                                                                                                                                                                                                                                      |
|  3                                                                                                                                                                                                                                                                                                                                                                        |

 

----

 

| **PETROCORP INC.**                                                        |
|---------------------------------------------------------------------------|
| **(An Exploration Stage Company)**                                        |
| **Consolidated Statements of Operations**

**(Unaudited)**                |
|                                                                      |   |   |   |   |   |   |   |   |   |   |
|                                                                      |   |   |   |   |   |   |   |   | June 19, 2006 |
|                                                                      |   |   |   |   |  (inception) to |
|                                                                      |   |   |       	Three Months Ended March 31, |   | March 31, |
|                                                                      |   |   | 2011 |   | 2010 |   | 2011 |
|                                                                      |   |   |   |   |   |   |   |   |   |   |
| Revenues earned during the  exploration stage                             |   |   |  $ |        34,795 |   |  $ |        30,910 |   |  $ |      239,205 |
|                                                                      |   |   |   |   |   |   |   |   |   |   |
| Cost of revenues during the  exploration stage:                           |   |   |   |   |   |   |   |   |   |   |
|   Oil and gas operating  costs                                       |   |   |   |        16,660 |   |   |        22,560 |   |   |      194,736 |
|   Exploration costs                                                  |   |   |   |  - |   |   |         5,920 |   |   |      169,374 |
|   Depletion, depreciation  and amortization                          |   |   |   |         5,000 |   |   |         7,500 |   |   |        61,250 |
|   Production taxes                                                   |   |   |   |         2,505 |   |   |         2,225 |   |   |        17,221 |
|                                                                      |   |   |   |        24,165 |   |   |        38,205 |   |   |      442,581 |
|                                                                      |   |   |   |   |   |   |   |   |   |   |
| Gross profit (loss)                                                       |   |   |   |        10,630 |   |   |        (7,295) |   |   |    (203,376) |
|                                                                      |   |   |   |   |   |   |   |   |   |   |
| Operating expenses:                                                       |   |   |   |   |   |   |   |   |   |   |
|   Salary - president and  majority stockholder                       |   |   |   |        30,000 |   |   |        30,000 |   |   |      390,000 |
|   Professional fees - chief  financial officer and secretary         |   |   |   |        25,500 |   |   |        25,500 |   |   |      330,206 |
|   Professional fees - audit  and reviews                             |   |   |   |  - |   |   |         6,000 |   |   |        65,500 |
|   Professional fees -  foreign                                       |   |   |   |  - |   |   |  - |   |   |      150,342 |
|   General and  administrative expenses                               |   |   |   |            963 |   |   |         6,782 |   |   |      136,810 |
|   Impairment charges                                                 |   |   |   |                - |   |     |                - |   |     |   1,557,607 |
|                                                                      |   |   |     |        56,463 |   |     |        68,282 |   |     |   2,630,465 |
|                                                                      |   |   |   |   |   |   |   |   |   |   |
| Loss from operations                                                      |   |   |   |      (45,833) |   |   |      (75,577) |   |   |  (2,833,841) |
|                                                                      |   |   |   |   |   |   |   |   |   |   |
| Other (income) expenses:                                                  |   |   |   |   |   |   |   |   |   |   |
|   Gain from sale of  marketable securities                           |   |   |   |  - |   |   |      (10,030) |   |   |      (10,030) |
|   Interest income                                                    |   |   |   |  - |   |   |              (1) |   |   |        (2,447) |
|   Interest expense                                                   |   |   |   |                - |   |   |                - |   |   |            359 |
|   Interest expense -  related parties                                |   |   |    |        14,250 |   |     |        16,500 |   |     |      182,002 |
|                                                                      |   |   |     |        14,250 |   |     |         6,469 |   |     |      169,884 |
|                                                                      |   |   |   |   |   |   |   |   |   |   |
| Loss before income taxes                                                  |   |   |   |      (60,083) |   |   |      (82,046) |   |   |  (3,003,725) |
|                                                                      |   |   |   |   |   |   |   |   |   |   |
| Provision for income taxes                                                |   |   |   |                - |   |   |                - |   |   |         1,600 |
|                                                                      |   |   |   |   |   |   |   |   |   |   |
| Net loss                                                                  |   |   |  $ |      (60,083) |   |  $ |      (82,046) |   |  $ |  (3,005,325) |
|                                                                      |   |   |   |   |   |   |   |   |   |   |
| Net loss per common share -                                               |   |   |   |   |   |   |   |   |   |   |
|    basic and diluted                                            |   |   |  $ | (0.00) |   |  $ | (0.00) |   |   |   |
|                                                                      |   |   |   |   |   |   |   |   |   |   |
| Weighted common shares  outstanding -                                     |   |   |   |   |   |   |   |   |   |   |
|    basic and diluted                                            |   |   |   | 22,680,000 |   |   | 22,680,000 |   |   |   |
|                                                                      |   |   |   |   |   |   |   |   |   |   |
|                                                                      |   |   |   |   |   |   |   |   |   |   |
| * See accompanying notes to the consolidated  financial statements.* |
|  4                                                                   |

