FORM 10-K











UNITED STATES




SECURITIES AND EXCHANGE COMMISSION




Washington, D.C. 20549




(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, 2009




[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934




For the transition period from ______ to ______




333-145569


(Commission file number)





PREMIER ENERGY CORP.




(Exact name of registrant as specified in its charter)




Florida
20-8724818(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)14785 Preston Road, Suite 550, Dallas, Texas
75254(Address of principal executive offices)
(Zip Code)




Issuer’s telephone number (972) 789-5500






Securities registered under Section 12(b) of the Exchange Act: None




Securities registered under Section 12(g) of the Exchange Act: None




Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes |_| No |X|




Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15 (d) of the Act. Yes |X| No |_|




Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act during the preceding 12 months (or for such shorter period that the issuer was required to file such reports), and (2)has been subject to such filing requirements for the past 90 days. Yes [ x ] No []















Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not 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-K or any amendment to this Form 10-K. [ x ]




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




Large accelerated filer.
[    ]
Accelerated filer.
[     ]Non-accelerated filer.
[    ]
Smaller reporting company.
[ X ](Do not check if a smaller reporting company)




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






As of June 30, 2009, the last business day of the Company’s most recently completed second fiscal quarter, the market value of our common stock held by non-affiliates was $17,010,000 which is computed using the last sales price on June 30, 2009 of $0.35 multiplied by 48,600,000




Number of the issuer’s Common Stock outstanding as of April 15, 2010: 210,600,000




Documents incorporated by reference: None









1











TABLE OF CONTENTS







pagePart IItem 1
Business
3Item 1A
Risk Factors
6Item 1B
Unresolved Staff Comments
6Item 2
Properties
6Item 3
Legal Proceedings
8Item 4
(Removed and Reserved)
9Part IIItem 5
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
9Item 6
Selected Financial Data
11Item 7
Management’s Discussion and Analysis of Financial Condition and Results of Operation
12Item 7A
Quantitative and Qualitative Disclosures about Market Risk
19Item 8
Financial Statements and Supplementary Data
19Item 9
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
20Item 9A
Controls and Procedures
21Item 9B
Other Information
21Part IIIItem 10
Directors and Executive Officers and Corporate Governance
22Item 11
Executive Compensation
25Item 12
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
26Item 13
Certain Relationships and Related Transactions, and Director Independence
27Item 14
Principal Accounting Fees and Services
28Part IVItem 15
Exhibits, Financial Statement Schedules
29Signatures

30








2







PART I






ITEM 1. BUSINESS






This annual report contains forward-looking statements as that term is defined under applicable securities laws. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may”, “should”, “expects”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential” or “continue” or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks in the section entitled “Risk Factors”, that may cause our company’s or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.




Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.




Our financial statements are stated in United States dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles (GAAP).




In this annual report, unless otherwise specified, all references to “common shares” refer to the common shares of our capital stock.




As used in this annual report, the terms “we”, “us” and “our” mean Premier Energy Corp., unless otherwise indicated.




Corporate History




Premier Energy Corp. ( “we”, “us”, “our”, or the “Company”) was incorporated in the State of Florida on December 26, 2006 under the name “Premier Nursing Products Corp.” The Company changed its name from “Premier Nursing Products Corp.” to “Premier Energy Corp.”  Immediately prior to the acquisition of Karbon (as described below) on January 30, 2009, we had nominal assets and revenues and no business operations. Our principal offices are located at 14785 Preston Road, Suite 550, Dallas, Texas, 75254 USA.





On January 30, 2009, we entered into a Share Exchange Agreement with Auxerre Trading Ltd., a British Virgin Islands Company (“Auxerre”) pursuant to which we acquired 51% of the outstanding securities of Karbon in exchange for 107,406,000 shares of our common stock (the “Karbon Acquisition”). Considering that, following the merger, Auxerre controls the majority of our outstanding voting common stock and we effectively succeeded our otherwise minimal operations to those that are theirs, Karbon is considered the accounting acquirer in this reverse-merger transaction.  A reverse-merger transaction is considered, and accounted for as, a capital transaction in substance; it is equivalent to the issuance of Karbon securities for our net monetary assets, which are deminimus, accompanied by a recapitalization. Accordingly, we have not recognized any goodwill or other intangible assets in connection with this reverse merger transaction. Karbon is the surviving and continuing entities and the historical financials following the reverse merger transaction will be those of Karbon.  We were a "shell company" (as such term is defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended) immediately prior to our acquisition of 51% of KARBON pursuant to the terms of the share exchange agreement.  As a result of such acquisition, our operations, in addition to the acquisition, exploration and development, if warranted, of prospective oil and gas properties, will include (i) consulting and working together with KARBON to plan and execute any exploration and development activities they conduct, (ii) reviewing annualized budgets from KARBON, and (iii) approving costs in excess of certain prescribed amounts by KARBON. Consequently, we believe that acquisition has caused us to cease to be a shell company as we no longer have nominal operations.





On January 30, 2009, prior to the Karbon Acquisition and the issuance of the 107,406,000, ZRV Consulting, Inc., the former majority shareholder of Premier, returned 107,406,000 shares of common stock of Premier for cancellation.





Business




Through our majority owned subsidiary, KARBON, which was organized on October 16, 2000 as a Closed Joint Stock Company under the Civil Code of the Russian Federation, we are engaged in the business of producing oil and gas from the North-Kopanskoye Oilfield, exploring and, if warranted, developing new commercial reserves of oil and gas. Our principal products are crude oil and natural gas that are marketed and sold by our majority owned subsidiary, KARBON, primarily through the third party operators of the wells and a third party marketing company.






3






We aim at improving our profitability from existing assets and attempting to acquire prospective oil and gas properties.




Our objective is to increase stockholder value by pursuing our corporate strategy of:





-
Economically growing reserves and production, by acquiring under-valued properties with reasonable risk-reward potential and by participating in, or actively conducting, drilling operations in order to further exploit our existing properties;





-
Seeking high-quality exploration and development projects with potential for providing operated, long-term drilling inventories; and





-
Selectively pursuing strategic acquisitions that may expand or complement our existing operations.





The pursuit of our strategy includes the following key elements:





Pursue Attractive Reserve and Leasehold Acquisitions





To date, we have closed one acquisition, the acquisition of 51% of KARBON.  We will seek to effect opportunistic acquisitions that can provide upside potential, including long-term drilling inventories and undeveloped leasehold positions with attractive return characteristics within the Russian Federation.





Drive Growth through Drilling





We plan to supplement our long-term reserve and production growth through drilling operations.  In 2010, subject to obtaining the required financing, we plan:





·
to do a major workover of a minimum of four (up to six) existing wells to grow production to 400 barrels of crude oil per day;





·
to use two drilling rigs to drill four new production wells to produce additional 800 (or better) barrels of crude oil per day; and





·
to perform a 3-D seismic survey to learn more about the deposit structure to enable us to better designate future development drilling locations and expected growth of reserve estimates.





The workover, drilling, completion and seismic work will be done using the presently available local and international labor, equipment and materials.  The above drilling program is subject to our obtaining the required financing.  As of the date hereof, we have no commitment to obtain this financing and, as a result, we are unable to commence such plan at this time.





Maximize Operational Control





It is strategically important to our future growth and maturation as an independent exploration and production company to be able to serve as operator of our properties when possible to exert greater control over costs and timing in and the manner of our exploration, development and production activities.  In 2009, we acquired 51 % of KARBON with assets that include 3,213 gross acres (1,639 net) with currently estimated total oil reserves of around 30.9 MMBbl. Although the assets also include similar amount of equivalent natural gas resources, we do not plan to start gas production during the first three years of development for reasons of reservoir pressure maintenance.  We are the owner of 51% of the outstanding securities of KARBON and consequently control the activities of KARBON.





Operate Efficiently and Effectively, and Maximize Economies of Scale Where Practical





As we manage our growth, we are actively focusing on reducing lease operating expenses as well as finding and development costs. In addition, our acquisition efforts are geared toward pursuing opportunities that fit well within existing operations, in areas where we are establishing new operations or in areas where we believe that a base of existing production will produce an adequate foundation for economies of scale.





Distribution Methods, Marketing and Major Customers





The operated oilfield in the Volga-Urals basin has reasonably sufficient infrastructure but may require some new infrastructure. A new oil discovery will also require new infrastructure, such as oil tanks and pumps. Crude oil must be moved from the production site to refineries. These movements can be made using a number of different modes of transportation, including trucks and trains, and also via an oil pipeline, which is available in close proximity with the oilfield. We would not, on our own, be able to distribute any oil and gas we currently produce and further discover, from our operations in Russia. We would need to rely on third party contractors to distribute any such oil and gas or sell any such oil and gas to third parties at the point of production.






4





When selling domestically, KARBON sells the crude oil to local refineries (on Ex Works terms) or enters into processing agreements with local refineries (for better bargains).  Depending on terms and seasonal conditions, best options are chosen at any particular period of time.





Once we choose to sell crude oil for export, an existing long term contract of sale to Trafigura Group (a global trading businesses, including the supply and offtake of crude oil, petroleum products, liquefied petroleum gas (LPG), metals, ores and concentrates) can be used. Crude oil can be made available for sale under Contract No AUXTRAF-04/07 dated September 4, 2007, that provides KARBON the right to sell to Trafigura during period of exploration up to 32 million barrels of crude oil.





Competition





The oil and gas industry is extremely competitive, particularly in the acquisition of prospective oil and natural gas properties and oil and gas reserves. We compete with numerous individuals and companies, including many major oil and gas companies, which have substantially greater technical, financial and operational resources and staffs. Accordingly, there is a high degree of competition for desirable oil and gas interests, suitable properties for drilling operations and necessary drilling equipment, as well as for access to funds. Our competitive position also depends on our geological, geophysical and engineering expertise, and our financial resources.





We believe that the location of our leasehold acreage, our exploration, drilling and production expertise and the experience and knowledge of our management and industry partners enable us to compete effectively in our current operating areas.





Seasonality





Generally, but not always, the demand and price levels for natural gas increase during the colder winter months and warmer summer months but decrease during the spring and fall months (“shoulder months”). Pipelines, utilities, local distribution companies and industrial users utilize natural gas storage facilities and purchase some of their anticipated winter and summer requirements during the shoulder months, which can lessen seasonal demand fluctuations.





In the past, we have not entered into hedging contracts, but we are considering entering various hedging contracts in the future for a portion of our production to reduce our overall exposure to seasonal demand and resulting commodity price fluctuations. The duration of our future hedging contracts will depend on our view of market conditions, available contract prices and our operating strategy at the time the contracts are initiated.





Regarding natural gas, as a producer local to Russia, KARBON is obligated to approach FST (Federalnaya Sluzba po Tarifam) to whom we must sell our gas under local domestic prices that are generally much lower then export prices.





Since December 31, 2007, KARBON has had sales delivery contracts in effect for the entire daily production capacity.





Government Approval and Regulation





We are required to obtain licenses and permits from various governmental authorities. We anticipate that we will be able to obtain all necessary licenses and permits to carry on the activities which we intend to conduct, and that we intend to comply in all material respects with the terms of such licenses and permits.





KARBON has been abiding by, and will continue to do so, all the Laws and Regulations of the Russian Federation that are applicable to oil and gas exploration, production and distribution activities.  These include, but are not limited to, the Russian Federation Tax Law for oil and gas production and refining, including the following particular taxes: Minerals Extraction Tax (MET: Russian acronym is NDPI), export tax if crude oil is shipped for export, value-added tax (VAT) if crude oil is sold locally in Russia; profit and property taxes, environmental protection taxes and payroll taxes.






5





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 Karbon, 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.





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 in excess of 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 Laws





The government of the Russian Federations, 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 Karbon license.





Employees





Other than our directors and officers, presently we have no employees at the US headquarters. We anticipate that we will be conducting most of our business through our management and any consultants whom we may engage in the USA and worldwide. KARBON has a staff of 35.




ITEM 1A. RISK FACTORS




As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide this information.




ITEM 1B. UNRESOLVED STAFF COMMENTS




As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide this information.




ITEM 2. PROPERTIES




We currently lease our office space in the USA and in Russia (Orenburg). Our principal executive offices are located at 14785 Preston Road, Suite 550 Dallas, Texas 75254. Our telephone number is (972) 789-5500.





North-Kopanskoye Oilfield (Russian Petroleum Property)




We control Karbon, a subsidiary that holds exploration and production license and operates the North-Kopanskoye Oilfield in the Volga-Urals Basin, close to Orenburg and Kazakhstan border.







6




Reserve Rule Changes




During 2009, the SEC issued its final rule on the modernization of oil and gas reporting (the “Reserve Ruling”) and the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update No. 2010-03 (“ASU 2010-03”) “Extractive Industries – Oil and Gas,” which aligns the estimation and disclosure requirements of FASB Accounting Standards Codification Topic 932 with the Reserve Ruling. The Reserve Ruling and ASU 2010-03 are effective for Annual Reports on Form 10-K for fiscal years ending on or after December 31, 2009. The key provisions of the Reserve Ruling and ASU 2010-03 are as follows:





•

Expanding the definition of oil- and gas-producing activities to include the extraction of saleable hydrocarbons, in the solid, liquid or gaseous state, from oil sands, coalbeds or other nonrenewable natural resources that are intended to be upgraded into synthetic oil or gas, and activities undertaken with a view to such extraction;





•

Amending the definition of proved oil and gas reserves to require the use of an average of the first-day-of-the-month commodity prices during the 12-month period ending on the balance sheet date rather than the period-end commodity prices;





•

Adding to and amending other definitions used in estimating proved oil and gas reserves, such as “reliable technology” and “reasonable certainty”;





•

Broadening the types of technology that a reporter may use to establish reserves estimates and categories; and





•

Changing disclosure requirements and providing formats for tabular reserve disclosures.




Proved reserves




The Company’s proved reserves totaled 15,651 TBOE, 15,576 TBOE and 15,602 TBOE at December 31, 2009, 2008 and 2007, respectively, representing $44,008, $10,335 and $27,778 Thousands, respectively, of Standardized Measure. The following table shows the changes in the Company’s proved reserve volumes for the North-Kopanskoye Oilfieldduring the year ended December 31, 2009 (in TBOE):





Production


Extensions and

Discoveries

Purchases of

Minerals-in-

Place

Sales of

Minerals-in-

Place


Revisions of

Previous

EstimatesNorth-Kopanskoye Oilfield

(25
)

—

—

—


100Total

(25
)

—

—

—


100




Tabular proved reserves disclosures.On a BOE basis, 0.7 percent of the Company’s total proved reserves at December 31, 2009 were proved developed reserves. Based on reserve information as of December 31, 2009, and using the Company’s production information for the year then ended, the reserve-to-production ratio associated with the Company’s proved reserves was in excess of 4 years on a BOE basis. The following table provides information regarding the Company’s proved reserves by geographic area as of and for the year ended December 31, 2009:





Summary of Oil and Gas Reserves as of December 31, 2009

Based on Average Fiscal-Year PricesOil

(TBbls)

NGLs

(MBbls)

Gas

(MMcf)

TBOE

Standardized

Measure(in thousands)Developed:Russia

93

-

111

112


315Undeveloped:Russia

8,029

-

45,060

15,539


43,693








The Company’s proved oil and gas reserves are located at the continent of Eurasia, entirely in the Russian Federation.





The North-Kopanskoye field covers an approximate area of 13 square kilometers and lies about 55 kilometers southeast of the city of Orenburg and 30 kilometers south of the Orenburg gas-condensate field.





The field is in the Urals Foredeep Province in the Volga-Urals Basin.





The North Kopanskoye field is a broad north/south-oriented elongated anticline structure. There are four domes on the structure. The central dome is the largest of the four. There are two smaller domes to the south and one smaller dome to the north. The field contains two reservoirs, the Pennsylvanian Bashkirian A-4 and Permian Artinskian Artinsky-1.





The Bashkirian A-4 and Artinsky-1 are structurally trapped, carbonate reservoirs. The Bashkirian A-4 reservoir accumulated oil on two of the four individual domes and is limited by Oil-Water Contacts (OWCs). The Artinsky-1 reservoir has a larger accumulation of oil limited by an OWC, an associated gas cap, and a separate nonassociated gas accumulation that is limited by a Gas-Water Contact (GWC).





