UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
DC 20549





Form
10-Q


(Mark
one)


|X|
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE


ACT
OF 1934





For the
quarterly period ended March 31, 2009


OR


|_|
TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE EXCHANGE ACT





For the
transition period from ____________ to _____________





Commission file number333-145569





PREMIER
ENERGY CORP.


(formerly
Premier Nursing Products Corp.)





(Exact
name of small business issuer as specified in its charter)






Florida
            20-8724818(State or
      other jurisdiction of incorporation or organization)
            (IRS
      Employer Identification No.)






14785
Preston Road, Suite 550


Dallas,
Texas 75254


(Address
of principal executive offices)





(972)
789-5151


(Issuer's
telephone number)





Indicate
by check mark whether registrant (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes |X| No |_|





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding
12 months (or for such shorter period that the registrant was required to submit
and post such files).


Yes x                                           No  o





Indicated
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of “accelerated
filter and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check
one):





Large
      accelerated filero
            Accelerated
      fileroNon-accelerated
      filer      o
            Smaller
      reporting companyx





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





As of May
6, 2009, there were 210,600,000 shares of the issuer's common stock issued and
outstanding.





Transitional
Small Business Disclosure Format (Check one): Yes |_| No |X|










1






TABLE OF CONTENTS






PART I - FINANCIAL
      INFORMATION
                                PageItem
      1.  Financial Statements.
                                3Item
      2.  Management's Discussion and Analysis of Financial Condition
      and Results of Operations.
                                23Item
      3.  Quantitative and Qualitative Disclosures About Market
      Risk.
                                29Item
      4.  Controls and Procedures.
                                29PART
      II - OTHER INFORMATIONItem
      1.  Legal Proceedings.
                                30Item
      1a. Risk Factors
                                30Item
      2.  Unregistered Sales of Equity Securities and Use of
      Proceeds.
                                30Item
      3.  Defaults Upon Senior Securities.
                                30Item
      4.  Submission of Matters to a Vote of Security
      Holders.
                                30Item
      5.  Other Information.
                                30Item
      6.  Exhibits.
                                30













2

















PART
I - FINANCIAL INFORMATION


Item 1. Financial
Statements.


PREMIER
      ENERGY CORP. AND SUBSIDARYConsolidated
      Balance SheetsASSETSNote
                              
                              
                              March 31,
      2009
                              
                              
                              December 31,
      2008(unaudited)Current
      Assets:Cash
                              
                              
                              
                              
                              $
                              1,415
                              
                              
                              $
                              52Accounts
      and notes receivables, net
                              
                              
                              
                              
                              
                              64,862
                              
                              
                              
                              85,369Inventories
                              
                              
                              5
                              
                              
                              
                              104,847
                              
                              
                              
                              121,171Prepaid
      taxes and expenses
                              
                              
                              6
                              
                              
                              
                              390,587
                              
                              
                              
                              451,765Prepaid
      and other assets
                              
                              
                              7
                              
                              
                              
                              38,682
                              
                              
                              
                              13,323600,393
                              
                              
                              
                              671,680Property,
      Plant and Equipment:Proven
      Oil and Gas properties (successful efforts), at cost
                              
                              
                              
                              
                              
                              
                              7,140,798
                              
                              
                              
                              8,266,831Less-
      accumulated depletion, depreciation and amortization
                              
                              
                              
                              (3,174,983
                              )
                              
                              
                              (3,594,193
                              )Other
      property, plant and equipment
                              
                              
                              
                              
                              
                              
                              88,449
                              
                              
                              
                              102,396Less-
      accumulated depreciation
                              
                              
                              
                              
                              
                              
                              (73,186
                              )
                              
                              
                              (82,169
                              )3,981,078
                              
                              
                              
                              4,692,865Deferred
      Income tax assets
                              
                              
                              10
                              
                              
                              
                              46,115
                              
                              
                              
                              78,683TOTAL
      ASSETS
                              
                              
                              
                              
                              