 

----

 

| **PETROCORP INC.**                                                                                    |
|-------------------------------------------------------------------------------------------------------|
| **(An Exploration Stage Company)**                                                                    |
| **Consolidated Statements of Cash Flows**

**(Unaudited)**                                            |
|                                                                                                  |   |   |   |   |   |   |   |   |   |   |
|                                                                                                  |   |   |   |   |   |   |   |   |  June 19, 2006 |
|                                                                                                  |   |   |   |   | (inception) to |
|                                                                                                  |   |   |          March 31, |   | March 31, |
|                                                                                                  |   |   | 2011 |   | 2010 |   | 2011 |
|                                                                                                  |   |   |   |   |   |   |   |   |   |   |
| Cash flows from operating  activities:                                                                |   |   |   |   |   |   |   |   |   |   |
|   Net loss                                                                                       |   |   |  $ |      (60,083) |   |  $ |      (82,046) |   |  $ |  (3,005,325) |
|   Adjustments to reconcile  net loss to net cash                                                 |   |   |   |   |   |   |   |   |   |   |
|      provided by (used in) operating  activities:                                 |   |   |   |   |   |   |   |   |   |   |
|      Depletion,  depreciation and amortization                                    |   |   |   |         5,000 |   |   |         7,500 |   |   |        62,321 |
|      Impairment charges                                                           |   |   |   | -  |   |   | -  |   |   |   1,557,607 |
|      Salary contribution                                                          |   |   |   |        30,000 |   |   |        30,000 |   |   |      390,000 |
|      Interest contribution                                                        |   |   |   |        14,250 |   |   |        16,500 |   |   |      182,002 |
|   Changes in operating assets  and liabilities:                                                  |   |   |   |   |   |   |   |   |   |   |
|      Revenue receivables                                                          |   |   |   |         2,056 |   |   |        20,271 |   |   |          (902) |
|      Accrued expenses                                                             |   |   |   |         9,123 |   |   |        (8,298) |   |      |        26,500 |
|         Net cash  provided  by (used in) operating activities |   |   |     |            346 |   |     |      (16,073) |   |   |    (787,797) |
|                                                                                                  |   |   |   |   |   |   |   |   |   |   |
| Cash flows from investing  activities:                                                                |   |   |   |   |   |   |   |   |   |   |
|   Proceeds from sale of  marketable securities                                                   |   |   |   |  - |   |   |         5,000 |   |   |         5,000 |
|   Acquisition of oil and  gas properties                                                         |   |   |   |                - |   |   |                - |   |   |  (1,682,996) |
|   Proceeds from sale of oil  and gas properties                                                  |   |   |   |                - |   |   |                - |   |   |        96,551 |
|   Purchase of equipment                                                                          |   |   |    |                - |   |   |                - |   |      |      (18,000) |
|         Net cash provided  by (used in) investing activities       |   |   |   |                - |    |   |         5,000 |   |   |  (1,599,445) |
|                                                                                                  |   |   |   |   |   |   |   |   |   |   |
| Cash flows from financing  activities:                                                                |   |   |   |   |   |   |   |   |   |   |
|   Proceeds from notes  payable to majority stockholder                                           |   |   |     |                - |   |     |                - |   |     |      949,892 |
|   Repayment of notes  payable to majority stockholder                                            |   |   |     |                - |   |     |                - |   |     |      (90,000) |
|   Proceeds from sale of  common stock                                                            |   |   |     |                - |   |      |                - |   |      |   1,557,100 |
|         Net cash provided  by financing activities                 |   |   |   |                - |   |   |                - |   |     |   2,416,992 |