The Artinsky-1 reservoir accumulations are trapped on three of the structural domes in two separate accumulations. The central and northern domes contain a continuous accumulation. This accumulation consists of oil and an associated gas cap.  It is mapped as high as 1,900 meters true vertical depth subsea (TVDSS) with a Gas-Oil Contact (GOC) at 1,979.5 meters TVDSS and an OWC at 2,021 meters TVDSS.








7





The area of the Artinsky-1 oil accumulation is about 10.2 square kilometers and the average thickness is 8.8 meters. The estimated volumes above the highest known oil in the Well 131 on the northern dome as well as the volumes located in the saddle area between the northern and central domes have been associated with probable reserves. The highest oil test in the Well 127 was at 1,976.9 meters TVDSS. The Wells 127 and 128 tested oil and water across the intervals of 2,021.9 to 2,028.9 meters TVDSS and 2,008.9 to 2,029.9 meters TVDSS, respectively. The highest water-only test at 2,043.9 meters TVDSS occurred in the Well 128. The Well 129 tested "no flow" in the Artinsky-1 reservoir over a low porosity and low permeability interval, as indicated by log interpretation. The northern dome of this accumulation tested oil from two different intervals down to 2,015 meters TVDSS in the Well 131.





The gas cap above the central dome of the Artinsky-1 oil reservoir is defined by gas and condensate tests in the Wells 127 and 129. The deepest gas test was at 1,984.9 meters TVDSS in the Well 129. The average thickness in this gas cap is 5.1 meters with an area of approximately 2.8 square kilometers.





The Artinsky-1 accumulation on the small southern structure, tested by the Well 109, is a nonassociated gas reservoir with a GWC estimated at 2,030 meters TVDSS. This gas reservoir has an area of approximately 1.2 square kilometers and estimated average thickness of 5.8 meters. The Well 109 tested gas and condensate down to 2,027.6 meters TVDSS and the adjacent Well 101 tested water as high as 2,036.7 meters TVDSS.





The Bashkirian A-4 Central reservoir is mapped as high as 2,800 meters TVDSS. The OWC is estimated at 2,839 meters TVDSS. This reservoir encompasses about 4.3 square kilometers with an average thickness of 12.4 meters. Oil was successfully tested in the Wells 130 and 133. Both wells tested water-free oil with the deepest oil test in the Well 130 at 2,839 meters TVDSS. A test in the Well 133 over an interval of 2,832.2 to 2,842.8 meters TVDSS produced oil and water.





The accumulation on the smaller southern dome, the Bashkirian A-4 South reservoir, is mapped as high as 2,900 meters TVDSS with an OWC at 2,905 meters TVDSS. This reservoir covers approximately 0.7 square kilometers and has an average thickness of 3.4 meters. The smaller southern accumulation was proved by a test in the Well 108 with oil-only down to 2,900.8 meters TVDSS and water tested as high as 2,929.8 meters TVDSS.





The Concession area of the North-Kopanskoye field for Exploration is located and delimited by the following geographic coordinates:





COORDINATES
LATITUDE:
LONGITUDE1
51° 22,3'
55° 32,8'2
51° 27,3'
55° 32,8'3
51° 27,3'
55° 36,4'4
51° 22,3'
55° 36,4'


Approximate area: 3,213 acres.




ITEM 3. LEGAL PROCEEDINGS




From time to time, the Company may become a party to litigation or other legal proceedings that it considers to be a part of the ordinary course of its business. Except as set forth below, the Company is not involved currently in legal proceedings that could reasonably be expected to have a material adverse effect on its business, prospects, financial condition or results of operations.




Until February 10, 2009, the Company’s subsidiary ZAO Karbon was litigating with Tintrade Limited, a lender of the Company’s subsidiary, with regard to repayment of a $300,000 loan that matured in June 2003. As of February 10, 2009, Karbon reached an out-of-court settlement with Tintrade Ltd and subsequently settled approximately $11,300 worth of court fees according to the payment plan agreed upon with Tintrade Ltd. Further, the Company has paid $100,000 off their liability to Tintrade Limited as part of an out-of-court settlement agreement and service of payment commitment.





The Company entered a Services Agreement with DirektFinanz AG (“DF”) dated July 7, 2009 (the “DF Agreement”).  The DF Agreement required that DF provide consulting services, serve as an investment banking liaison and assist in obtaining financing in consideration of 500,000 shares of common stock and various cash payments.  DF has failed to provide these services and is in breach of the DF Agreement.  Accordingly, as DF has breached the Agreement, the Company has advised DF that the DF Agreement is terminated and that the Company has no obligation to provide any further compensation to DF under the DF Agreement.




There are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our interest.




The Company may become involved in material legal proceedings in the future.






8









ITEM 4. (REMOVED AND RESERVED)






None.






PART II






ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS ANDISSUERPURCHASES OF EQUITY SECURITIES






Our common shares were approved for quotation on the OTC Bulletin Board on December 4, 2007, and are currently quoted for trading under the symbol “PNRC”.   In addition, the Company also trades on the Frankfurt, Berlin, Stuttgart and XETRA Exchanges under the symbol “P79.”   The following quotations obtained from the OTC Bulletin Board reflect the high and low bids for our common stock based on inter-dealer prices, without retail mark-up, mark-down or commission an may not represent actual transactions. The high and low bid prices of our common stock for the periods indicated below are as follows:







OTC Bulletin Board(1)Quarter Ended
High
LowYear Ended December 31, 2009December 31, 2009
$1.04
$0.375September 30, 2009
$0.75
$0.30June 30, 2009
$0.63
$0.17March 31, 2009
$0.86
$0.20Year Ended December 31, 2008December 31, 2008 (2)
$1.08
$0.20September 30, 2008
$0.76
$0.70June 30, 2008
N/A
N/AMarch 31, 2008
N/A
N/A





The above tables set forth the range of high and low closing bid prices per share of our common stock as reported by www.nasdaq.com for the periods indicated.





(1)
OTC Bulletin Board quotations reflect inter-dealer prices without retail mark-up, mark-down or commission, and may not represent actual transactions. Our common shares are issued in registered form. The transfer agent and registrar for our common stock is StockTrans, LLC (Telephone: (610)-649-7300; Facsimile: (610)-649-7302).(2)
Our common shares were approved for quotation on the OTC Bulletin Board on August 31, 2007. The first trade of PNRC stock on the OTC Bulletin Board occurred on September 8, 2008.




The following table sets forth the high and low closing price per share of our common stock on the Frankfurt, Berlin, Stuttgart and XETRA Exchanges**. Price is presented in Euros:






9







Frankfurt  (EUR)Quarter Ended
High
LowYear Ended December 31, 2009December 31, 2009
0.71
0.30September 30, 2009
0.40
0.20June 30, 2009
0.48
0.15March 31, 2009
0.19
0.15Year Ended December 31, 2008December 31, 2008 (2)
0.89
0.19September 30, 2008
0.55
0.55June 30, 2008
N/A
N/AMarch 31, 2008
N/A
N/A









Berlin (EUR)Quarter Ended
High
LowYear Ended December 31, 2009December 31, 2009
0.70
0.30September 30, 2009
0.51
0.10June 30, 2009
0.54
0.13March 31, 2009
0.67
0.15Year Ended December 31, 2008December 31, 2008 (2)
0.89
0.19September 30, 2008
N/A
N/AJune 30, 2008
N/A
N/AMarch 31, 2008
N/A
N/A









Stuttgart(EUR)Quarter Ended
High
LowYear Ended December 31, 2009December 31, 2009
0.71
0.35September 30, 2009
N/A
N/AJune 30, 2009
N/A
N/AMarch 31, 2009
N/A
N/AYear Ended December 31, 2008December 31, 2008 (2)
N/A
N/ASeptember 30, 2008
N/A
N/AJune 30, 2008
N/A
N/AMarch 31, 2008
N/A
N/A








10









XETRA(EUR)Quarter Ended
High
LowYear Ended December 31, 2009December 31, 2009
0.80
0.31September 30, 2009
N/A
N/AJune 30, 2009
N/A
N/AMarch 31, 2009
N/A
N/AYear Ended December 31, 2008December 31, 2008 (2)
N/A
N/ASeptember 30, 2008
N/A
N/AJune 30, 2008
N/A
N/AMarch 31, 2008
N/A
N/A




On April 15, 2010, the shareholders’ list of our common shares showed 24 registered shareholders and: 210,600,000 shares outstanding.




Dividend Policy




No cash dividends have been paid by our company on our common stock. We anticipate that our company’s future earnings will be retained to finance the continuing development of our business. The payment of any future dividends will be at the discretion of our company’s board of directors and will depend upon, among other things, future earnings, any contractual restrictions, the success of business activity, regulatory and corporate law requirements and the general financial condition of our company.




Equity Compensation Plan Information




We currently do not have any stock option or equity compensation plans or arrangements.




Purchases of Equity Securities by the Issuer and Affiliated Purchasers




We did not purchase any of our shares of common stock or other securities during our fiscal year ended December 31, 2009.




ITEM 6. SELECTED FINANCIAL DATA






The following financial data is derived from, and should be read in conjunction with, the “Financial Statements” and notes thereto. Information concerning significant trends in the financial condition and results of operations is contained in “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”






Selected Historical Data




December 31,2009


2008Total Assets

$
5,006,157


$
5,443,228Total Liabilities

$
2,208,451


$
1,437,018Total Stockholders' Equity (Deficit)

$
2,797,705


$
4,006,210Net Working Capital (Deficit)

$
(859,528
)

$
(102,740
)Revenues

$
383,158


$
808,211Operating Expenses

$
1,507,284


$
1,916,002Net Loss

$
1,205,163


$
1,097,077






11




ITEM 7. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS




Cautionary Notice Regarding Forward Looking Statements




The information contained in Item 7 contains forward-looking statements. Actual results may materially differ from those projected in the forward-looking statements as a result of certain risks and uncertainties set forth in this report. Although management believes that the assumptions made and expectations reflected in the forward-looking statements are reasonable, there is no assurance that the underlying assumptions will, in fact, prove to be correct or that actual results will not be different from expectations expressed in this report.




All statements made in this filing other than statements of historical fact, including statements addressing operating performance, events, or developments which management expects or anticipates will or may occur in the future, including statements related to distributor channels, volume growth, revenues, profitability, new products, adequacy of funds from operations, statements expressing general optimism about future operating results, and non-historical information, are forward looking statements. In particular, the words “believe,” “expect,” “intend,” “anticipate,” “estimate,” “may,” variations of such words, and similar expressions identify forward-looking statements, but are not the exclusive means of identifying such statements, and their absence does not mean that the statement is not forward-looking. These forward-looking statements are subject to certain risks and uncertainties, including those discussed below. Our actual results, performance or achievements could differ materially from historical results as well as those expressed in, anticipated, or implied by these forward-looking statements. We do not undertake any obligation to revise these forward-looking statements to reflect any future events or circumstances.




Readers should not place undue reliance on these forward-looking statements, which are based on management’s current expectations and projections about future events, are not guarantees of future performance, are subject to risks, uncertainties and assumptions (including those described below), and apply only as of the date of this filing. Our actual results, performance or achievements could differ materially from the results expressed in, or implied by, these forward-looking statements. Factors which could cause or contribute to such differences include, but are not limited to, the risks to be discussed in our Annual Report on form 10-K and in the press releases and other communications to shareholders issued by us from time to time which attempt to advise interested parties of the risks and factors which may affect our business. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.




Use of Generally Accepted Accounting Principles (“GAAP”) Financial Measures




We use GAAP financial measures in the section of this report captioned "Management’s Discussion and Analysis or Plan of Operation" (“MD&A”). All of the GAAP financial measures used by us in this report relate to the inclusion of financial information. This discussion and analysis should be read in conjunction with our financial statements and the notes thereto included elsewhere in this annual report. All references to dollar amounts in this section are in United States dollars unless expressly stated otherwise. Please see our “Risk Factors” for a list of our risk factors.




Overview




This subsection of MD&A provides an overview of the important factors that management focuses on in evaluating our businesses, financial condition and operating performance, our overall business strategy and our earnings for the periods covered. This MD&A should be read in conjunction with “Item 1. Financial Statements” of this report on Form 10-K.




This overview summarizes the MD&A, which includes the following sections:








•

Executive Summary –an executive summary of our results of operations for the year ended December 31, 2009.





•

Critical Accounting Estimates – a discussion of the accounting estimates that are most critical to aid in fully understanding and evaluating our reported financial results and that require management’s most difficult, subjective or complex judgments.





•

New Accounting Standards – a discussion of recently issued accounting standards and their potential impact on our consolidated financial statements.





•

Results of Operations – an analysis of the Company’s consolidated results of operations for the years ended December 31, 2009 and 2008, which have been presented in its consolidated financial statements. In order to assist the reader in understanding our business as a whole, certain metrics are presented for each of our segments.





•

Liquidity and Capital Resources – an analysis of cash flows, off-balance sheet arrangements, stock repurchases and the impact of changes in interest rates on our business.





RESULTS OF OPERATIONS





The following discussion and analysis summarizes the results of operations of the Company for the year ended December 31, 2009 and 2008.






12





COMPARISON OF THE YEAR ENDED DECEMBER 31, 2009 AND 2008





EXECUTIVE SUMMARY





The following is an executive summary of what Premier Energy Corp. believes are important results as of and during the year ended December 31, 2009, which should be considered in the context of the additional discussions herein and in conjunction with its consolidated financial statements. We believe such highlights are as follows:








•

Net revenues for the year ended December 31, 2009 decreased 52.6% to $383,158 from $808,211 in the comparable period in 2008.





•

Deterioration in current ratio (defined as current assets divided by current liabilities) of 46.56% at December 31, 2009 as compared to 86.73% at December 31, 2008.





•

General and administrative expenses as a percentage of revenue were 140.1% and 27.7% for the year ended December 31, 2009 and 2008, respectively, which was primarily due to increases in, among other factors, additional legal, consult and audit expenses.





•

Marketing and transportation expenses were down by 35.6%, value falling from $318,845 at the year ended December 31, 2008 to $205,290 at December 31, 2009.








CRITICAL ACCOUNTING ESTIMATES





Our consolidated financial statements are prepared in accordance with GAAP. In connection with the preparation of our financial statements, we are required to make assumptions and estimates about future events, and apply judgments that affect the reported amount of assets, liabilities, revenue, expenses and the related disclosures. We base our assumptions, estimates and judgments on historical experience, current trends, and other factors that management believes to be relevant at the time our consolidated financial statements are prepared. On a regular basis, management reviews the accounting policies, estimates, assumptions and judgments to ensure that our consolidated financial statements are presented fairly and in accordance with GAAP. However, because future events and their effects cannot be determined with certainty, actual results could differ from our assumptions and estimates, and such differences could be material.





Our significant accounting policies are discussed in Note Summary of Significant Accounting Policies, of the Notes to Consolidated Financial Statements included in Item 1. Financial Statements. Please also refer to our transition report on Form 10-K for the transition period ended December 31, 2008 filed with the SEC on May 1, 2009 for a more detailed discussion of our critical accounting estimates.




NEW ACCOUNTING STANDARDS




New Accounting Standards





In December 2007, the FASB issued SFAS No. 141R, Business Combinations (“SFAS 141R”), which replaces SFAS No. 141. This statement retains the purchase method of accounting for acquisitions but establishes principles and requirements for how an acquirer entity recognizes and measures in its financial statements the identifiable assets acquired (including intangibles), the liabilities assumed and any non-controlling interests in the acquired entity. This statement also changes the recognition of assets acquired and liabilities assumed arising from contingencies and requires the expensing of acquisition-related costs as incurred. We adopted SFAS 141R on January 1, 2009, which did not have any impact on our consolidated financial statements upon adoption. However, we expect that SFAS 141R will have an impact on our future consolidated financial statements, but the nature and magnitude of the specific effects will depend upon the nature of any future transactions.