                              $
                              4,627,586
                              
                              
                              $
                              5,443,228LIABILITIES
      AND STOCKHOLDERS' EQUITYCurrent
      Liabilities:Accounts
      Payable
                              
                              
                              8
                              
                              
                              $
                              366,590
                              
                              
                              $
                              315,624Short
      term borrowings
                              
                              
                              9
                              
                              
                              
                              313,056
                              
                              
                              
                              310,194Short
      term account payable under out-of-court settlement
                              
                              
                              
                              
                              
                              
                              84,654
                              
                              
                              
                              -Production
      taxes payable
                              
                              
                              
                              
                              
                              
                              196,104
                              
                              
                              
                              148,602960,404
                              
                              
                              
                              774,420.Long-Term
      Liabilities:Long
      Term Notes Payables
                              
                              
                              
                              
                              
                              
                              78,962
                              
                              
                              
                              -Provision
      for litigations
                              
                              
                              
                              
                              
                              
                              -
                              
                              
                              
                              96,319Asset
      retirement obligations
                              
                              
                              11
                              
                              
                              
                              500,262
                              
                              
                              
                              566,279579,224
                              
                              
                              
                              662,598TOTAL
      LIABILITIES
                              
                              
                              
                              
                              
                              
                              1,539,628
                              
                              
                              
                              1,437,018STOCKHOLDERS'
      EQUITYPreferred
      stock, $0.0001 par value, 10,000,000 shares authorized,
    noneissued
      and outstanding
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              -Common
      Stock, $0.0001 par value,250,000,000
      shares authorized,
                              
                              
                              12
                              
                              
                              
                              21,060
                              
                              
                              
                              21,060210,600,000
      shares issued and outstanding at March 31, 2009 and December 31, 2008,
      respectivelyAdditional  Paid-in
      Capital
                              
                              
                              
                              
                              
                              
                              10,271,174
                              
                              
                              
                              10,271,174Accumulated
      Deficit
                              
                              
                              
                              
                              
                              
                              (6,475,747
                              )
                              
                              
                              (6,102,629
                              )Accumulated
      other comprehensive income
                              
                              
                              
                              
                              
                              
                              (728,529
                              )
                              
                              
                              (183,395
                              )3,087,958
                              
                              
                              
                              4,006,210TOTAL
      LIABILITIES AND STOCKHOLDERS' EQUITY
                              
                              
                              
                              
                              
                              $
                              4,627,586
                              
                              
                              $
                              5,443,228






The
accompanying notes to the unaudited financial statements are an integral part of
these statements.






3











PREMIER
      ENERGY CORP. AND SUBSIDARYConsolidated
      Statements of OperationsThree months ended
                          
                          
                          Three months endedMarch 31, 2009
                          
                          
                          March 31, 2008(unaudited)
                          
                          
                          (unaudited)Operating
      revenues:Oil
      and gas production revenue
                          
                          $
                          68,416
                          
                          
                          $
                          129,509Operating
      expenses:Oil
      and gas production expense
                          
                          
                          57,837
                          
                          
                          
                          136,844Mineral
      extraction tax
                          
                          
                          29,163
                          
                          
                          
                          158,672Depreciation,
      depletion and amortization
                          
                          
                          72,728
                          
                          
                          
                          96,623Taxes
      other that income taxes
                          
                          
                          14,207
                          
                          
                          
                          40,604Loss
      on sales proven properties
                          
                          
                          -
                          
                          
                          
                          -Marketing
      and transportation expenses
                          
                          
                          38,468
                          
                          
                          
                          113,591General
      and administrative
                          
                          
                          144,246
                          
                          
                          
                          36,122356,649
                          
                          
                          
                          582,456Operating
      loss
                          
                          
                          (288,233
                          )
                          
                          
                          (452,947
                          )Other
      Income (Expense):Currency
      translation gain/(loss)
                          
                          
                          (51,837
                          )
                          
                          
                          14,469Interest
      expense
                          
                          
                          (11,144
                          )
                          
                          
                          (15,586
                          )(62,981
                          )
                          
                          
                          (1,117
                          )Loss
      Before Provision forIncome
      Taxes
                          