|                                                                                                  |   |   |   |   |   |   |   |   |   |   |
| Net change in cash                                                                                    |   |   |   |            346 |   |   |      (11,073) |   |   |        29,750 |
|                                                                                                  |   |   |   |   |   |   |   |   |   |   |
| Cash at beginning of period                                                                           |   |   |     |        29,404 |   |   |        38,510 |   |      |  - |
| Cash at end of period                                                                                 |   |   |  $ |        29,750 |   |  $ |        27,437 |   |  $ |        29,750 |
|                                                                                                  |   |   |   |   |   |   |   |   |   |   |
| Supplemental disclosure of  cash flow information:                                                    |   |   |   |   |   |   |   |   |   |   |
|   Cash paid for interest                                                                         |   |   |  $ |  - |   |  $ |  - |   |  $ |            359 |
|   Cash paid for taxes                                                                            |   |   |  $ |  - |   |  $ |  - |   |  $ |  - |
|                                                                                                  |   |   |   |   |   |   |   |   |   |   |
| Supplemental disclosure of  noncash investing and                                                     |   |   |   |   |   |   |   |   |   |   |
|   financing activities:                                                                          |   |   |   |   |   |   |   |   |   |   |
|   Forgiveness of debt by a  stockholder                                                     |   |   |  $ |                - |   |  $ |                - |   |  $ |         3,000 |
|   Salary contribution                                                                       |   |   |  $ |        30,000 |   |  $ |        30,000 |   |  $ |      390,000 |
|   Interest contribution                                                                          |   |   |  $ |        14,250 |   |  $ |        16,500 |   |  $ |      182,002 |
|   Exchange of $294,000 of  marketable securities, $245,000                                       |   |   |   |   |   |   |   |   |   |   |
|      cost basis to Soladino  Investments SA, an entity owned                      |   |   |   |   |   |   |   |   |   |   |
|      by the president for  cancellation of $294,000 of notes                      |   |   |  $ |  - |   |  $ |  - |   |  $ |      294,000 |
|   Acquisition of  undeveloped oil and gas properties                                             |   |   |   |   |   |   |   |   |   |   |
|      from majority  stockholder for notes                                         |   |   |  $ |  - |   |  $ |  - |   |  $ |      967,881 |
|   Sale of $448,876 of oil  and gas properties to                                                 |   |   |   |   |   |   |   |   |   |   |
|     Soladino  Investments  SA for cancellation of                                 |   |   |   |   |   |   |   |   |   |   |
|     $500,000 of notes and  cash payment of $96,551                                          |   |   |  $ |  - |   |  $ |  - |   |  $ |    (500,000) |
|                                                                                                  |   |   |   |   |   |   |   |   |   |   |
|                                                                                                  |   |   |   |   |   |   |   |   |   |   |
| * See accompanying notes to the consolidated  financial statements.*                             |
|  5                                                                                               |

 

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**PETROCORP INC.(An Exploration Stage Company)March 31, 2011 and 2010Notes to the Consolidated Financial Statements(Unaudited)**

**1.  Basis of Presentation**

 

The accompanying unauditedinterim consolidated financial statements have been prepared in accordance withthe accounting principles generally accepted in the United States of America forinterim financial information and with the instructions to Form 10-Q and Article8 of Regulation S-X.  Accordingly, they do not include all of theinformation and footnotes required by accounting principles generally acceptedin the United States of America for annual financial statements.  In theopinion of management, all adjustments, consisting of normal recurring accrualsconsidered necessary for a fair presentation, have been included.  Operatingresults for the three months ended March 31, 2011 are not necessarily indicativeof the results that may be expected for the year ending December 31, 2011. These financial statements should be read in conjunction with the financialstatements of the Company for the year ended December 31, 2010 and notes theretocontained in the Annual Report on Form 10-K of the Company as filed with theUnited States Securities and Exchange Commission (the "SEC") on April 15, 2011.