In April 2009, the FASB issued FSP No. 141R-1 Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies (“FSP 141R-1”). FSP 141R-1 amends the provisions in SFAS 141R for the initial recognition and measurement, subsequent measurement and accounting, and disclosures for assets and liabilities arising from contingencies in business combinations. FSP 141R-1 eliminates the distinction between contractual and non-contractual contingencies, including the initial recognition and measurement criteria in SFAS 141R and instead carries forward most of the provisions in SFAS 141 for acquired contingencies. FSP 141R-1 is effective for contingent assets and contingent liabilities acquired in business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. We expect that FSP 141R-1 will have an impact on our future consolidated financial statements, but the nature and magnitude of the specific effects will depend upon the nature, term and size of any acquired contingencies.







13






In April 2008, the FASB issued FSP No. 142-3, Determination of the Useful Life of Intangible Assets (“FSP 142-3”). FSP 142-3 amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under FASB Statement No. 142, Goodwill and Other Intangible Assets, and requires enhanced disclosures relating to: (a) the entity’s accounting policy on the treatment of costs incurred to renew or extend the term of a recognized intangible asset; (b) in the period of acquisition or renewal, the weighted-average period prior to the next renewal or extension (both explicit and implicit), by major intangible asset class; and (c) for an entity that capitalizes renewal or extension costs, the total amount of costs incurred in the period to renew or extend the term of a recognized intangible asset for each period for which a statement of financial position is presented, by major intangible asset class. FSP 142-3 must be applied prospectively to all intangible assets acquired as of and subsequent to fiscal years beginning after December 15, 2008, and interim periods within those fiscal years.





International Financial Reporting Standards (“IFRS”) are a set of standards and interpretations adopted by the International Accounting Standards Board. The SEC is currently considering a potential IFRS adoption process in the U.S., which could, in the near term, provide domestic issuers with an alternative accounting method and ultimately could replace U.S. GAAP reporting requirements with IFRS reporting requirements. It is anticipated that the SEC will soon issue guidance on this potential adoption. We are currently investigating the implications to the Company should we be required to adopt IFRS.





RESULTS OF OPERATIONS





Years Ended December 31, 2009 and 2008





The following summarizes our operational highlights during the years ended December 31, 2009 and 2008:





The Company’s oil operations consist of its development and production efforts in the Russian Federation. The following table sets forth its domestic oil operating results for the years ended December 31, 2009 and 2008 (in US Dollars):





For years ended December 31,2009


2008Oil revenue

$
383,158


$
807,730Net Oil sold (Bbls)


19,972



19,764Average price of oil sold (per bbl)

$
19,18


$
40,89Average production and transportation cost (per bbl)

$
25.70


$
46.37





During the year ended December 31, 2009, the Company’s domestic oil revenues were down by 52.6%, due to decreased oil production by 2.0 % and decrease of selling price by 53.1%.





The Company’s domestic oil operating expenses decreased 19.7%, value falling from $1.9 million at the prior year ended December 31, 2008 to $1.5 million at December 31, 2009. The decrease in rate of Mineral Extraction Tax (NDPI), marketing and transportation expenses and oil and gas production expense are the primary reason for the overall decrease in the operating expenses. Falling oilfield costs and the same level of production during the period of 12 months ended December 31, 2009 resulted in lower costs per bbl.





The exploration for, and the acquisition, development, production, and sale of, natural gas and crude oil is highly competitive and capital intensive. As in any commodity business, the market price of the commodity produced and the costs associated with finding, acquiring, extracting, and financing the operation are critical to profitability and long-term value creation for stockholders. Generating reserve and production growth while containing costs represents an ongoing focus for management and is made particularly important in our business by the natural production and reserve decline associated with oil and gas properties. In addition to developing new reserves, we compete to acquire additional reserves, which involve judgments regarding recoverable reserves, future oil and gas prices, operating costs and potential environmental and other liabilities, title issues and other factors.





Since December 31, 2009 there have been no significant material developments.




Results of Operations achieved during 12 months ended December 31, 2009 Compared to 12 months ended December 31, 2008





We generate all of our revenues in Russian Rubles (RUR). Our revenues have been affected by fluctuations in foreign currency exchange rates.





Records of our Proven Oil and Gas Properties as well as other Property, Plant and Equipment have been also affected by fluctuations in foreign currency exchange rates in the US GAAP accounts.






14





We had net loss from continuing operations for the 12 months ended December 31, 2009 of $1.12 million compared to a net loss of $1.11 million for the same period in 2008. Factors contributing to the $0.01 million increase in net loss from 12 months ended December 31, 2008 to 12 months ended December 31, 2009 included the following:





·
Oil production net of our interest for 12 months ended December 31, 2009 was 21,528 Bbls resulting in $383,158 worth of oil sales, at an average wellhead price of $19.18 per Bbls for the 12 months ended December 31, 2009.·
In 2008, our net production was 21,966 Bbls resulting in $807,730 worth of oil sales, at an average wellhead price of $40.89.·
The 2.0% decrease in production volumes resulted from abandonment of oil production from Wells 108, 130 and 133 due to operating necessity of work over activities.





Our marketing and transportation expenses and production taxes (mineral extraction tax) for 12 months ended December 31, 2009 decreased to $205,290 (35.6% over 12 months ended December 31, 2008) and to $203,564 (53.2% over 12 months ended December 31, 2008).





General and administrative expenses increased from $223,955 for the 12 months ended December 31, 2008 to $536,991 for the 12 months ended December 31, 2009, due largely to:





·
Increase in audit, legal, advisory and accounting expense due to the Premier Energy Corp. appointed lawyers, auditors and advisers charging additional professional fees associated with compliance to SEC reporting rules and requirements.








LIQUIDITY AND CAPITAL RESOURCES





We have historically met our capital requirements through the issuance of common stock, obtaining contributions of Additional Paid-In Capital from our parent and by borrowings. As we do not generate sufficient sales revenues we will continue to finance our operations through equity and/or debt financings.  There is no guarantee that we will be able to generate adequate revenues or obtain further capital through equity and/or debt.  In the event that we do not generate adequate revenue or raise capital, our operations will be negatively impacted.





As the most expeditious way to quickly increase production output, Karbon CJSC has commenced a program of repairs and modernization of the existing wells in the North-Kopanskoye Oilfield in accordance with the approved schedule for work-over of the shut-in oil wells. The exploration wells drilled in 1980s, and subsequently completed and produced, have been shut-in in the meantime due to needed repairs. The current plans call for routine re-work on two shut-in wells and full work-over on additional two (or more) shut-in wells by the end of 2010. The aim is to increase production rate in this year from the present 55 bopd to the expected 400 bopd from the existing wells. We expect to engage local Russian contractor (ART), specializing in oil well work-over and modernization, to provide the required work at the North-Kopanskoye Oilfield in 2010 assuming we raise the required capital.





Subject to the availability of funds, the current plans also call for other concurrent work, including drilling and completion of four new production wells in 2010 at the North-Kopanskoye Oilfield (we have engaged international contractor KCA Deutag). Produced oil is presently trucked away after being sold at the wellhead at field-posted prices. With the planned increases in oil production output, the intent is to switch from trucking to more efficient and economic oil export via the adjacent GazpromNeft pipeline system provided the demand for crude keeps as expected. All needed infrastructure already exists for pipeline export.





Satisfaction of Our Cash Obligations for the Next 12 Months





Unless we receive an imminent infusion of cash either through the sale of equity or debt, we will not be adequately capitalized. There is no guarantee that we will be able to obtain funding or if we do obtain funding that will be on adequate terms to meet our drilling commitments and expected general and administrative expenses for the next twelve months. We believe there may be distressed situations that will arise in 2010 that may make the acquisition of assets a viable strategy, and we will evaluate any potential opportunities as they arise. However, there can be no assurance that any additional capital for use in such acquisition will be available to us on favorable terms or at all.





For the years ended December 31, 2009 and 2008, we have incurred net losses of approximately $1,205,163 and $1,097,077 respectively. We have funded our working capital needs primarily from revenues and advances from our principal stockholders which generated cash from equity offerings on the stock exchanges in the European Union (EU) and sales on the over-the-counter market in the USA.





Over the next twelve months we believe we have the required working capital needed to fund our current operations through revenues and further advances from our principal stockholders. However, any expansion or future business acquisitions will require us to raise capital through an equity offering and/or debt financing. There can be no assurance that any additional capital for use in such acquisition will be available to us on favourable terms or at all.








15





Our prospects must be considered in light of the risks, expenses and difficulties frequently encountered by companies in their early stage of operations, particularly companies in the oil and gas exploration industry. Such risks include, but are not limited to, an evolving and unpredictable business model and the management of growth. To address these risks we must, among other things, implement and successfully execute our business and marketing strategy, continue to develop and upgrade technology and products, respond to competitive developments, and attract, retain and motivate qualified personnel. There can be no assurance that we will be successful in addressing such risks, and the failure to do so can have a material adverse effect on our business prospects, financial condition and results of operations.




Off-Balance Sheet Arrangements





We do not participate in transactions that generate relationships with unconsolidated entities or financial partnerships. Such entities are often referred to as structured finance or special purpose entities (“SPEs”) or variable interest entities (“VIEs”). SPEs and VIEs can be established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. We were not involved in any unconsolidated SPEs or VIEs at any time during any of the periods presented in this Form 10K.





From time to time, we enter into contracts that might be construed as off-balance sheet obligations but are normal in the day-to-day course of business in the oil and gas industry. Those contracts could include the contracts discussed directly above under Contractual Obligations. We do not believe we will be affected by these contracts materially differently than other similar companies in the energy industry.





Cash Flows and Capital Expenditures





Our capital budget for 2009 was estimated at $19.3 million for the planned drilling of 7 new wells in the North Kopanskoye Field and $8.5 millions for the oil field construction of surface facilities. Our planned 2009 development and exploration program had failed due to lack of finance.





The capital required for our 2010 planned work is estimated at $26 million, including the existing wells workover at $1.5 million, new wells drilling and completion at $14 million, surface facilities at $8 million and seismic survey at $2.5 million.





Contractual Obligations





Presently we have no Company hedging policy in place.  Collared hedges have the effect of providing a protective floor while allowing us to share in upward pricing movements to a fixed point. Consequently, while these hedges are designed to decrease our exposure to price decreases, they also have the effect of limiting the benefit of price increases beyond the ceiling. As we need, we may pursue hedging to protect a portion of our production against future pricing fluctuations, or enter into derivative contracts to decrease exposure to commodity price volatility.




Subsequent Events




As of March 2, 2010 the Company obtained $ 100,000 worth of loan finance from Auxerre Trading Limited, the Company’s 51% parent company. The Company has settled all of the outstanding audit fees and some of the other professional fees. The loan is termed for one year and the interest rate of 8 % is fixed for the term of the loan.




Off-Balance Sheet Arrangements




Our company has no outstanding derivative financial instruments, off-balance sheet guarantees, interest rate swap transactions or foreign currency contracts. Our company does not engage in trading activities involving non-exchange traded contracts.






16






Application of Critical Accounting Policies




The preparation of financial statements in conformity with United States Generally Accepted Accounting Principles (GAAP) requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying disclosures of our company. Although these estimates are based on management’s knowledge of current events and actions that our company may undertake in the future, actual results may differ from such estimates.




Basic and Diluted Loss Per Share




We report basic loss per share in accordance with the Financial Accounting Standards Board (“FASB”) Statement of Financial Accounting Standards (“SFAS”) No. 128, “Earnings Per Share”. Basic loss per share is computed using the weighted average number of shares outstanding during the period. Diluted earnings (loss) per share are computed similar to basic income (loss) per share except that the denominator is increased to include the number of common stock equivalents (primarily outstanding options and warrants). Common stock equivalents represent the dilutive effect of the assumed exercise of the outstanding stock options and warrants, at either the beginning of the respective period presented or the date of issuance, whichever is later, and only if the common stock equivalents are considered dilutive based upon our net income (loss) position at the calculation date. Diluted loss per share has not been provided as it would be antidilutive.




Inventory




Inventory represents crude oil in storage tanks at the Company's oilfield facility and other items valued at the lower of cost (first-in, first-out) or market (net realizable value). The cost of inventories comprises all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition.




Recent Accounting Pronouncements




Effective July 1, 2009, the Company adopted the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 105-10, Generally Accepted Accounting Principles – Overall (“ASC 105-10”). ASC 105-10 establishes the FASB Accounting Standards Codification(the “Codification”) as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with U.S. GAAP. Rules and interpretive releases of the SEC under authority of federal securities laws are also sources of authoritative U.S. GAAP for SEC registrants. All guidance contained in the Codification carries an equal level of authority. The Codification superseded all existing non-SEC accounting and reporting standards. All other non-grandfathered, non-SEC accounting literature not included in the Codification is non-authoritative. The FASB will not issue new standards in the form of Statements, FASB Staff Positions or Emerging Issues Task Force Abstracts. Instead, it will issue Accounting Standards Updates (“ASUs”). The FASB will not consider ASUs as authoritative in their own right. ASUs will serve only to update the Codification, provide background information about the guidance and provide the bases for conclusions on the change(s) in the Codification. References made to FASB guidance throughout this document have been updated for the Codification.





In June 2009, the FASB issued SFAS No. 167,Amendments to FASB Interpretation No. 46(R) (“SFAS 167”).  SFAS 167, which amends ASC 810-10,Consolidation  (“ASC 810-10”), prescribes a qualitative model for identifying whether a company has a controlling financial interest in a variable interest entity (“VIE”) and eliminates the quantitative model prescribed by ASC 810-10.  The new model identifies two primary characteristics of a controlling financial interest: (1) provides a company with the power to direct significant activities of the VIE, and (2) obligates a company to absorb losses of and/or provides rights to receive benefits from the VIE.  SFAS 167 requires a company to reassess on an ongoing basis whether it holds a controlling financial interest in a VIE.  A company that holds a controlling financial interest is deemed to be the primary beneficiary of the VIE and is required to consolidate the VIE.  SFAS 167, which is referenced in ASC 105-10-65, has not yet been adopted into the Codification and remains authoritative.  This statement is effective for fiscal years beginning after November 15, 2009.  The Company plans to adopt SFAS 167 effective January 1, 2010.  The adoption of SFAS 167 is not expected to have a material impact on the Company’s consolidated financial position and results of operations.





In June 2009, the FASB issued SFAS No. 166,Accounting for Transfers of Financial Assets (“SFAS 166”).  SFAS 166 removes the concept of a qualifying special-purpose entity from ASC 860-10,Transfers and Servicing (“ASC 860-10”), and removes the exception from applying ASC 810-10.  This statement also clarifies the requirements for isolation and limitations on portions of financial assets that are eligible for sale accounting.  SFAS 166, which is referenced in ASC 105-10-65, has not yet been adopted into the Codification and remains authoritative.  This statement is effective for fiscal years beginning after November 15, 2009.  The Company plans to adopt SFAS 166 effective January 1, 2010.  The adoption of SFAS 166 is not expected to have a material impact on the Company’s consolidated financial position and results of operations.









17




In October 2009, the FASB issued ASU No. 2009-13, Multiple-Deliverable Revenue Arrangements—a consensus of the FASB Emerging Issues Task Force, that provides amendments to the criteria for separating consideration in multiple-deliverable arrangements. As a result of these amendments, multiple-deliverable revenue arrangements will be separated in more circumstances than under existing U.S. GAAP. The ASU does this by establishing a selling price hierarchy for determining the selling price of a deliverable. The selling price used for each deliverable will be based on vendor-specific objective evidence if available, third-party evidence if vendor-specific objective evidence is not available, or estimated selling price if neither vendor-specific objective evidence nor third-party evidence is available. A vendor will be required to determine its best estimate of selling price in a manner that is consistent with that used to determine the price to sell the deliverable on a standalone basis. This ASU also eliminates the residual method of allocation and will require that arrangement consideration be allocated at the inception of the arrangement to all deliverables using the relative selling price method, which allocates any discount in the overall arrangement proportionally to each deliverable based on its relative selling price. Expanded disclosures of qualitative and quantitative information regarding application of the multiple-deliverable revenue arrangement guidance are also required under the ASU. The ASU does not apply to arrangements for which industry specific allocation and measurement guidance exists, such as long-term construction contracts and software transactions. ASU No. 2009-13 is effective beginning January 1, 2011. The Company is currently evaluating the impact of this standard on its consolidated results of operations and financial condition.