                          
                          (351,214
                          )
                          
                          
                          (454,064
                          )Benefit(Provision)
      for Income Tax
                          
                          
                          (21,904
                          )
                          
                          
                          62,137Net
      Loss
                          
                          $
                          (373,118
                          )
                          
                          $
                          (391,927
                          )Loss
      Per ShareBasic
      and diluted
                          
                          $
                          (0.00
                          )
                          
                          $
                          (0.00
                          )Weighted
      Average Number of Shares Outstanding
                          
                          
                          210,600,000
                          
                          
                          
                          210,600,000






The
accompanying notes to the unaudited financial statements are an integral part of
these statements.








4




PREMIER
ENERGY CORP.
 AND
SUBSIDIARY
 Statement
of Stockholders Equity
 For
the period January 1, 2009 through March 31, 2009





AccumulatedAdditional
                        
                        
                        
                        
                        
                        OtherComprehensive
                        
                        
                        
                        
                        
                        Common
                        
                        
                        Paid-in
                        
                        
                        Accumulated
                        
                        
                        Comprehensiveincome/(loss)
                        
                        
                        Shares
                        
                        
                        Stock
                        
                        
                        Capital
                        
                        
                        Deficit
                        
                        
                        Income
                        
                        
                        TotalBalance
      at January 1, 2009
                        
                        
                        
                        
                        
                        210,600,000
                        
                        
                        $
                        21,060
                        
                        
                        $
                        10,271,174
                        
                        
                        $
                        (6,102,629
                        )
                        
                        $
                        (183,395
                        )
                        
                        $
                        4,006,210Net
      loss for 3 months ended March 31, 2009
                        
                        $
                        (373,118
                        )
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        (373,118
                        )
                        
                        
                        
                        
                        
                        
                        (373,118
                        )Foreign
      currency translation adjustment
                        
                        
                        (545,134
                        )
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        (545,134
                        )
                        
                        
                        (545,134
                        )$
                        (918,252
                        )Balance
      at March 31, 2009
                        
                        
                        
                        
                        
                        
                        210,600,000
                        
                        
                        $
                        21,060
                        
                        
                        $
                        10,271,174
                        
                        
                        $
                        (6,475,747
                        )
                        
                        $
                        (728,529
                        )
                        
                        $
                        3,087,958




















5








PREMIER
      ENERGY CORP.AND
      SUBSIDIARIESStatement
      of Cash FlowsThree months ended
                    
                    
                    Three months endedMarch 31, 2009
                    
                    
                    March 31, 2008(unaudited)
                    
                    
                    (unaudited)Cash
      Flows from Operating Activities:Net
      Loss
                    
                    $
                    (373,118
                    )
                    
                    $
                    (391,927
                    )Adjustments
      to reconcile net loss to cashused
      in operating activities:Depreciation,
      depletion and amortization
                    
                    
                    72,744
                    
                    
                    
                    96,623Interest
      expense
                    
                    
                    11,144
                    
                    
                    
                    15,586Deferred
      income taxes
                    
                    
                    32,568
                    
                    
                    
                    (110,322
                    )Changes
      in Assets and Liabilities:Accounts
      Receivable and notes receivable
                    
                    
                    20,508
                    
                    
                    
                    197,316Inventories
                    
                    
                    16,324
                    
                    
                    
                    7,871Prepaid
      expenses and taxes
                    
                    
                    61,178
                    
                    
                    
                    66,421Prepaid
      and other assets
                    
                    
                    (25,359
                    )
                    
                    
                    (7,186
                    )Accounts
      Payable and accrued expenses
                    
                    
                    50,963
                    
                    
                    
                    (276,706
                    )Taxes
      payable
                    
                    
                    47,502
                    
                    
                    
                    84,476Net
      Cash Used in Operating Activities
                    
                    
                    (85,546
                    )
                    
                    
                    (317,848
                    )Cash
      Flows used in Investing activities:Proceeds
      from Sales and disposals of Property
                    
                    
                    
                    
                    