 

*Reclassifications*

 

Certain amounts in the prior period consolidated financialstatements have been reclassified to conform with the current periodpresentation.   These reclassifications had no effect on reportedlosses.

 

**2.  Exploration Stage Company**

 

The Company is an exploration stage companyas defined by section 915-10-20 of theFASB Accounting Standards Codification.  Although theCompany has recognized some nominal amount of revenue since inception, the Companyis devoting substantially all of its efforts on establishing the business andits planned principal operations have not yet commenced.  The Company has nodeclared oil and gas reserves.  All losses since inception have been consideredpart of the Company’s exploration stage activities.

** **

**3. Related Party Transactions**

** **

AtMarch 31, 2011, the Company has $949,950 in secured, non-interest bearing notes(four), payable on demand with its majority stockholder, Soladino InvestmentsSA.

 

Duringthe three month period ended March 31, 2011 the Company recorded interestexpense of $14,250.  Interest is computed at an implied rate of 6% and thisamount was recorded as a capital contribution by the stockholder to the Company.

** **

TheCompany was provided management services by its president, Mr. Fitzsimons duringthe quarter at no cost.  The Company recorded the $30,000 estimated value ofthese services as compensation expense and credit the same as a capital contribution.

 

 6

 

----

 

 **PETROCORPINC.(An Exploration Stage Company)March 31, 2011 and 2010Notes to the Consolidated Financial Statements(Unaudited)**

 

**4. Subsequent Events**

 

The Company has evaluated all events thatoccurred after the balance sheet date through the date when the financialstatements were issued to determine if they must be reported.  Management ofthe Company has determined that there are no reportable subsequent events to bedisclosed.

7

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#  

# Item 2 - Management’s Discussion and Analysis orPlan of Operation

 

References to “Company”, “we”or “us” refer to Petrocorp Inc., unless the context requires otherwise.

 

Forward Looking Statements

 

Thefollowing is provided to supplement, and should be read in conjunction with,our financial statements and the accompanying notes included in our Form 10-K asof December 31, 2010.  This report contains forward-looking statements andinformation relating to us that is based on the beliefs of our management aswell as assumptions made by, and information currently available to, ourmanagement. When used in this report, the words “anticipate”, “believe”,“estimate”, “expect”, “intend”, “plan” and similar expressions, as they relateto us or our management, are intended to identify forward-looking statements.These statements reflect management’s current view of us concerning futureevents and are subject to certain risks, uncertainties and assumptions,including among many others:

 

|   | ● | the  quality of our properties with regard to, among other things, the existence  of reserves in economic quantities; |
|--------|---------|-----------------------------------------------------------------------------------------------------------------------|
|   | ● | uncertainties  about the estimates of reserves;                                                                       |

|   | ● | our  ability to increase our production and oil and natural gas income through  exploration and development; |
|--------|---------|--------------------------------------------------------------------------------------------------------------|
|   | ● | the  number of well locations to be drilled and the time frame within which they  will be drilled;           |

|   | ● | the  timing and extent of changes in commodity prices for natural gas and crude  oil; |
|--------|---------|---------------------------------------------------------------------------------------|
|   | ● | domestic  demand for oil and natural gas;                                             |

|   | ● | drilling  and operating risks;                                                       |
|--------|---------|--------------------------------------------------------------------------------------|
|   | ● | the  availability of equipment, such as drilling rigs and transportation  pipelines; |

|   | ● | changes  in our drilling plans and related budgets;                                                                               |
|--------|---------|-----------------------------------------------------------------------------------------------------------------------------------|
|   | ● | the  adequacy of our capital resources and liquidity including, but not limited  to, access to additional borrowing capacity; and |

|   | ● | risks  and uncertainties described in the Risk Factors section or elsewhere in our  Annual Report on Form 10-K. |
|--------|---------|-----------------------------------------------------------------------------------------------------------------|

 

Shouldone or more of these risks or uncertainties materialize or should theunderlying assumptions prove incorrect, actual outcomes and results coulddiffer materially from those indicated in the forward-looking statements.