In October 2009, the FASB issued ASU No. 2009-14, Certain Revenue Arrangements That Include Software Elements—a consensus of the FASB Emerging Issues Task Force, that reduces the types of transactions that fall within the current scope of software revenue recognition guidance. Existing software revenue recognition guidance requires that its provisions be applied to an entire arrangement when the sale of any products or services containing or utilizing software when the software is considered more than incidental to the product or service. As a result of the amendments included in ASU No. 2009-14, many tangible products and services that rely on software will be accounted for under the multiple-element arrangements revenue recognition guidance rather than under the software revenue recognition guidance. Under the ASU, the following components would be excluded from the scope of software revenue recognition guidance:  the tangible element of the product, software products bundled with tangible products where the software components and non-software components function together to deliver the product’s essential functionality, and undelivered components that relate to software that is essential to the tangible product’s functionality. The ASU also provides guidance on how to allocate transaction consideration when an arrangement contains both deliverables within the scope of software revenue guidance (software deliverables) and deliverables not within the scope of that guidance (non-software deliverables). ASU No. 2009-14 is effective beginning January 1, 2011. The Company is currently evaluating the impact of this standard on its consolidated results of operations and financial condition.





In January 2010, the FASB issued ASU 2010-3, Extractive Activities—Oil and Gas (Topic 932): Oil and Gas Reserve Estimation and Disclosures("ASU 2010-3") that amends Topic 932, Extractive Activities—Oil and Gas, of the FASB Codification. ASU 2010-3 expands the definition of oil- and gas-producing activities to include the extraction of various saleable hydrocarbons or other nonrenewable natural resources that are intended to be upgraded into synthetic oil or gas, and activities undertaken with a view to such extraction. An entity must also consider its equity investees in determining whether they have significant oil and gas producing activities. ASU 2010-3 indicates that entities must use the 12-month average price rather than the year-end price when estimating whether reserves are economical to produce.





ASU 2010-3 also introduces new disclosure requirements. At a minimum, each entity is required to disclose separate information about reserves and financial information for geographic areas and for each country that represent 15 percent or more of proved reserves. An entity must disclose separately information about consolidated subsidiaries and equity investees. Disclosures about equity investees must be in the same level of detail as is required for consolidated subsidiaries.





ASU 2010-3 is effective for annual reporting periods ending on or after December 31, 2009 as a change in accounting principle inseparable from change in estimate. The revised methodology for determining reserves impacts the basis for the calculation of the unit of production depletion prospectively. The Company adopted ASU 2010-3 for its annual consolidated financial statements as of and for the year ended December 31, 2009. Adoption of ASU 2010-3 did not have a material impact on the Company’s consolidated financial position and results of operations.







18






ITEM 7A. QUANTITATIVE AND QUALITIATIVE DISCLOSURES ABOUT MARKET RISK




We are a smaller reporting company, as defined by Rule 229.10(f)(1) and are not required to provide the information required by this Item.




ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA




Our financial statements are stated in United States dollars and are prepared in accordance with United States generally accepted accounting principles.




It is the opinion of management that the audited financial statements for the fiscal years ended December 31, 2009 and 2008 include all adjustments necessary in order to ensure that the audited financial statements are not misleading.




The following financial statements are filed as part of this annual report:










19








Logo
 
 
 Report of Independent Registered Public Accounting Firm
 
 
 TO THE BOARD OF DIRECTORS
 PREMIER ENERGY CORP.
 FKA PREMIER NURSING PRODUCTS CORP.
 (A DEVELOPMENT STAGE COMPANY)
 
 
 We have audited the accompanying balance sheet of Premier Energy Corp. fka Premier Nursing Products Corp. (a Development Stage Company), as of December 31, 2009, and the related consolidated statements of operations, stockholders’ equity, cash flows, and comprehensive income (loss) for the year ended December 31, 2009. 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 audits.
 
 We conducted our audits 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.  An audit includes 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.  An audit also 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 audits provide a reasonable basis for our opinion.
 
 In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Premier Energy Corp. fka Premier Nursing Products Corp. (a Development Stage Company), at December 31, 2009, and the consolidated results of its operations and its cash flows for the year ended December 31, 2009, in conformity with U.S. generally accepted accounting principles.
 
 As discussed in Note 2 “Summary of significant accounting policies” to the consolidated financial statements, the Company has changed its reserve estimates and related disclosures as a result of adopting new oil and gas reserve estimation and disclosure requirements resulting from Accounting Standards Update No. 2010-03, “Oil and Gas Reserve Estimation and Disclosures,” effective December 31, 2009.
 
 The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the financial statements, the Company has suffered recurring losses from operations and has a significant working capital deficit that raise significant doubt about its ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
 
 
 
 
 /s/ Audit Firm “Femida-Audit”, LLC
 
 Audit Firm “Femida-Audit”, LLC
 
 Moscow, Russia
 April 14, 2010












F-1








PREMIER ENERGY CORP. AND SUBSIDARY


Consolidated Balance Sheets


December 31,


December 31,Note


2009


2008ASSETSCurrent Assets:Cash




$
441


$
52Accounts and notes receivables, net





92,936



85,369Inventories


5



207,532



121,171Prepaid taxes and expenses


6



429,695



451,765Prepaid and other assets


7



18,204



13,323748,808



671,680Property, Plant and Equipment:Proven Oil and Gas properties (successful efforts), at cost






8,030,724



8,266,831Less- accumulated depletion, depreciation and amortization



(3,848,448
)


(3,594,193
)Other property, plant and equipment






100,702



102,396Less- accumulated depreciation






(89,830
)


(82,169
)4,193,146



4,692,865Deferred Income tax assets


10



64,203



78,683TOTAL ASSETS





$
5,006,157


$
5,443,228LIABILITIES AND STOCKHOLDERS' EQUITYCurrent Liabilities:Accounts Payable


8


$
686,161


$
315,624Short term borrowings


9



522,844



310,194Production taxes payable






314,460



148,602Provision for litigations


11



84,872



-1,608,336



774,420.Long-Term Liabilities:Provision for litigations


11



-



96,319Asset retirement obligations


12



600,115



566,279600,115



662,598TOTAL LIABILITIES






2,208,451



1,437,018STOCKHOLDERS' EQUITYPreferred stock, $0.0001 par value, 10,000,000 shares authorized, none issued and outstandingCommon Stock, $0.0001 par value, 250,000,000 shares authorized, 210,600,000 shares issued and outstanding at December 31, 2009 and December 31, 2008


13



21,060



21,060Additional  Paid-in Capital


14



10,503,677



10,271,174Accumulated Deficit






(7,392,870
)


(6,102,629
)Accumulated other comprehensive income






(334,162
)


(183,395
)2,797,705



4,006,210TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY


$
5,006,157


$
5,443,228





See accompanying notes to audited consolidated financial statements.






F-2






PREMIER ENERGY CORP. AND SUBSIDARY





Consolidated Statements of Operations






Year ended


Year endedDecember 31, 2009


December 31, 2008Operating revenues:Oil and gas production revenue

$
383,158


$
807,730Other revenue


-



481383,158



808,211Operating expenses:Oil and gas production expense


150,573



362,243Mineral extraction tax


203,564



434,658Depreciation, depletion and amortization


353,450



376,614Taxes other that income taxes


57,417



87,708Loss on sales proven properties


-



111,979Marketing and transportation expenses


205,290



318,845General and administrative


536,991



223,9551,507,284



1,916,002Operating loss


(1,124,126
)


(1,107,791
)Other Income (Expense):Currency translation gain/(loss)


(24,387
)


(66,661
)Interest expense


(47,781
)


(61,058
)(72,168
)


(127,720
)Loss Before Provision forIncome Taxes


(1,196,294
)


(1,235,511
)Benefit(Provision) for Income Tax


(8,869
)


138,434Net Loss

$
(1,205,163
)

$
(1,097,077
)Loss Per ShareBasic and diluted

$
(0.01
)

$
(0.01
)Weighted Average Number of Shares Outstanding


210,600,000



210,600,000





See accompanying notes to audited consolidated financial statements.






F-3








PREMIER ENERGY CORP. AND SUBSIDIARY





Consolidated Statement of Stockholders’ Equity


For the period January 1, 2008 through December 31, 2009





AccumulatedAdditional


Accumulated


OtherComprehensive





Common


Paid-in


Deficit


Comprehensiveincome/(loss)


Shares


Stock


Capital





Income


TotalBalance at January 1, 2008





601,000


$
2,251,569


$
5,175,344


$
(5,005,553
)

$
54,932


$
2,476,292Additional paid-in contribution













2,865,325











2,865,325Net loss for the year ended December 31, 2008

$
(1,097,077
)














(1,097,077
)






(1,097,077
)Foreign currency translation adjustment


(238,327
)


















(238,327
)


(238,327
)$
(1,335,404
)Balance at December 31, 2008






601,000


$
2,251,569


$
8,040,668


$
(6,102,629
)

$
(183,395
)

$
4,006,213Effect of merger and recapitalization pursuant toexecution of Security Exchange Agreement






209,999,000



(2,230,509
)


2,266,509



(85,078
)






(49,078
)Forgiveness of note payable to related parties














196,500











196,500Net loss for the year ended December 31, 2009

$
(1,205,163
)














(1,205,163
)






(1,205,163
)Foreign currency translation adjustment


(150,767
)


















(150,767
)


(150,767
)$
(1,355,930
)Balance at December 31, 2009






210,600,000


$
21,060


$
10,503,677


$
(7,392,870
)

$
(334,162
)

$
2,797,705








See accompanying notes to audited consolidated financial statements.






F-4





PREMIER ENERGY CORP. AND SUBSIDIARIES





Consolidated Statement of Cash Flows





Year ended


Year endedDecember 31, 2009


December 31, 2008Cash flows from operating activitiesNet (loss)


(1,205,163
)


(1,097,077
)Adjustments to reconcile net income (loss) to cash provided by (used in) operating activities:Depreciation, depletion and amortization


353,482



376,614Interest expense


47,781



61,058Loss on disposals and impairments of assets


-



111,979Deferred income taxes


14,481



(211,283
)Provision for litigations


-



96,709Changes in operating assets and liabilities:Accounts and notes receivable


(7,566
)


206,113Inventories


(86,360
)


30,271Prepaid expenses and taxes


22,069



188,460Prepaid and others assets


(4,881
)


1,507Accounts payable and accrued expenses


332,268



(396,357
)Taxes payable


165,859



(6,156
)Net Cash Flows used in operating activities


(368,031
)


(638,171
)Cash flows from investing activitiesPayments to Acquire Oil and Gas properties


-



-Payments to Acquire Property, Plant and Equipment


(1,228
)


(2,123
)Net cash used in investing activities


(1,228
)


(2,123
)Cash flows from financing activitiesProceeds from issuing of shares and additional capital


196,500



2,865,325Short-term Borrowings


201,840



(2,886,274
)Net cash provided by financing activities


398,340



(20,949
)Effect of exchange rate changes on cash and cash equivalents


(28,692
)


661,132Net increase (decrease) in cash and cash equivalents


389



(110
)Cash and cash equivalents at beginning of period


52



162Cash and cash equivalents at end of period


441



52Supplemental disclosures of cash flow information:Interest paid

$
-


$
-Income taxes paid

$
4,599


$
1,261





See accompanying notes to audited consolidated financial statements.






F-5




PREMIER ENERGY CORP.


AND SUBSIDIARY





NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


DECEMBER 31, 2009





Note 1 - Basis of Presentation, Organization and Business Overview





The accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for financial information and with the instructions to Form 10-K and Article 10 of Regulation S-X. The accompanying consolidated financial statements reflect the operations of Premier Energy Corp and its subsidiaries beginning on January 1, 2008. The reverse merger transaction and the resulting reorganization of entities constituted a change in reporting entity in 2009. As such, these consolidated financial statements reflect the financial position, results of operations and cash flows as if Premier Energy Corp and ZAO Karbon were combined for all of 2008 and 2009. All intercompany balances and transactions have been eliminated for all periods presented. Operating results for the year ended December 31, 2009, are not necessarily indicative of the results that may be expected for the future.


Premier Energy Corp. fka Premier Nursing Products, Corp. (the "Company") was incorporated under the laws of the State of Florida on December 26, 2006. On September 25, 2008 the Board of Directors and holder of a majority of our issued and outstanding common stock adopted a resolution changing the name of Premier Nursing Products Corp. to Premier Energy Corp. and in connection therewith on September 25, 2008 filed Articles of Amendment to its Articles of Incorporation with the Secretary of State of Florida. The effective time of the name change will be close of business on October 6, 2008. There were no mandatory exchange of stock certificates. Following the name change, the share certificates which reflected our prior name continue to be valid. Certificates reflecting the corporate new name will be issued in due course as old share certificates are tendered for exchange or transfer to our transfer agent in activities raising capital.





On January 30, 2009, the Company entered into a Share Exchange Agreement with Auxerre Trading Ltd., a British Virgin Islands Company (“Auxerre”) pursuant to which the Company acquired 51% of the outstanding securities of Karbon in exchange for 107,406,000 shares of our common stock (the “Karbon Acquisition”). Considering that, following the merger, Auxerre controls the majority of the Company’s outstanding voting common stock and the Company effectively succeeded our otherwise minimal operations to those that are theirs, Karbon is considered the accounting acquirer in this reverse-merger transaction.  A reverse-merger transaction is considered, and accounted for as, a capital transaction in substance; it is equivalent to the issuance of Karbon securities for the Company’s net monetary assets, which are deminimus, accompanied by a recapitalization. Accordingly, the Company (Premier) will not recognize any goodwill or other intangible assets in connection with this reverse merger transaction. Karbon is the surviving and continuing entity and the historical financials following the reverse merger transaction will be those of Karbon.  As a result, of this reverse merger and recapitalization, Karbon’s stockholders’ equity has been restated in terms of Premier’s legal equity for all periods presented in these financial statements. In accordance with Statement of Position 98-5 (“SOP 98-5”), the Company expensed $82,698 representing the excess of liabilities over the assets at January 31, 2009 the date of the transaction as organization costs.





All reference to Common Stock shares and per share amounts have been retroactively restated to effect the reverse acquisition as if the transaction had taken place as of the beginning of the earliest period presented.






F-6







Premier was a "shell company" (as such term is defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended) immediately prior to our acquisition of 51% of KARBON pursuant to the terms of the share exchange agreement.  As a result of such acquisition, the Company’s operations, in addition to the acquisition, exploration and development, if warranted, of prospective oil and gas properties, will include (i) consulting and working together with KARBON to plan and execute any exploration and development activities they conduct, (ii) reviewing annualized budgets from KARBON, and (iii) approving costs in excess of certain prescribed amounts by KARBON. Consequently, the Company believes that acquisition has caused us to cease to be a shell company as we no longer have nominal operations and also are no longer considered a development stage enterprise as of the effective date of this transaction.





On January 30, 2009, prior to the Karbon Acquisition and the issuance of the 107,406,000, ZRV Consulting, Inc., the former majority shareholder of Premier, returned 107,406,000 shares of common stock of Premier for cancellation.





The accompanying audited consolidated financial statements include the accounts of Premier Energy Corp., and its legal subsidiary PREMIER ENERGY CORP. AND SUBSIDARY after eliminating all intercompany transactions. PREMIER ENERGY CORP. AND SUBSIDARY was organized October 16, 2000 as a Closed Joint Stock Company under the Civil Code of the Russian Federation and carries on its principal activity in the territory of the Russian Federation.





In conjunction with the transaction with Karbon, Premier adopted the December 31 year end of Karbon the operating company and the accounting successor.





The registered office of Premier Energy Corp is 8990 Wembley Court, Sarasota, Florida 33428 USA. The Company’s principal offices are located at 14785 Preston Road, Suite 550, Dallas, Texas, 75254 USA. The registered address of the subsidiary is 1A Ilekskaya Street, 460034, Orenburg Russia.