 

Anyforward-looking statement speaks only as of the date on which such statement ismade, and we undertake no obligation to update any forward-looking statement orstatements to reflect events or circumstances after the date on which such statementis made or to reflect the occurrence of unanticipated events. New factorsemerge from time to time and it is not possible for management to predict allof such factors, nor can it assess the impact of each factor on the business orthe extent to which any factor, or combination of factors, may cause actualresults to differ materially from those contained in any forward-lookingstatements.

 

BusinessOverview

 

Petrocorp Inc. was incorporated on June19, 2006 under the laws of the State of Delaware.  Prior to September 2007, theCompany’s business model provided telephonic conferencing services tobusinesses, organizations and individuals in North America.

 

During2009 the Company changed its emphasis from an international oil and gas companyprimarily to a US focused company because of world economic conditions and lackof debt/capital financing.  The Company disposed of its foreign oil and gasleases/permits in two separate transactions.  The Company completed anextensive review of its Alaska and Oklahoma oil and gas leases, operations andrecorded a $900,865 impairment charge in 2010 as compared to $639,813 in 2009.

 

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Our office is located at 1065 Dobbs FerryRoad, White Plains, NY 10607 and our telephone number is (914) 674-4373.

** **

Planof Operation

*** ***

We are a US exploration stage Company engaged in the acquisition,exploration and production, if warranted, development of prospective oil andgas properties.  We plan to conduct exploration work on each of our current andfuture properties in order to ascertain whether any of them possesscommercially exploitable quantities of oil and gas reserves.  The Companycurrently has lease holdings on the North Slope of Alaska and oil and gas productionin Oklahoma.  

      

**            Alaska**

 

On October 25, 2007, Union Energy (Alaska) LLC (“UEA”), oursubsidiary, was the winning bidder for tracts 254, 258 and 259 in the NorthSlope Areawide 2007 Competitive Oil and Gas Lease Sale.  The leases, covering14,680 net acres, were issued on August 1, 2008, with a term of seven years andsubject to a 12.5% royalty interest infavor of the State of Alaska.  These tracts arecontiguous and the Company believes, based upon current available geologicaldata and maps from the public domain, to contain the Kavik gas field,discovered in 1969, which has been evaluated in detail by the U.S. Departmentof the Interior, U.S Geological Survey ("USGS").

 

On February 27, 2008, UEA was the winning bidder for tracts 922,923, 927, 988, 989, 990, 991, 992 and 925 in the State of Alaska North SlopeFoothills Areawide 2008 Competitive Oil and Gas Lease Sale. The leases,covering 9,600 net acres, were issued on September 1, 2008, with a term of 10years and subject to a 12.5% royaltyinterest in favor of the State of Alaska.  Thesetracts are contiguous and the Company believes, based upon current availablegeological data and maps from the public domain, to contain the East Kurupa gas field, discovered by Texaco in 1976.  The USGS has been studying thepotential for unconventional over-pressured, continuous gas deposits in theColville basin that contains the Kurupa anticline and is now interpreting the East Kurupa well to have encountered a thick section of over-pressured gas in Brookianstrata.

 

Furthermore, any gas recovered from our Alaska leases will not besalable unless or until a proposed North Slope gas pipeline is completed.

 

**            Oklahoma**

 

OnAugust 12, 2008, the Company acquired from its President, James Fitzsimons, a50% working interest (41.25% net revenue interest) in the Snake Creek prospect,a 3,200 gross (3,022 net) acre gas development project located in northernOkmulgee County.  The Company reimbursed Mr. Fitzsimons for his historic costs(acreage and drilling) by issuing a secured, non-interest bearing note, payableon demand for $210,917 and assumed responsibility for all further costs.

 

OnNovember 30, 2008, the Company acquired from Mr. Fitzsimons, a 100% workinginterest (81.25% net revenue interest) in the Spanish Peak prospect, a 2,041gross (900 net) acre gas development project located in Okmulgee County,Oklahoma.  The Company reimbursed Mr. Fitzsimons for his historic costs(acreage) by issuing a secured, non-interest bearing note, payable on demandfor $173,141 and assumed responsibility for all further costs.