The principal activity of the Company is the exploration and production of oil and gas within the Russian Federation.




Note 2 - Summary of significant accounting policies





Business and economic environment





The Russian Federation has been experiencing political and economic change, which has affected and will continue to affect the activities of enterprises operating in this environment. Consequently, operations in the Russian Federationinvolve risks, which do not typically exist in other markets.





The accompanying audited consolidated financial statements reflect management’s assessment of the impact of the business environment in the country in which the Company operates and the financial position of the Company. The future business environments may differ from management’s assessment.





Use of Estimates in the Preparation of Financial Statements





The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of oil and gas reserves, assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.  Estimates of oil and gas reserve quantities provide the basis for calculations of depletion, depreciation, and amortization (“DD&A”) and impairment, each of which represents a significant component of the accompanying audited consolidated financial statements.





The Company adopted ASU 2010-3, Extractive Activities—Oil and Gas (Topic 932): Oil and Gas Reserve Estimation and Disclosures("ASU 2010-3") for its annual consolidated financial statements as of and for the year ended December 31, 2009. Adoption of ASU 2010-3 is effective as a change in accounting principle inseparable from change in estimate. The revised methodology for determining reserves impacts the basis for the calculation of the unit of production depletion prospectively.





Revenue





The Company derives revenue primarily from the sale of produced natural gas and crude oil.  The Company reports revenue as the gross amount received before taking into account production taxes and transportation costs, which are reported as separate expenses.  Revenue is recorded in the month the Company’s production is delivered to the purchaser, but payment is generally received between 30 days after the date of production.  No revenue is recognized unless it is determined that title to the product has transferred to a purchaser.









F-7





Reporting currency





The Company maintains its accounting records in Russian roubles. The Company’s functional currency is the Russian rouble.





The Company’s reporting currency is United States Dollar ($). The balance sheet is translated into US Dollars at a principal rate of exchange. The statement of income is translated at average principal rate of exchange for the appropriate periods.





The principal rate of exchange used for translating foreign currency balances was following:




as of December 31, 2009
$1 = RUB31.72;as of December 31, 2008
$1 = RUB29.38;as of December 31, 2007
$1 = RUB24.55.





Average principal rate used of exchange income and expenses were following:


for year ended December 31, 2009
$1 = RUB32.48;for year ended December 31, 2008
$1 = RUB24.85;





Resulting translation adjustments are reflected as a separate component of comprehensive income.





The exchange rate fluctuation of the Russian Rouble against the US Dollar may affect the book value of the Company’s assets and liabilities.





Accordingly, the translation of amounts recorded in this currency into US dollars should not be construed as a representation that such currency amounts have been, could be or will in the future be converted into US dollars at the exchange rate shown or at any other exchange rate.





Cash and cash equivalents





Cash and cash equivalents comprise cash on hand, deposits held with banks, and other short-term highly liquid investments with original maturities of three months or less.





Inventories





Inventories are stated at the lower of cost (first-in, first-out) or market (net realizable value). The cost of inventories comprises all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition.





Accounts and notes receivable





Accounts and notes receivable are recorded at their transaction amounts less provisions for doubtful debts. Provisions for doubtful debts are recorded to the extent that there is a likelihood that any of the amounts due will not be obtained. As of December 31, 2009 and December 31, 2008 the Company did not have any allowances for uncollectible accounts receivable.




Property, plant and equipment





Fixtures and fittings are stated at cost, less accumulated depreciation. Depreciation is calculated using the straight-line method over the expected economic life of the asset. Gains and losses on the sale of property, plant and equipment are included in other business income. Costs related to repair and maintenance activities are expensed in the period in which they are incurred and significant renewals and improvements are capitalized.








F-8





Vehicles under capital leases are initially recorded at the present value of minimum lease payments. These assets are amortized using the straight-line method over the shorter of lease term or the estimated useful life of the asset.





Expected economic life of the assets is summarized as follows:





Office equipment                   5 years


Vehicles                                5 years





Useful life and depreciation methods are regularly reviewed in order to ensure the methods and depreciation periods remain appropriate.





Oil and Gas Properties





In accordance with Statement of Financial Accounting Standard ("SFAS") 19, Financial Accounting and Reporting by Oil and Gas Producing Companies, oil and gas properties and the related expenses are recognized under the successful efforts method. This method prescribes that certain exploration costs, including the costs of exploratory dry holes, delay rentals, geological and geophysical costs are charged to expense when incurred.





Exploratory well costs (including costs associated with stratigraphic test wells) are initially capitalized pending determination of whether commercial oil and gas reserves have been discovered by the drilling effort. The length of time necessary for this determination depends on the specific technical or economic difficulties in assessing the recoverability of the reserves. If a determination is made that the well did not encounter oil and gas in economically viable quantities, the well costs are expensed and are reported in "exploration expenses".





Exploratory drilling costs are temporarily capitalized pending determination of whether the well has found proved reserves if both of the following conditions are met:


·
The well has found a sufficient quantity of reserves to justify, if appropriate, its completion as a producing well, assuming that the required capital expenditure is made; and





·
Satisfactory progress toward ultimate development of the reserves is being achieved, with the Company making sufficient progress assessing the reserves and the economic and operating viability of the project.





The Company evaluates the progress made on the basis of regular project reviews which take into account the following factors:


·
First, if additional exploratory drilling or other exploratory activities (such as seismic work or other significant studies) are either underway or firmly planned, the Company deems there to be satisfactory progress. For these purposes, exploratory activities are considered firmly planned only if they are included in the Company’s three-year exploration plan/budget.





·
In cases where exploratory activity has been completed, the evaluation of satisfactory progress takes into account indicators such as the fact that costs for development studies are incurred in the current period, or that governmental or other third-party authorizations are pending or that the availability of capacity on an existing transport or processing facility awaits confirmation.





Costs, including "internal" costs relating to drilling and equipping of development wells, including development dry holes, as well as costs required for drilling and equipping of injection wells in the process of oil and gas reserves development, are capitalized. These costs are included in oil and gas properties in the balance sheet.






F-9







Depreciation, depletion and amortization of capitalized costs of oil and gas properties is calculated using the unit-of-production method based upon proved reserves for the cost of property acquisitions and proved developed reserves for development costs.





Production and related overhead costs are expensed as incurred.





Impairment of long-lived assets





Long-lived assets, including blocks with proved oil and gas reserves, are assessed for potential impairment in accordance with Accounting Standards Codification subtopic 360-10 (SFAS 144, Accounting for the Impairment or Disposal of Long-Lived Assets).





Oil and gas properties are assessed whenever events or circumstances indicate potential impairment. If the carrying value of oil and gas properties is not recoverable through undiscounted cash flows, impairment is recognized. The impairment is determined on the basis of the estimated fair value of oil and gas properties which, in turn, is measured by discounting future net cash flows. Discounted future cash flows from oil and gas fields are based on the management estimates of future prices that rely on recent actual prices and published prices for forward transactions; such prices are applied to forecast production volumes at particular fields with further discounting for the expected risk level.





Forecast production volumes shall be understood as reserves, including probable reserves that are proposed to be extracted using a known amount of capital expenditures. Production volumes and prices correspond to the internal plans and forecasts, as well as other data in the published financial statements. Assumptions regarding future prices and costs used to assess oil and gas properties for impairment differ from those used in the Standardized measure of proved oil and gas reserves. During the years ended December 31, 2009 and 2008, no property impairments were recorded.





Grouping of assets for the purpose of impairment is performed on the basis of the lowest level of identifiable cash flows that are largely independent of the cash flows from other groups of assets – as a rule, for oil and gas properties such level is represented by the field. Long-lived assets intended by management for use during a period not exceeding one year are recorded at the lower of depreciated value or fair value, less selling expenses.





Acquisition costs of unproved oil and gas properties are assessed for impairment on a regular basis and any estimated impairment is charged to expense.





Asset retirement obligations





The Company has asset retirement obligations associated with its core business activities. The nature of the assets and potential obligations are as follows:





Exploration and Production – The Company’s exploration, development and production activities involve the use of the following assets: wells, related equipment, operating site and in-field pipeline.





Generally, licenses and other regulatory acts require that such assets be decommissioned upon the completion of production. According to these requirements, the Company is obliged to decommission wells, dismantle equipment, restore the sites and perform other related activities. The Company’s estimates of these obligations are based on current regulatory or license requirements, as well as actual dismantling and other related costs. Asset retirement obligations are calculated in accordance with ASC Topic 410-20 (SFAS 143, Accounting for Asset Retirement Obligations).





Deferred tax





Deferred tax assets and liabilities are measured using the balance sheet liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax assets are recognized to the extent it is more likely than not that future taxable profit will be available against which the temporary differences can be applied. Deferred tax is calculated using the tax rates (and laws) that have been enacted or substantively enacted by the balance sheet date and that are expected to apply when the deferred tax asset concerned is realized or the deferred tax liability is settled.






F-10








Interest-bearing borrowings





The Company’s financial instruments including cash and cash equivalents, accounts receivable, and accounts payable are carried at cost, which approximates fair value due to the short-term maturity of these instruments. The recorded value of the Company’s credit facility approximates its fair value as it bears interest at a floating rate.





The Company had $522,844 in loans outstanding under its credit agreements as of December 31, 2009 and $310,194 in loans outstanding under its credit agreements as of December 31, 2008.





Contingencies





Certain conditions may exist as of the balance sheet date, which may result in losses to the Company but the impact of which will only be resolved when one or more future events occur or fail to occur.





If a Company’s assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability is accrued and charged to the statement of income. If the assessment indicates that a potentially material loss is not probable, but is reasonably possible, or is probable, but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss, is disclosed in the notes to the financial statements. Loss contingencies considered remote or related to unasserted claims are generally not disclosed unless they involve guarantees, in which case the nature of the guarantee is disclosed.





Income Taxes





Until January 1, 2009 operations in the Russian Federation were subject to Federal and city income tax rates that total 9.5% and a regional income tax rate that varies from 10.5% to 14.5% at the discretion of the individual regional administration. The combined statutory tax rate in the Russian Federation is 24%.





Starting on January 1, 2009, the combined statutory tax is 20% (Federal and city income tax rates that total 2.0% and a regional income tax rate that varies from 13.5% to 18.0%.





The U.S. Parent has had only losses from inception and has established a reserve equal to 100% of any benefit for Net Operating Loss Carryforwards.





Stock-based Compensation





The Company follows Accounting Standards Codification subtopic 718-10 (SFAS No. 123R "Share-Based Payment" ("SFAS 123R"), a revision to SFAS No. 123 "Accounting for Stock-Based Compensation" ("SFAS 123.) The company has yet to award any stock compensation, so the adoption of the this pronouncement has had not material effect on the financial statements.





Loss per Share





Basic and diluted net loss per common share is computed based upon the weighted average common shares outstanding as defined by Accounting Standards Codification subtopic 260-10 (Financial Accounting Standards No. 128, "Earnings per Share.").  As of December 31, 2009 and 2008, there we no common share equivalents outstanding.





Business Segments





The Company operates in one segment and therefore segment information is not presented.






F-11





Fair Value of Assets and Liabilities





Effective June 1, 2008, the Company adopted ASC 820 (Statement of Financial Accounting Standards No. 157,Fair Value Measurements (SFAS 157)), which provides a framework for measuring fair value under GAAP. ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 requires that valuation techniques maximize the use of observable inputs and minimize the use of unobservable inputs. ASC 820 also establishes a fair value hierarchy, which prioritizes the valuation inputs into three broad levels.





There are three general valuation techniques that may be used to measure fair value, as described below:





A)
Market approach – Uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities. Prices may be indicated by pricing guides, sale transactions, market trades, or other sources;





B)
Cost approach – Based on the amount that currently would be required to replace the service capacity of an asset (replacement cost); and





C)
Income approach – Uses valuation techniques to convert future amounts to a single present amount based on current market expectations about the future amounts (includes present value techniques and option-pricing models). Net present value is an income approach where a stream of expected cash flows is discounted at an appropriate market interest rate.





Financial assets and liabilities are valued using either level 1 inputs based on unadjusted quoted market prices within active markets or using level 2 inputs based primarily on quoted prices for similar assets or liabilities in active or inactive markets. For certain long-term debt, fair value is based on present value techniques using inputs derived principally or corroborated from market data. Using level 3 inputs using management’s assumptions about the assumptions market participants would utilize in pricing the asset or liability. In the Company’s case this entailed assumptions used in pricing models for attached warrant calculations. Valuation techniques utilized to determine fair value are consistently applied.





The Company’s short-term debt is the only item that is subject to ASC 820 in the amounts of $520,494 and $310,194 at December 31, 2009 and December 31, 2008, respectively.





Recent accounting pronouncements





Effective July 1, 2009, the Company adopted the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 105-10, Generally Accepted Accounting Principles – Overall (“ASC 105-10”). ASC 105-10 establishes the FASB Accounting Standards Codification(the “Codification”) as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with U.S. GAAP. Rules and interpretive releases of the SEC under authority of federal securities laws are also sources of authoritative U.S. GAAP for SEC registrants. All guidance contained in the Codification carries an equal level of authority. The Codification superseded all existing non-SEC accounting and reporting standards. All other non-grandfathered, non-SEC accounting literature not included in the Codification is non-authoritative. The FASB will not issue new standards in the form of Statements, FASB Staff Positions or Emerging Issues Task Force Abstracts. Instead, it will issue Accounting Standards Updates (“ASUs”). The FASB will not consider ASUs as authoritative in their own right. ASUs will serve only to update the Codification, provide background information about the guidance and provide the bases for conclusions on the change(s) in the Codification. References made to FASB guidance throughout this document have been updated for the Codification.





In June 2009, the FASB issued SFAS No. 167,Amendments to FASB Interpretation No. 46(R) (“SFAS 167”).  SFAS 167, which amends ASC 810-10,Consolidation  (“ASC 810-10”), prescribes a qualitative model for identifying whether a company has a controlling financial interest in a variable interest entity (“VIE”) and eliminates the quantitative model prescribed by ASC 810-10.  The new model identifies two primary characteristics of a controlling financial interest: (1) provides a company with the power to direct significant activities of the VIE, and (2) obligates a company to absorb losses of and/or provides rights to receive benefits from the VIE.  SFAS 167 requires a company to reassess on an ongoing basis whether it holds a controlling financial interest in a VIE.  A company that holds a controlling financial interest is deemed to be the primary beneficiary of the VIE and is required to consolidate the VIE.  SFAS 167, which is referenced in ASC 105-10-65, has not yet been adopted into the Codification and remains authoritative.  This statement is effective for fiscal years beginning after November 15, 2009.  The Company plans to adopt SFAS 167 effective January 1, 2010.  The adoption of SFAS 167 is not expected to have a material impact on the Company’s consolidated financial position and results of operations.






F-12





In June 2009, the FASB issued SFAS No. 166,Accounting for Transfers of Financial Assets (“SFAS 166”).  SFAS 166 removes the concept of a qualifying special-purpose entity from ASC 860-10,Transfers and Servicing (“ASC 860-10”), and removes the exception from applying ASC 810-10.  This statement also clarifies the requirements for isolation and limitations on portions of financial assets that are eligible for sale accounting.  SFAS 166, which is referenced in ASC 105-10-65, has not yet been adopted into the Codification and remains authoritative.  This statement is effective for fiscal years beginning after November 15, 2009.  The Company plans to adopt SFAS 166 effective January 1, 2010.  The adoption of SFAS 166 is not expected to have a material impact on the Company’s consolidated financial position and results of operations.