 

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OnMarch 31, 2009, the Company purchased 171 oil and gas lease interests totaling3,827 gross (2,666 net) acres in Okfuskee and Okmulgee Counties, Oklahoma from CH4 Energy, Inc., a company controlled by Soladino Investments SA at a costof $583,823.  The Company reimbursed Soladino for its historic costs (acreage)by issuing a secured, non-interest bearing note, payable on demand for $583,823and assumed responsibility for all further costs.

 

The Oklahoma leases are in areas which the Company believes arepromising for oil and gas production although the Company does not make anyrepresentations as to future profitable production, if any.

 

Resultsof Operations

 

For the quarter ended March 31, 2011,we had revenues of $34,795, oil and gas operating costs of $16,660 and incurreda loss of $60,083, as compared to revenues of $30,910, operating costs of $22,560and a loss of $82,046 in 2010.  Duringthe 2011 quarter, the Company paid compensation to its President of $30,000which was recorded as a capital contribution by the Company and professionalfees of $25,500, which related primarily to the development of the Company’sbusiness plan and costs associated with being a public company, as compared to$31,500 for the 2010 quarter.  Also during the 2011 quarter, the Company paidgeneral and administrative expenses of $963, as compared to $6,782 for the 2010quarter.  Interest expense of $14,250 was computed on the majority stockholderloans at an implied rate of 6% and this amount was recorded as a capitalcontribution by the Company during the quarter.

 

Liquidityand Capital Resources

 

OurCompany's principal cash requirements are for exploration expenses which weanticipate will rise as we proceed to determine the feasibility of developingour current or future property interests.  As of March 31, 2011, we had cash of$29,750 and negative working capital of $945,798.  Our net cash provided byfinancing activities from June 19, 2006 (inception) to March 31, 2011 was $2,416,992.

 

AtMarch 31, 2011, the Company has $949,950 in notes (four) payable to SoladinoInvestments SA.  The notes are secured bythe Company’s oil and gas leases, are non interest bearing and payable upondemand.

** **

Weanticipate that additional funding will be provided in the form of equityfinancing from the sale of our common stock or loans from our majoritystockholder.  We cannot provide investors with any assurance that additionalfunds will be raised.  Currently, we do not have any arrangements in place forfuture equity financings.

** **

Critical Accounting Policies

Financial Reporting Release No. 60 of the SEC encouragesall companies to include a discussion of critical accounting policies ormethods used in the preparation of the financial statements.  There are nocurrent revenue generating activities that give rise to significant assumptionsor estimates.  Our most critical accounting policies relate to the accountingand disclosure of related party transactions.  Our financial statements filed aspart of our December 31, 2010 Annual Report on Form 10-K include a summary ofthe significant accounting policies and methods used in the preparation of ourfinancial statements.

 

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Off-BalanceSheet Arrangements

 

Wehave never entered into any off-balance sheet financing arrangements and havenot formed any special purpose entities. We have not guaranteed any debt orcommitments of other entities or entered into any options on non-financialassets.

** **

**Item3. - Quantitative and Qualitative Disclosures About Market Risk**

 

Theinformation called for by this item is not required as we are a smallerreporting company.

** **

**Item4T. - Controls and Procedures**

 

***Disclosure Controls and Procedures***

 

Regulations under the Securities Exchange Act of 1934 (the“Exchange Act”) require public companies to maintain “disclosure controls andprocedures,” which are defined as controls and other procedures that aredesigned to ensure that information required to be disclosed by the issuer inthe reports that it files or submits under the Exchange Act is recorded,processed, summarized and reported, within the time periods specified in theSecurities and Exchange Commission's rules and forms.  Disclosurecontrols and procedures include, without limitation, controls and proceduresdesigned to ensure that information required to be disclosed by an issuer in thereports that it files or submits under the Exchange Act is accumulated andcommunicated to the issuer's management, including its principal executive andprincipal financial officers, or persons performing similar functions, asappropriate to allow timely decisions regarding required disclosure.

 

We conducted an evaluation, with the participation of our ChiefExecutive Officer and Chief Financial Officer, of the effectiveness of ourdisclosure controls and procedures as of March 31, 2011.  Based onthat evaluation, our Chief Executive Officer and Chief Financial Officer haveconcluded that as of March 31, 2011, our disclosure controls and procedureswere not effective at the reasonable assurance level due to the materialweaknesses described below.

 

In light of the material weaknesses described below, we performedadditional analysis and other post-closing procedures to ensure our financialstatements were prepared in accordance with generally accepted accountingprinciples.  Accordingly, we believe that the financial statementsincluded in this report fairly present, in all material respects, our financialcondition, results of operations and cash flows for the periods presented.

 

A material weakness is a control deficiency (within the meaning ofthe Public Company Accounting Oversight Board (PCAOB) Auditing Standard No. 2)or combination of control deficiencies that result in more than a remotelikelihood that a material misstatement of the annual or interim financialstatements will not be prevented or detected.  Management hasidentified the following two material weaknesses which have caused managementto conclude that, as of March 31, 2011, our disclosure controls and procedureswere not effective at the reasonable assurance level:

 

1.     We do nothave written documentation of our internal control policies andprocedures.  Written documentation of key internal controls overfinancial reporting is a requirement of Section 404 of the Sarbanes-Oxley Actwhich is applicable to us for the quarter ending March 31, 2011.  Managementevaluated the impact of our failure to have written documentation of ourinternal controls and procedures on our assessment of our disclosure controlsand procedures and has concluded that the control deficiency that resulted representeda material weakness.

 

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            2.      We do nothave sufficient segregation of duties within accounting functions, which is abasic internal control.  Due to our size and nature, segregation ofall conflicting duties may not always be possible and may not be economicallyfeasible.  However, to the extent possible, the initiation oftransactions, the custody of assets and the recording of transactions should beperformed by separate individuals.  Management evaluated the impactof our failure to have segregation of duties on our assessment of ourdisclosure controls and procedures and has concluded that the controldeficiency that resulted represented a material weakness.

 

To address these material weaknesses, management performedadditional analyses and other procedures to ensure that the financialstatements included herein fairly present, in all material respects, ourfinancial position, results of operations and cash flows for the periodspresented.

 

***Management'sReport on Internal Control Over Financial Reporting***

 

Our management is responsible for establishing and maintainingadequate internal control over financial reporting.  Internal controlover financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgatedunder the Exchange Act as a process designed by, or under the supervision of,the issuer’s principal executive and principal financial officers and effectedby the issuer’s board of directors, management and other personnel, to providereasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance withaccounting principles generally accepted in the United States of America andincludes those policies and procedures that:

 
|   | ●

 

●

 

 

● | Pertain to the maintenance of records that in reasonable detail  accurately and fairly reflect the transactions and dispositions of the assets  of the issuer;

Provide reasonable assurance that transactions are recorded as  necessary to permit preparation of financial statements in accordance with  accounting principles generally accepted in the United States of America and  that receipts and expenditures of the Company are being made only in  accordance with authorizations of management and directors of the issuer; and

Provide reasonable assurance regarding prevention or timely  detection of unauthorized acquisition, use or disposition of the issuer’s  assets that could have a material effect on the financial statements. |
|--------|---------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

 

 

 

 

 

 

 

 

 

 

Because of its inherent limitations, internal control overfinancial reporting may not prevent or detectmisstatements.  Projections of any evaluation of effectiveness tofuture periods are subject to the risk that controls may become inadequatebecause of changes in conditions, or that the degree of compliance with thepolicies or procedures may deteriorate.  All internal controlsystems, no matter how well designed, have inherentlimitations.  Therefore, even those systems determined to beeffective can provide only reasonable assurance with respect to financialstatement preparation and presentation.  Because of the inherentlimitations of internal control, there is a risk that material misstatementsmay not be prevented or detected on a timely basis by internal control overfinancial reporting.  However, these inherent limitations are knownfeatures of the financial reporting process.  Therefore, it ispossible to design into the process safeguards to reduce, though not eliminate,this risk.

 

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As of the end of our most recent quarter, management assessed theeffectiveness of our internal control over financial reporting based on thecriteria for effective internal control over financial reporting established inInternal Control-Integrated Framework issued by the Committee of SponsoringOrganizations of the Treadway Commission ("COSO") and SEC guidance onconducting such assessments.  Based on that evaluation, theyconcluded that, as of March 31, 2011, such internal control over financialreporting was not effective.  This was due to deficiencies that existedin the design or operation of our internal control over financial reportingthat adversely affected our internal controls and that may be considered to bematerial weaknesses.