In October 2009, the FASB issued ASU No. 2009-13, Multiple-Deliverable Revenue Arrangements—a consensus of the FASB Emerging Issues Task Force, that provides amendments to the criteria for separating consideration in multiple-deliverable arrangements. As a result of these amendments, multiple-deliverable revenue arrangements will be separated in more circumstances than under existing U.S. GAAP. The ASU does this by establishing a selling price hierarchy for determining the selling price of a deliverable. The selling price used for each deliverable will be based on vendor-specific objective evidence if available, third-party evidence if vendor-specific objective evidence is not available, or estimated selling price if neither vendor-specific objective evidence nor third-party evidence is available. A vendor will be required to determine its best estimate of selling price in a manner that is consistent with that used to determine the price to sell the deliverable on a standalone basis. This ASU also eliminates the residual method of allocation and will require that arrangement consideration be allocated at the inception of the arrangement to all deliverables using the relative selling price method, which allocates any discount in the overall arrangement proportionally to each deliverable based on its relative selling price. Expanded disclosures of qualitative and quantitative information regarding application of the multiple-deliverable revenue arrangement guidance are also required under the ASU. The ASU does not apply to arrangements for which industry specific allocation and measurement guidance exists, such as long-term construction contracts and software transactions. ASU No. 2009-13 is effective beginning January 1, 2011. The Company is currently evaluating the impact of this standard on its consolidated results of operations and financial condition.





In October 2009, the FASB issued ASU No. 2009-14, Certain Revenue Arrangements That Include Software Elements—a consensus of the FASB Emerging Issues Task Force, that reduces the types of transactions that fall within the current scope of software revenue recognition guidance. Existing software revenue recognition guidance requires that its provisions be applied to an entire arrangement when the sale of any products or services containing or utilizing software when the software is considered more than incidental to the product or service. As a result of the amendments included in ASU No. 2009-14, many tangible products and services that rely on software will be accounted for under the multiple-element arrangements revenue recognition guidance rather than under the software revenue recognition guidance. Under the ASU, the following components would be excluded from the scope of software revenue recognition guidance:  the tangible element of the product, software products bundled with tangible products where the software components and non-software components function together to deliver the product’s essential functionality, and undelivered components that relate to software that is essential to the tangible product’s functionality. The ASU also provides guidance on how to allocate transaction consideration when an arrangement contains both deliverables within the scope of software revenue guidance (software deliverables) and deliverables not within the scope of that guidance (non-software deliverables). ASU No. 2009-14 is effective beginning January 1, 2011. The Company is currently evaluating the impact of this standard on its consolidated results of operations and financial condition.






F-13





Note 3 - Going concern





These financial statements have been prepared in accordance with generally accepted accounting principles applicable to a going concern, which assumes that the Company will be able to meet its obligations and continue its operations for the next twelve months. Realization values may be substantially different from carrying values as shown and these financial statements do not give effect to adjustments that would be necessary to the carrying values and classification of assets and liabilities should the Company be unable to continue as a going concern. At December 31, 2009, the Company had not yet achieved profitable operations giving rise to substantial doubt as to the Company’s ability to continue as a going concern.





The Company's ability to continue as a going concern is dependent upon:


(i) raising additional capital to fund operations and to complete the recapitalization,


(ii) the further development of the North-Kopanskoye oilfield and,


(iii) ultimately, the achievement of profitable operations.





Management is currently contemplating several additional financing sources to fund operations until profitability can be achieved. However, there can be no assurance that additional financing can be obtained on conditions considered by management to be reasonable and appropriate, if at all. The financial statements do not include any adjustments that might arise as a result of this uncertainty.








Note 4 - Concentration of credit risk





Substantially all of the Company's receivables are within the oil and gas industry, primarily from purchasers of oil and gas. Although diversified among many companies, collectability is dependent upon the financial wherewithal of each individual company as well as the general economic conditions of the industry. The receivables are not collateralized. To date the Company has had minimal bad debts.





During the year ended December 31, 2009, sales to one unrelated customers represented 100% of total revenue (over the year ended December 31, 2008 – sales to four unrelated customers represented 91 %, 6%, 2.6% and 0.4% of total revenue).








Note 5 - Inventories.





Inventories are summarized as follows:





As of December 31, 2009


As of December 31, 2008Inventories of crude oil (less valuation allowance $98,631 and $90,241 as of September 31, 2009 and December 31, 2008, respectively)

$
110,255


$
23,608Raw materials


97,277



97,563$
207,532


$
121,171






F-14





Note 6 - Prepaid taxes and expenses.





Prepaid taxes and expenses include:





As of December 31, 2009


As of December 31, 2008VAT receivable

$
418,428


$
432,160Current Income Tax Receivables


4,000



115Other taxes receivable


6,917



19,249Deferred expenses


450



241$
429,695


$
451,765








Note 7 - Prepaid and other assets.





Prepaid and other assets include:





As of December 31, 2009


As of December 31, 2008Prepayments

$
18,204


$
10,773Loans to related parties


-



2,550$
18,204


$
13,323








Note 8 -  Accounts payable and accrued expenses





Accounts payable and accrued expenses are summarized as follows:





As of December 31, 2009


As of December 31, 2008Trade accounts payable

$
502,530


$
234,183Wages and salaries payable


135,423



33,810Other accounts payable


48,208



47,631$
686,161


$
315,624








F-15





Note 9 -  Borrowings





The Company borrows operating funds under several loans agreements with non-financial institutions:





As of December 31, 2009


As of December 31, 2008Interest free, unsecured loans from RossGas, LLC a related party (debt is repayable on mutual consent)

$
118,667



-Interest free, unsecured loans from Vlasov N.V. a related party (debt is repayable on mutual consent)


84,314



-Interest free, unsecured loans from Galazov A.A. a related party (debt is repayable on mutual consent)


102,830



-Interest free, unsecured loans from ZRV Consulting, Inc. a related party (debt is repayable on mutual consent)


2,350



-Interest free, unsecured loan from Tintrade Limited ($300,000 is overdue, for disclosure see Note 11)


200,000


$
300,000Interest free, unsecured loans from members of staff


14,683



10,194$
522,844


$
310,194





As of February 10, 2009, Karbon reached an out-of-court settlement with Tintrade Ltd and subsequently settled approximately $11,300 worth of court fees according to the payment plan agreed upon with Tintrade Ltd.











Note 10 - Deferred tax assets and liabilities





Deferred tax assets and liabilities are composed of the following items:





GROSS ASSETS


GROSS LIABILITIES


NET ASSETSAs of December 31, 2009


As of December 31, 2008


As of December 31, 2009


As of December 31, 2008


As of December 31, 2009


As of December 31, 2008Property, plant and equipment

$
441


$
544


$
-


$
-


$
441


$
544Proved Oil and Gas properties


15,013



31,441



-



-



15,013



31,441Inventories


19,726



21,658



-



-



19,726



21,658Accounts payable


1,250



3,088



-



-



1,250



3,088Assets retirement obligations


37,363



33,798



-



-



37,363



33,798Borrowings


-



-



(9,590
)


(11,846
)


(9,590
)


(11,846
)Deferred tax assets/(liabilities)

$
73,793


$
90,529


$
(9,590
)

$
(11,846
)

$
64,203


$
78,683





Temporary differences between these financial statements and tax records gave rise to deferred income tax assets and liabilities as of December 31, 2009 as above.





Note 11 – Provision for litigation





The Company was litigating with Tintrade Limited, a lender of the Company, with regard to repayment of a $300,000 loan that matured in June 2003. As of February 10, 2009, Karbon reached an out-of-court settlement with Tintrade Ltd and subsequently settled approximately $11,300 worth of court fees according to the payment plan agreed upon with Tintrade Ltd. Further, the Company has paid $100,000 off their liability to Tintrade Limited as part of an out-of-court settlement agreement and service of payment commitment.





Full provision for the amounts in questions has been recognized in the reporting period.





Note 12 – Assets retirement obligations





As of December 31, 2009


As of December 31, 2008Beginning asset retirement obligation

$
566,279


$
616,185Liabilities incurred


-



-Liabilities settled


-



-Accretion expense


13,944



61,059Revision to estimated cash flows


-



-Foreign currency translation


22,962



(110,965
)Ending asset retirement obligation

$
600,115


$
566,279





The asset retirement obligations represent the estimated future costs associated with the plugging and abandonment of oil and gas wells, removal of equipment and facilities from owned and leased acreage, and land restoration.








F-16








Note 13 - Stockholders' Equity





All descriptions and transactions that affect stockholders’ equity are in terms of Premier (See Note 1).





On May 30, 2008, the Company increased its number of authorized shares of common stock from 100,000,000 (One Hundred Million Common Shares) to 250,000,000 (Two Hundred and Fifty Million Common Shares) and the Par Value changed from ($.001) to ($.0001). The Aggregate par value of the Common Shares changed from ($10,000) to ($25,000) and the Aggregate par value of the Preferred changed from ($10,000) to ($1,000). The number of authorized preferred shares remained at 10,000,000.





On July 28, 2008 the Corporation's Board of Directors and the holder of a majority of its issued and outstanding common stock adopted resolutions approving an eighteen for one (18:1) forward stock split of the Corporation's issued and outstanding common stock, par value $0.0001 per share. The split became effective August 8, 2008. All prior amounts have been adjusted retroactive for the stock split.





On September 5, 2008, the Company and its principal shareholder and executive officer, entered into an agreement with ZRV Consulting Inc. pursuant to which ZRV acquired 162,000,000 shares of Premier for a cash consideration of $300,000. The transaction was completed on September 5, 2008. As a result of the transaction, there are currently outstanding 210,600,000 common shares of which ZRV owns 162,000,000 common shares or approximately 77% of the outstanding common shares.








Note 14 – Additional paid-in capital





The amount of $ 10,307,177 carried as additional paid-in capital includes the following items:





On December 31, 2009, Alexey Goleshev, Aslanbi Kodzokov and Bosko Popovic forgave amounts due to them totaling $125,000 ($41,667 for Alexey Goleshev; $41,667 for Aslanbi Kodzokov and $41,667 for Bosko Popovic). This forgiveness has been recorded as a capital contribution.





During the year ended December 31, 2009, ZRV Consulting Inc. forgave most of the amounts due to them, totaling $71,500. This forgiveness has been recorded as a capital contribution.




Note 15 - Operating lease





The following is a schedule by years of future minimum rental payments on operating leases as of December 31, 2009.





Years ending December 31,

US Dollars2010

$
60,8082011


-$
60,808




The Company rents office space and the monthly rental as at December 31, 2009 was $ 2,555. The Monthly Rental is paid on or before the first day of each month. The Tenancy Agreement expires in December 2010. The Company has the exclusive right to extend the term of the Tenancy whereas the Owner has the right to revise the Monthly Rental.





Further, the company rents 3 plots of land and the monthly rental as at December 31, 2009 was $2,679. The Monthly Rental is paid on or before the first day of each month. The term of the Land Lease Agreement is extendable through to December 2010 whereas the Owner has the right to revise the Monthly Rental.








F-17






Note 16 - Related party transactions





In the 12 month period ended December 31, 2009, related parties settled various expenses for and on behalf of the Company. The related parties are entities owned by a major shareholder of Premier Energy Corp. In the year ended December 31, 2009 the Company did not enter into transactions with related parties that are material either to the Company or any related party, or that are unusual in their nature of conditions.





The reporting and comparative periods’ balances with related parties are set out below:








As of December 31, 2009


As of December 31, 2008Receivable from related parties:Receivable from companies under common control and key members of staff, non-interest bearing loans

$
-


$
2,551Total receivable from related parties

$
-


$
2,551Payable to related parties:Payable to companies under common control, trade

$
133,001


$
136,911Payable to companies under common control, non interest bearing


322,844



10,194Total payable to related parties

$
455,845


$
147,105








Note 17 -  Disclosure about Oil and Gas Producing Activity





Oil and Natural Gas Reserves (Unaudited)





In accordance with FASB ASC 932, Extractive Activities—Oil and Gas,subtopic 235, Notes to Financial Statements, the Company makes certain supplemental disclosures about its oil and gas exploration and production operations. While this information was developed with reasonable care and disclosed in good faith, it is emphasized that the data represents management’s best estimates.





Accordingly, this information may not necessarily represent the current financial condition of the Company and its expected future financial results.





Capitalized Costs Relating to Oil and Gas Producing Activities





As of December 31, 2009


As of December 31, 2008Oil and gas properties:Proved

$
8,030,724


$
8,266,831Unproved


-



-Total capitalized costs

$
8,030,724


$
8,266,831Accumulated depreciation, depletion and amortization, and valuation

allowances


(3,848,448)



(3,594,193)Net capitalized costs

$
4,182,276


$
4,672,638





In financial years 2009 and 2008 we had US$ Nil costs incurred in Oil and Gas Property Acquisition, Exploration and Development Activity.






F-18







Results of Operations for Oil & Gas Production Activity





2009


2008Revenues:Sales

$
383,158


$
807,730Transfers


-



-Total


383,158



807,730Production costs (excluding production taxes)


150,573



362,243General and administrative


742,281



542,800Exploration expenses


-



-Accretion expenses


-



-Depreciation, depletion and amortization


353,450



376,614Taxes other that income taxes


260,981



522,366Income taxes


-



-Results of operations for producing activities

$
(1,124,127


$
(996,293
)





Reserve Quantity Information





The recording and reporting of proved reserves is governed by criteria established by regulations of the United States Securities and Exchange Commission. The Company’s reserves as of December 31, 2006 were appraised by an outside unrelated third-party petroleum engineers, and subsequently interpreted by the management as atDecember 31, 2009, 2008 and 2007 as contained herein in order to reflect the current period mineral reserve records.





The Company’s proved oil and gas reserves are located at the continent of Eurasia, entirely in the Russian Federation.





Proved reserves are those quantities of oil and gas which, by analysis of geosciences and engineering data, can be estimated with reasonable certainty to be economically producible from a given date forward from known reservoirs, and under the existing economic conditions, operating methods, and government regulation. In certain cases, recovery of such reserves may require considerable investments in wells and related equipment. Proved reserves also include additional oil and gas reserves that will be extracted after the expiry date of licence agreements if the renewal of such agreements is reasonably certain. Proved developed reserves are the quantities of oil and gas expected to be recovered from existing wells using existing equipment and operating methods or in which the cost of the required equipment is relatively minor compared with the cost of new well.





Proved undeveloped oil and gas reserves are proved reserves that are expected to be recovered from new wells on undrilled acreage, or from existing wells where a relatively major expenditure is required for recompletion. Reserves on undrilled acreage are limited to those directly offsetting development spacing areas that are reasonably certain of production when drilled unless evidence using reliable technology exits that establishes reasonable certainty of economic producibility at greater distances.





Undrilled locations can be classified as having undeveloped reserves only if a development plan has been adopted indicating that they are scheduled to drilled within five years, unless the specific circumstances justify a longer time.






F-19







Under no circumstances are estimates of proved undeveloped reserves attributable to any acreage for which an application of fluid injection or other improved recovery technique is contemplated, unless those techniques have been proved effective by actual project in the same reservoir or an analogous reservoir, or by other evidence using reliable technology establishing reasonable certainty. Due to inherent industry uncertainties and the limited nature of deposit data, estimates of reserves are subject to change as additional information becomes available.





The Company’s estimates of net proved oil and gas reserves and changes thereto for the years ended December 31, 2009, 2008 and 2007 are shown in the table below:





For year ended December 31, 2009


For year ended December 31, 2008


For year ended December 31, 2007Oil or Condensate


Gas


Oil or Condensate


Gas


Oil or Condensate


Gas(TBbl)


(MMcf)


(TBbl)


(MMcf)


(TBbl)


(MMcf)Developed and undeveloped:Beginning of period


8,044



45,189



8,066



45,211



8,093



45,237Revision of previous estimate


100



-



-



-



-



-Discoveries and extensions


-



-



-



-



-



-Infill reserves in an existing

proved fields


-



-



-



-



-



-Purchase of minerals in place


-



-



-



-



-



-Sales of reserves


-



-



-



-



-



-Production


(22
)


(18
)


(22
)


(22
)


(27
)


(26
)End of period


8,122



45,171



8,044



45,189



8,066



45,211Proved developed reserves:Beginning of period


15



129



37



151



64



177End of period


93



111



15



129



37



151





Standardized Measure of Discounted Future Net Cash Flows and Changes Therein Relating to Proved Oil and Natural Gas Reserves (Unaudited)





The standardized measure of discounted future net cash flows related to the above oil and gas reserves is calculated in accordance with the requirements of FASB ASC 932-235. Estimated future cash inflows from oil and gas production are computed by applying average of the first-day-of-the-month price for each month within 12-month period before the balance sheet date for oil and gas to year-end quantities of estimated net proved reserves. Adjustment in this calculation for future price changes is limited to those required by contractual arrangements in existence at the end of each reporting period.