 

The matters involving internal control over financial reportingthat our management considered to be material weaknesses under the standards ofthe Public Company Accounting Oversight Board were: (1) lack of a functioningaudit committee due to a lack of a majority of independent members and a lackof a majority of outside directors on our board of directors, resulting inineffective oversight in the establishment and monitoring of required internalcontrols and procedures; and (2) inadequate segregation of duties consistentwith control objectives of having segregation of the initiation oftransactions, the recording of transactions and the custody ofassets.  The aforementioned material weaknesses were identified byour Chief Financial Officer in connection with the review of our financialstatements as of March 31, 2011.

 

Management believes that the material weaknesses set forth initems (1) and (2) above did not have an effect on our financial results. However, management believes that the lack of a functioning audit committee andthe lack of a majority of outside directors on our board of directors resultsin ineffective oversight in the establishment and monitoring of requiredinternal controls and procedures, which could result in a material misstatementin our financial statements in future periods.

 

This quarterly report does not include an attestation report ofthe Company's registered public accounting firm regarding internal control overfinancial reporting.  Management's report was not subject toattestation by the Company's registered public accounting firm pursuant totemporary rules of the SEC that permit the Company to provide only themanagement's report in this annual report.

 

***Management'sRemediation Initiatives***

 

In an effort to remediate the identified material weaknesses andother deficiencies and enhance our internal controls, we have initiated, orplan to initiate, the following series of measures:

 

We will increase our personnel resources and technical accountingexpertise within the accounting function when funds are available to us. First,we will create a position to segregate duties consistent with controlobjectives of having separate individuals perform (i) the initiation oftransactions, (ii) the recording of transactions and (iii) the custody ofassets.  Second, we will create a senior position to focus on financialreporting and standardizing and documenting our accounting procedures with thegoal of increasing the effectiveness of the internal controls in preventing anddetecting misstatements of accounting information.  Third, we plan to appointone or more outside directors to our board of directors who shall be appointedto an audit committee resulting in a fully functioning audit committee who willundertake the oversight in the establishment and monitoring of requiredinternal controls and procedures such as reviewing and approving estimates andassumptions made by management when funds are available to us. We anticipatethe costs of implementing these remediation initiatives will be approximately $37,500to $75,000 a year in increased salaries, legal and accounting expenses.

 

Management believes that the appointment of one or more outsidedirectors, who shall be appointed to a fully functioning audit committee, willremedy the lack of a functioning audit committee and a lack of a majority ofoutside directors on our Board.

 

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We anticipate that these initiatives will be at least partially,if not fully, implemented by December 31, 2011.

 

# PART II –OTHER INFORMATION

 

## Item 1- LegalProceedings

 

TheCompany is not currently a party to any legal proceedings.

 

## Item 2 - Unregistered Sales of Equity Securities andUse of Proceeds

 

None

 

## Item 3- Defaults UponSenior Securities

 

None

 

## Item 4- Submission ofMatters to a Vote of Security Holders

 

None

##  

## Item 5- Other Information

 

None

 

## Item 6- Exhibits

 

Thefollowing documents are filed as part of this Report.

 
| **Exhibit Number** | **Exhibit Description**                                                                                                                                          |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 31.1               | Certification  of Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of  the Securities Exchange Act, as amended.  **                    |
| 31.2               | Certification  of Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of  the Securities Exchange Act, as amended.  **                    |
| 32.1               | Certificate  (Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the  Sarbanes-Oxley Act of 2002) of Principal Financial Officer.  ** |
| 32.2               | Certificate  (Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the  Sarbanes-Oxley Act of 2002) of Principal Financial Officer.  ** |

 

** Filed herewith

 

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**SIGNATURE**

 

 

In accordance with the requirements of the SecuritiesExchange Act of 1934, as amended, the registrant caused this Report on Form10-Q to be signed on its behalf by the undersigned, thereunto duly authorized.

 

                                                                                           **PETROCORP INC.**

 

Date:May 16, 2011

                                                                                    By:   /s/ James Fitzsimons  

         James Fitzsimons

         CEO and President

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