Future development and production costs are those estimated future expenditures necessary to develop and produce estimated proved reserves as of year-end based on year-end cost indices and assuming continuation of year end economic conditions. Estimated future income taxes are calculated by applying appropriate year-end statutory tax rates. These rates reflect allowable deductions and tax credits and are applied to estimated future net pre-tax cash flows, net of the tax bases of related assets.









F-20








Supplementary Oil and Gas Disclosure (unaudited) (continued)





Discounted future net cash flows are calculated using a 10% discount factor. Discounting requires a year-by-year estimates of future expenditures to be incurred in the periods when the reserves will be extracted.





The information provided in the tables below does not represent management’s estimates of the Company’s expected future cash flows or of the value of its proved oil and gas reserves. Estimates of proved reserves change over time as new information becomes available. Moreover, probable and possible reserves which may become proved in the future are excluded from the calculations. The arbitrary valuation prescribed under FASB ASC 932-235 requires assumptions as to the timing and the amount of future development and production costs. The calculations should not be relied upon as an indication of the Company’s future cash flows or of the value of its oil and gas reserves.





US Dollars

As of December 31, 2009


As of December 31, 2008


As of December 31, 2007Gas (per Mcf)

$
0.98


$
1.01


$
0.87Oil (per Bbl)

$
34.14


$
20.92


$
31.86






F-21







The following summary sets forth the Company’s future net cash flows relating to proved oil and gas reserves based on the standardized measure prescribed in SFAS No. 69:





US Dollars (In thousands)

As of December 31, 2009


As of December 31, 2008


As of December 31, 2007Future cash inflows

$
308,701


$
204,106


$
288,431Future production costs


(178,141
)


(125,132
)


(169,257
)Future development cost


(65,371
)


(63,504
)


(68,211
)Future income taxes


(17,095
)


(2,872
)


(19,754
)Future net cash flows


48,094



12,599



31,20910 percent annual discount


(4,086
)


(2,264
)


(3,431
)Standardized measure of discounted future net cash flows

$
44,008


$
10,335


$
27,778





The principle sources of change in the standardized measure of discounted future net cash flows are:





US Dollars (In thousands)

For year ended December 31, 2009


For year ended December 31, 2008


For year ended December 31, 2007Standardized measure, beginning of period

$
10,335


$
27,778


$
37,844Sales of oil and gas produced, net of production costs


(735
)


(870
)


(294
)Net charge in prices and production costs


50,454



(34,622
)


(15,313
)Extensions, discoveries and other including infill reserves in an existing proved field, net of production costs


-



-



-Purchase of mineral in place






-



-Development costs incurred during the period






-



-Change in estimated future development costs






-



-Revisions of previous quantity estimates






-



-Accretions of discount


(1,822
)


1,167



559Sales of reserves in placeNet charge of income taxes


(14,223
)


16,882



4,982Changes in timing and other






-



-Standardized measure, end of period

$
44,008


$
10,335


$
27,778





There are no material effects of the adoption of ASU 2010-03 on the standardized measure of discounted future cash flows.














F-22







Note 18 - Commitments, contingencies and operating risks





Capital expenditure, exploration and investment programs





The entity owns and operates the asset (natural gas and crude oil reserves located in the North Kopanskoye Field) under which it has commitments for capital expenditure in relation to its exploration programs. It relates to an existing license agreement in the Russian Federation.





Development plan calls for the implementing of pressure maintenance by water flooding both the Artinsky-1 and Bashkirian A4 Central oil reservoirs. A combination of procedures and injectors totaling 18 wells in Artinsky-1 reservoir and 9 wells in the Bashkirian A4 Central reservoir are scheduled to be active when the water flood development plant are fully implemented. Additionally, two wells are scheduled to be completed in the Bashkirian A4 South reservoir, which will be produced by primary depletion.





The overall capital commitments to undertake the drilling and oilfield construction activities envisaged by the North Kopanskoye Field exploration and development plan, were assessed and estimated by the management to be in the region of $70,000,000 to $73,000,000. Unless the Company is able to raise sufficient capital, the Company will not be able to meet its license obligations and may not be able to continue as a going concern.





Russian Business Environment





While there have been improvements in the Russian economic situation, such as an increase in gross domestic product and a reduced rate of inflation, Russia continues economic reforms and development of its legal, tax and regulatory frameworks as required by a market economy. The future stability of the Russian economy is largely dependent upon these reforms and developments and the effectiveness of economic, financial and monetary measures undertaken by the government. In addition, laws and regulations, including interpretations, enforcement and judicial processes, continue to evolve in Russia. Other laws and regulations and certain other restrictions have a significant effect on the Company's industry, including, but not limited to the following issues: rights to use subsurface resources, environmental matters, site restoration, transportation and export, corporate governance, taxation, etc.





Political environment





Trading activity and the profit derived there from may be affected by political, statutory, financial and administrative changes, including the changes in environment protection legislation that are currently underway in Russia.





Insurance





During the normal course of business disputes and claims may arise and there can be uncertainties surrounding the ultimate resolution of these matters.





Taxation





The taxation system in the Russian Federation is relatively new and is characterized by frequent changes in legislation, official pronouncements and court decisions, which are often unclear, contradictory and subject to varying interpretation by different tax authorities. Taxes are subject to review and investigation by a number of authorities, which have the authority to impose severe fines, penalties and interest charges. A tax year remains open for review by the tax authorities during the three subsequent calendar years.






F-23







Russian transfer pricing rules were introduced in 1999, giving Russian tax authorities the right to make transfer pricing adjustments and impose additional tax liabilities in respect of all “controlled” transactions, provided that the transaction price deviates from the market price by more than 20%. Controlled transactions include transactions between related entities and certain other types of transactions between independent parties, such as foreign trade transactions with significant (by more than 20%) price fluctuations.





The Russian transfer pricing rules are vaguely drafted, leaving wide scope for interpretation by Russian tax authorities and courts. Due to the uncertainties in interpretation of transfer pricing legislation, the tax authorities may challenge the Company’s prices and propose an adjustment. If such price adjustments are upheld by the Russian courts and implemented, the Company’s future financial results could be adversely affected. In addition, the Company could face significant losses associated with the assessment of prior tax underpaid and related interest and penalties, which could have an adverse effect on the Company’s financial condition and results of operations. The Company’s management believes that such transfer pricing related tax contingencies are remote and therefore may not have any significant impact on the Company’s financial statements.





Environmental liabilities





Potential liabilities that may arise as a result of changes in laws and regulations and settlement of the civil disputes can not be reliably assessed but they may prove to be material. Under existing legislation, management believes that there are no significant unrecorded liabilities which could have a significant adverse effect on the operating results or financial position of the Company.





Environmental protection





Environmental protection liabilities are carried in accounts when they arise and can be reliably measured and when there are probabilities of arising of such liabilities.





Pension Benefits





The Company makes payments to State Pension Fund of Russian Federation. These payments are calculated by the employer as a percentage of salary expense and are expensed as they are incurred.








F-24





Employment Agreements





On October 16, 2008 the Company entered into an employment agreement with Dr. Prodanovic. Under the terms of the 24 month agreement, he will serve as Chief Executive Officer. In addition, during the term of the agreement we agreed to cause him to be successively nominated for election to the Board of Directors. As compensation, the Company agreed to pay Dr. Prodanovic an annual base salary of $100,000, which such base is subject to annual merit review and increase as deemed appropriate by the Board, together with bonus compensation in amounts as may be determined by the Board. The Company has agreed to issue Dr. Prodanovic options to purchase 200,000 of our common stock. As of December 31, 2009 the Options have not be granted and the Company is currently negotiating the terms. He is also entitled to participate in such benefit packages as we provide to similarly situated employees, four weeks paid vacation and 10 paid holidays. The agreement contains customary provisions related to non-compete, confidentiality, non-solicitation and invention assignment. As of December 31, 2009 the Company recorded accrued salary of $116,663.





The agreement may be terminated by us for cause as set forth in the agreement, by us without cause, or by Dr. Prodanovic under certain circumstances. If we terminate the agreement for cause, he is not entitled to any severance benefits. If we should terminate the agreement without cause, we are obligated to pay Dr. Prodanovic an amount equal to his monthly base salary for the greater of 24 months or until he is hired in a new position which is consistent with his experience and stature. If such new position pays less than his then current base salary we are obligated to pay the difference for the balance of the 24 month severance period. If his employment in the new position should terminate prior to the expiration of the 24 month severance period, we are obligated to pay his monthly base salary during the remaining period. In the event we should fail to appoint Dr. Prodanovic Chief Executive Officer and a member of our Board of Directors in any successive periods during the term of the agreement, should we fail to compensate him pursuant to the terms of the agreement, or if there is a material breach of the agreement, Dr. Prodanovic is entitled to terminate the agreement and we shall be obligated to pay him the same severance benefits had we terminated the agreement without cause.





On February 27, 2009, the Company entered into an employment agreement with Alexey Goleshev. Under the terms of the agreement, Alexey will serve as Chief Financial Officer and a director.





On February 27, 2009, the Company entered into an employment agreement with Bosko Popovic. Under the terms of the agreement, Bosko will serve as Chief Operating Officer and a director.





On February 27, 2009, the Company entered into an employment agreement with Aslanbi Kodzokov. Under the terms of the agreement, Aslanbi will serve as Secretary and a director.








Note 19 - Subsequent events








In accordance with the requirements of ASC No. 855, “Subsequent events,” the Company evaluated subsequent events through the date the financial statements were available to be issued. Therefore subsequent events were evaluated by the Company up to March 31, 2010.





As of March 2, 2010 the Company obtained $ 100,000 worth of loan finance from Auxerre Trading Limited, the Company’s 51% parent company, at 8% for the term of the loan of one year. The Company has settled all of the outstanding audit fees and some of the other professional fees.








F-25







ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING ANDFINANCIAL DISCLOSURE




Moore & Associates Chartered had served as the Company’s independent auditor since inception until January 30, 2009.





On January 30, 2009 (the “Engagement Date”), the Company engaged RBSM LLP (“RBSM”) as its independent registered public accounting firm for the Company’s fiscal year ended December 31, 2008. 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.





On February 4, 2009 (the “Dismissal Date”), the Company advised Moore & Associates Chartered (the “Former Auditor”) that it was dismissed as the Company’s independent registered public accounting firm. The decision to dismiss the Former Auditor as the Company’s independent registered public accounting firm was approved by the Company’s Board of Directors on January 30, 2009. Except as noted in the paragraph immediately below, the reports of the Former Auditor on the Company’s consolidated financial statements for the years ended May 31, 2008 and May 31, 2007 did not contain an adverse opinion or disclaimer of opinion, and such reports were not qualified or modified as to uncertainty, audit scope, or accounting principle.





On August 27, 2009, the Public Company Accounting Oversight Board ("PCAOB") revoked the registration of the Former Auditor because of violations of PCAOB rules and auditing standards in auditing the financial statements, PCAOB rules and quality controls standards, and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and non-cooperation with a Board investigation.





The reports of the Former Auditor on the Company’s consolidated financial statements as of and for the years ended May 31, 2008 and May 31, 2007, contained an explanatory paragraph which noted that there was substantial doubt as to the Company’s ability to continue as a going concern as the Company had a net loss as of May 31, 2008.





During the years ended May 31, 2008 and May 31, 2007, and through the Dismissal Date, the Company has not had any disagreements with the Former Auditor on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreements, if not resolved to the Former Auditor’s satisfaction, would have caused them to make reference thereto in their reports on the Company’s consolidated financial statements for such years.





During the years ended May 31, 2008 and May 31, 2007, and through the Dismissal Date, there were no reportable events, as defined in Item 304(a)(1)(v) of Regulation S-K.





On April 16, 2009 (the “Resignation Date”), RBSM advised the Company that it was resigning as the Company’s independent registered public accounting firm. Premier Energy Corp. ( was engaged on January 30, 2009 and did not issue a report on the Company’s consolidated financial statements during the most recent two fiscal years and through the Resignation Date. From January 30, 2009 through April 16, 2009 , the Company has not had any disagreements with RBSM on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreements, if not resolved to RBSM’s satisfaction, would have caused them to make reference thereto in their reports on the Company’s financial statements for such year. From January 30, 2009 through April 16, 2009, there were no reportable events, as defined in Item 304(a)(1)(v) of Regulation S-K.





On April 16, 2009 (the “Engagement Date”), the Company engaged Audit Firm “Femida-Audit”, LLC (“Femida”) as its independent registered public accounting firm for the Company’s fiscal year ended December 31, 2008. The decision to engage the Femida as the Company’s independent registered public accounting firm was approved by the Company’s Board of Directors.










20






ITEM 9A. CONTROLS AND PROCEDURES






As required by Rule 13a-15 under the Securities Exchange Act of 1934, as of the end of the period covered by this annual report, being December 31, 2009, we have carried out an evaluation of the effectiveness of the design and operation of our company’s disclosure controls and procedures. This evaluation was carried out under the supervision and with the participation of our company’s management, including our company’s Chief Executive Officer and Chief Financial Officer. Based upon that evaluation, our company’s Chief Executive Officer and Chief Financial Officer concluded that our company’s disclosure controls and procedures are effective as at the end of the period covered by this report. There have been no changes in our internal controls over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect our internal controls over financial reporting.




Disclosure controls and procedures and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time period 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 in our reports filed under the Securities Exchange Act of 1934 is accumulated and communicated to management including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.




Management’s report on internal control over financial reporting




Management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rule 13a-15(f) of the 1934 Act. Management has assessed the effectiveness of our internal control over financial reporting as at December 31, 2009, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Our internal control over financial reporting includes maintaining records that in reasonable detail accurately and fairly reflect our transactions and dispositions of our assets; providing reasonable assurance that transactions are recorded as necessary for preparation of our financial statements in accordance with generally accepted accounting principles; providing reasonable assurance that receipts and expenditures are made in accordance with authorizations of management and our directors; and providing reasonable assurance that unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements would be prevented or detected on a timely basis. As a result of this assessment, management concluded that, as at December 31, 2009, our internal control over financial reporting was effective in providing reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. However, because of its inherent limitations, internal control over financial reporting may not provide absolute assurance that a misstatement of our financial statements would be prevented or detected.




This annual report does not include an attestation report of our independent auditors regarding internal control over financial reporting. Management's report was not subject to attestation by our independent auditors pursuant to temporary rules of the SEC that permit our company to provide only management's report in this annual report.




ITEM 9B. OTHER INFORMATION




None.






21








PART III






ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE






Directors and Executive Officers, Promoters and Control Persons




Below are the names and certain information regarding Premier’s executive officers and directors.





Name

Age

PositionDr. Anton Prodanovic

63

Chief Executive Officer and DirectorAlexey Goleshev

37

Chief Financial Officer and DirectorBosko Popovic

46

Chief Operating Officer and DirectorAslanbi Kodzokov

42

Secretary and Director







Business Experience






The following is a brief account of the education and business experience during at least the past five years of our directors and executive officers, indicating their principal occupations during that period, and the name and principal business of the organizations in which such occupation and employment were carried out.




Background of Executive Officers and Directors





Dr. Anton Prodanovic, our Chief Executive Officer and a director of the Company, has been focused on the evaluation, planning, permitting, contracting, construction and management of various energy projects. From 2000 until joining our company, Dr. Prodanovic has served as a consultant to various oil and gas projects, renewable energy sources and emerging alternative fuel projects. Between 1984 and 2000, Dr. Prodanovic served in various capacities with Mobil Corporation as an officer or senior executive with various divisions and projects within Mobil Corporation, and from 1976 until 1984 he was a Senior Research Associate with Exxon Production Research Co., a division of Exxon Corporation. Dr. Prodanovic is a member of the American Society of Civil Engineers and the American Society of Mechanical Engineers. He was co-founder or organizer of Offshore Mechanics & Arctic Engineering, Polar Offshore Arctic Conferences, Offshore Technology Conferences and Russian Arctic Offshore Conferences. A Fulbright scholar (1973), Dr. Prodanovic also served as Assistant Professor at the University of Sarajevo, Yugoslavia and was a Research Assistant at Rice University. Dr. Prodanovic holds a Ph.D. in Structural Engineering from Rice University, an M.A. in International Business from the University of Texas and a B.S. in Civil Engineering from the University of Sarajevo.








Alexey Goleshev,our Chief Financial Officer and a director, has served as Vice President of National Republic Bank (Russia) since June 2003 where has been responsible for planning of oil and gas project financing.  From November 1998 through June 2001, Mr. Goleshev has served as the President of Codexbank.  Mr. Goleshev holds a MBA from the Pacific Coast University.





Bosko Popovic, our Chief Operating Officer and a director, has served as a Director of a Representation Office for Auxerre Trading Ltd, a significant shareholder of the Company, since October 2005 where he has monitored and controlled assets in Russia and traded crude oil and products.  From July 2003 through September 2005, Mr. Popovic served as Director of the Moscow office where he was responsible for processing and supplying crude oil.  Mr. Popovic holds an engineering degree from the University of Belgrade.








22





Aslanbi Kodzokov,our Secretary and a director, has since 2006, served as the Deputy General Director for the Legal Department of OOO Rossgaz and the Director of the Legal Department for OAO Hydrometalurg from 2002 to 2006.  From 2000 to 2002, Mr. Kodzokov served as the General Director of Moscow Institute of Economy and Law.  Mr. Kodzokov earned an economics degree from the Government University of Kabardino-Balkaria and a law degree from the Moscow Institute of Economy and Law.




Family Relationships






There are no family relationships among our directors or executive officers.






Involvement in Certain Legal Proceedings






Our directors, executive officers and control persons have not been involved in any of the following events during the past five years:




1.
any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time;2.
any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);3.
being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities; or4.
being found by a court of competent jurisdiction (in a civil action), the Securities and Exchange Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated.




Section 16(a) Beneficial Ownership Compliance




Section 16(a) of the Securities Exchange Act requires our executive officers and directors, and persons who own more than 10% of our common stock, to file reports regarding ownership of, and transactions in, our securities with the Securities and Exchange Commission and to provide us with copies of those filings. Based solely on our review of the copies of such forms received by us, or written representations from certain reporting persons, we believe that during fiscal year ended December 31, 2009, all filing requirements applicable to our officers, directors and greater than 10% percent beneficial owners were complied with.




23








Code of Ethics






We do not have a Code of Ethics applicable to our principal executive, financial and accounting officers. We do not have an audit committee or nominating committee and, in turn, we do not have a financial expert member of the Board of Directors.




We plan to search for an independent qualified accountant with a CPA designation to join our Board of Directors. Until January 2009, the Company had no operations and did not perceive the need for such committee or expert until it begins to derive sufficient profit to make the necessary expenditures to establish such committee or engage any such expert.




Nomination Process




As of December 31, 2009, we did not effect any material changes to the procedures by which our shareholders may recommend nominees to our board of directors. Our board of directors does not have a policy with regards to the consideration of any director candidates recommended by our shareholders. Our board of directors has determined that it is in the best position to evaluate our company’s requirements as well as the qualifications of each candidate when the board considers a nominee for a position on our board of directors. If shareholders wish to recommend candidates directly to our board, they may do so by sending communications to the president of our company at the address on the cover of this annual report.




Committees of the Board




All proceedings of our board of directors were conducted by resolutions consented to in writing by all the directors and filed with the minutes of the proceedings of the directors. Such resolutions consented to in writing by the directors entitled to vote on that resolution at a meeting of the directors are, according to the corporate laws of the State of Florida and the bylaws of our company, as valid and effective as if they had been passed at a meeting of the directors duly called and held.




Our company currently does not have nominating, compensation or audit committees or committees performing similar functions nor does our company have a written nominating, compensation or audit committee charter. Our board of directors does not believe that it is necessary to have such committees because it believes that the functions of such committees can be adequately performed by our board of directors.




Our company does not have any defined policy or procedure requirements for shareholders to submit recommendations or nominations for directors. The board of directors believes that, given the early stage of our development, a specific nominating policy would be premature and of little assistance until our business operations develop to a more advanced level. Our company does not currently have any specific or minimum criteria for the election of nominees to the board of directors and we do not have any specific process or procedure for evaluating such nominees. The board of directors assesses all candidates, whether submitted by management or shareholders, and makes recommendations for election or appointment.




A shareholder who wishes to communicate with our board of directors may do so by directing a written request addressed to our president, at the address appearing on the first page of this annual report.




Audit Committee Financial Expert




Our board of directors has determined that we do not have a board member that qualifies as an “audit committee financial expert” as defined in Item 407(d)(5)(ii) of Regulation S-B.




We believe that our board of directors is capable of analyzing and evaluating our financial statements and understanding internal controls and procedures for financial reporting. The board of directors of our company does not believe that it is necessary to have an audit committee because our company believes that the functions of an audit committee can be adequately performed by our board of directors. In addition, we believe that retaining an independent director who would qualify as an “audit committee financial expert” would be overly costly and burdensome and is not warranted in our circumstances given the stage of our development.




In order to remediate this weakness, during the second quarter of 2009, the Company engaged RBSM LLP as an independent consultant to evaluate its needs and provide needed accounting services.







24






ITEM 11. EXECUTIVE COMPENSATION




Executive Compensation




The particulars of compensation paid to the persons who we will collectively refer to as the named executive officers of our company for the years ended December 31, 2009 and 2008, are set out in the following summary compensation table:




SUMMARY COMPENSATION TABLEName

and Principal

Position
Year
Salary

($)
Bonus

($)
Stock

Awards ($)
Option

($)
Non-Equity

Incentive

Plan

Compensa-

tion

($)
Change in

Pension

Value and

Nonqualified

Deferred

Compensation

Earnings

($)
All

Other

Compensa

-tion

($)
Total

($)Anton Prodanovic
2008

2009
$20,833

$100,000
Nil

Nil
Nil

Nil
Nil

Nil
Nil

Nil
Nil

Nil
Nil

Nil
$20,833

$100,000Alexey Goleshev
2009
$50,000
Nil
Nil
Nil
Nil
Nil
Nil
$41,667Bosko Popovic
2009
$50,000
Nil
Nil
Nil
Nil
Nil
Nil
$41,667Aslanbi Kodzokov
2009
$50,000
Nil
Nil
Nil
Nil
Nil
Nil
$41,667





The Company did not pay salaries during the year ended December 31, 2008 and the year ended December 31, 2009.








Dr. Anton Prodanovic has been Chief Executive Officer and a director of the Company since October 16, 2008.





Alexey Goleshev has been our Chief Financial Officer and a director since February 27, 2009.





Bosko Popovic has been our Chief Operating Officer and a director since February 27, 2009.





Aslanbi Kodzokovhas been our our Secretary and a director since February 27, 2009.




Executive Compensation




During the year ended December 31, 2009, we paid $4,167 as part of the management fees owing to Dr. Anton Prodanovic for 2008, therefore a total of $16,667 remain due to him for 2008.  During the year ended December 31, 2009, we paid nil management fees owing to Dr. Anton Prodanovic for 2009.




During the year ended December 31, 2009, Alexey Goleshev, Bosko Popovic and Aslanbi Kodzokov forgave amounts due to them totaling $125,000 ($41,667 for Alexey Goleshev; $41,667 for Bosko Popovic; $41,667 for Aslanbi Kodzokov). This forgiveness has been recorded as a capital contribution.






25






Equity Compensation Plan Information and Stock Options




We do not currently have any equity compensation plans or any outstanding stock options.




Compensation of Directors




We currently have no formal plan for compensating our directors for their services in their capacity as directors, although we may elect to issue stock options to such persons from time to time. Directors are entitled to reimbursement for reasonable travel and other out-of-pocket expenses incurred in connection with attendance at meetings of our board of directors. Our board of directors may award special remuneration to any director undertaking any special services on our behalf other than services ordinarily required of a director.




Pension, Retirement or Similar Benefit Plans




There are no arrangements or plans in which we provide pension, retirement or similar benefits for directors or executive officers. We have no material bonus or profit sharing plans pursuant to which cash or non-cash compensation is or may be paid to our directors or executive officers, except that stock options may be granted at the discretion of the board of directors or a committee thereof.




ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS




The following tables set forth certain information as of April 15, 2010, regarding (i) each person known by the Company to be the beneficial owner of more than 5% of the outstanding shares of Common Stock, (ii) each director, nominee and executive officer of the Company and (iii) all officers and directors as a group.








26











Name of Beneficial Owner (1)

Common Stock

Beneficially Owned


Percentage of

Common Stock (2)Dr. Anton Prodanovic *


0



**Alexey Goleshev *


0



**Bosko Popovic *


0



**Aslanbi Kodzokov *


0



**ZRV Consulting


54,594,000



25.9
%Auxerre Trading Ltd.


107,406,000



51.0
%All officers and directors as a group (5 persons)


0



**
0


*Executive officer and/or director of Premier.


** Less than 1%





(1)
Except as otherwise indicated, the address of each beneficial owner is c/o Premier Energy Corp., 14785 Preston Road, Suite 550, Dallas, Texas  75254.





(2)
Applicable percentage ownership is based on 210,600,000 shares of common stock outstanding as of April 15, 2010, together with securities exercisable or convertible into shares of common stock within 60 days of April 15, 2010 for each stockholder.  Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to securities.  Shares of common stock that are currently exercisable or exercisable within 60 days of April 15, 2010 are deemed to be beneficially owned by the person holding such securities for the purpose of computing the percentage of ownership of such person, but are not treated as outstanding for the purpose of computing the percentage ownership of any other person.





Change in Control




We are not aware of any arrangement that might result in a change in control of our company in the future.




Equity Plan Compensation Information




Our company does not currently have a stock option plan or other form of equity plan.






ITEM 13. CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS, AND DIRECTOR INDEPENDENCE




On January 30, 2009, we entered into a Share Exchange Agreement with Auxerre Trading Ltd., a British Virgin Islands Company (“Auxerre”) pursuant to which we acquired 51% of the outstanding securities of Karbon in exchange for 107,406,000 shares of our common stock (the “Karbon Acquisition”).  Bosko Popovic, an executive officer and director of the Company, is an employee of Auxerre.





On January 30, 2009, prior to the Karbon Acquisition, ZRV Consulting Inc., the former majority shareholder of Premier, returned 107,406,000 shares of common stock of Premier for cancellation.   Michael Yuster, a director and officer of the Company, is the sole owner and director of ZRV Consulting, Inc.





On October 16, 2008 we entered into an employment agreement with Dr. Anton Prodanovic. Under the terms of this24 month agreement, he will serve as Chief Executive Officer. In addition, during the term of the agreement we agreed to cause him to be successively nominated for election to the Board of Directors. As compensation, we agreed to pay Dr. Prodanovic an annual base salary of $100,000, which such base is subject to annual merit review and increase as deemed appropriate by the Board, together with bonus compensation in amounts as may be determined by the Board. We have agreed to grant Dr. Prodanovic options to purchase 200,000 of our common stock at an exercise price equal to fair market value on the date of grant. He is also entitled to participate in such benefit packages as we provide to similarly situated employees, four weeks paid vacation and 10 paid holidays. The agreement contains customary provisions related to non-compete, confidentiality, non-solicitation and invention assignment.





On February 27, 2009 we have entered two year employment agreements with each of Alexey Goleshev, Bosko Popovic and Aslanbi Kodzokov providing annual salaries of $50,000 in consideration for their services to Premier Energy Corp.




During the year ended December 31, 2009, Alexey Goleshev, Bosko Popovic and Aslanbi Kodzokov forgave amounts due to them totaling $125,000 ($41,667 for Alexey Goleshev; $41,667 for Bosko Popovic; $41,667 for Aslanbi Kodzokov). This forgiveness has been recorded as a capital contribution.




During the year ended December 31, 2009, ZRV Consulting Inc., a related party, provided the Company with $ 73,850 in the form of cash advances, management fees, rent and office expenses incurred or paid on behalf of the Company. $71,500 of those amounts were non-interest bearing and comprised the amounts forgiven and recorded as part of the entire annual capital contribution. As at December 31, 2009 the balance amount of $2,350 was recorded in Borrowings repayable to related parties, as further disclosed in Note 9 Borrowings.









27






Corporate Governance




We currently act with four directors consisting of Anton Prodanovic, Alexey Goleshev, Bosko Popovic and Aslanbi Kodzokov.




We do not have a standing audit, compensation or nominating committee, but our entire board of directors acts in such capacities. We believe that the members of our board of directors are capable of analyzing and evaluating our financial statements and understanding internal controls and procedures for financial reporting. The board of directors of our company does not believe that it is necessary to have a standing audit, compensation or nominating committee because we believe that the functions of such committees can be adequately performed by the board of directors, consisting of Anton Prodanovic, Alexey Goleshev, Bosko Popovic and Aslanbi Kodzokov.




ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES




Audit Fees




The aggregate fees billed by Femida-Audit, LLC for professional services rendered for the audit of our annual financial statements included in our annual report on Form 10-K for 2009 is $11,500.




Audit Related Fees




For the fiscal year ended December 31, 2009, the aggregate fees billed for consultation concerning financial accounting and reporting standards and related services by RBSM LLP, were $150,286.




Tax Fees




None.




All Other Fees




None.




28




PART IV






ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES







Exhibit No.

Description




3.1

Articles of Incorporation (4)3.2

Bylaws (4)10.1

Share Exchange Agreement dated as of January 30, 2009 by and among Auxerre Trading Ltd., Karbon, CJSC and Premier Energy Corp. ( 1 )10.2

Employment Agreement between Premier Energy Corp. and Alexey Goleshev ( 1 )10.3

Employment Agreement between Premier Energy Corp. and Bosko Popovic ( 1 )10.4

Employment Agreement between Premier Energy Corp. and Aslanbi Kodzokov ( 1 )16.1

Letter from Audit Firm Femida-Audit LLC, dated February 11, 2009 (2)16.2

Letter from RBSM LLP, dated April 21, 2009 (3)31.1

Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes Oxley Act.31.2

Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes Oxley Act.32.1

Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350 as adopted Pursuant to Section 906 of the Sarbanes Oxley Act of 2002.32.2

Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 as adopted Pursuant to Section 906 of the Sarbanes Oxley Act of 2002.





(1)
Incorporated by reference to the Form 8K Current Report filed with the Securities and Exchange Commission on February 2, 2009.(2)
Incorporated by reference to the Current Report on Form 8-K filed with the Securities and Exchange Commission on February12, 2009.





(3)
Incorporated by reference to the Current Report on Form 8-K filed with the Securities and Exchange Commission on April 21, 2009.(4)
Incorporated by reference to the Registration Statement on Form SB-2 filed with the Securities and Exchange Commission on August 31, 2007.













29





SIGNATURES





In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.





PREMIER ENERGY CORP.





Date:  April 15, 2010
By:/s/ Dr. Anton ProdanovicDr. Anton ProdanovicChief Executive Officer and Director (Principal Executive Officer)





Date:  April 15, 2010
By: /s/Alexey GoleshevAlexey GoleshevChief Financial Officer and Director (Principal Financial & Accounting Officer)





POWER OF ATTORNEY





KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Dr. Anton Prodanovic as his true and lawful attorney-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this report on Form 10-K, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.





Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.





Name

Position

Date/s/ Dr. Anton Prodanovic



Dr. Anton Prodanovic

Chief Executive Officer and Director (Principal Executive Officer)

April 15, 2010/s/ Alexey Goleshev

Alexey Goleshev

Chief Financial Officer and Director (Principal Financial Officer and Principal Accounting Officer)

April 15, 2010/s/ Bosko Popovic

Bosko Popovic

Chief Operating Officer and Director

April 15, 2010/s/Aslanbi Kodzokov

Aslanbi Kodzokov

Secretary and Director

April 15, 2010