                    
                    -Plant
      and Equipment
                    
                    
                    -Payments
      to Acquire Oil and Gas properties
                    
                    
                    -Payments
      to Acquire Property, Plant and Equipment
                    
                    
                    -
                    
                    
                    
                    -Net
      Cash Used in investing Activities
                    
                    
                    -
                    
                    
                    
                    -Cash
      Flows from Financing Activities:Proceeds
      from sale of equity
                    
                    
                    -
                    
                    
                    
                    -Proceeds
      from Short-term Borrowings
                    
                    
                    2,862
                    
                    
                    
                    410,489Proceeds
      from Long-term Borrowings
                    
                    
                    78,962
                    
                    
                    
                    -Net
      Cash Provided from financing Activities
                    
                    
                    81,824
                    
                    
                    
                    410,489Effect
      of exchange rate changes on cash and cash equivalents
                    
                    
                    5,085
                    
                    
                    
                    (92,596
                    )Net
      increase (decrease)  in cash
                    
                    
                    1,363
                    
                    
                    
                    45Cash
      at beginning of period
                    
                    
                    52
                    
                    
                    
                    162Cash
      at end of period
                    
                    $
                    1,415
                    
                    
                    $
                    207Supplemental
      Disclosures of Cash Flow information:Interest
      paid:
                    
                    $
                    -
                    
                    
                    $
                    -Income
      Taxes paid
                    
                    $
                    142
                    
                    
                    $
                    -














6






PREMIER
ENERGY CORP.


AND
SUBSIDIARY




NOTES
TO FINANCIAL STATEMENTS







Note
1 - Basis of Presentation, Organization and Business Overview







The accompanying unaudited consolidated
financial statements have been prepared in accordance with accounting principles
generally accepted in the United States of America for interim financial
information and with the instructions to Form 10-Q and Article 10 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by accounting principles generally accepted in the United States of
America for complete financial statements. In the opinion of our management, the
accompanying unaudited condensed financial statements include all adjustments,
consisting of normal recurring accruals, necessary to present fairly our
financial position, results of operations and cash flows. Interim results are
not necessarily indicative of the results that may be expected for the
entire year.





These
unaudited consolidated financial statements should be read in conjunction with
the financial statements and notes thereto included in the Company’s Transition
Report on Form 10-K for the transition period ended December 31, 2008, as filed
with the Securities and Exchange Commission (“SEC”). The financial statements
included herein as of March 31, 2009, and for the three month periods ended
March 31, 2009 and 2008, are unaudited, and in the opinion of management, the
information furnished reflects all material adjustments, consisting of normal
recurring adjustments, necessary for a fair presentation of financial position
and of the results for the interim period presented




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 recapitializaion,
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.





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.








7






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 consolidated financial statements include the accounts of Premier
Energy Corp., and its legal subsidiary KARBON, CJSC after eliminating all
intercompany transactions. KARBON, CJSC 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 address of the Karbon 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 Federation involve
risks, which do not typically exist in other markets.





The
accompanying 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 financial statements.





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.






8







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 March 31, 2009
                  
                  
                  
                  $1
      = RUB34.01;as
      of December 31, 2008
                  
                  
                  
                  $1
      = RUB29.38;as
      of March 31, 2008
                  
                  
                  
                  $1
      = RUB23.52;as
      of December 31, 2007
                  
                  
                  
                  $1
      = RUB24.55


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




for
      three months period ended March 31, 2009
                  
                  $1
      = RUB33.93;for
      year ended December 31, 2008
                  
                  $1
      = RUB24.85;for
      three months period ended March 31, 2008
                  
                  $1
      = RUB24.26;for
      year ended December 31, 2007
                  
                  $1
      = RUB25.08.


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 March 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.






9







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
      yearsVehicles
                  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.





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.








10






Impairment
of long-lived assets





Long-lived
assets, including blocks with proved oil and gas reserves, are assessed for
potential impairment in accordance with 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, 2008, 2007 and 2006, 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 the provisions of 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.






11





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 $313,056 in loans outstanding under its credit agreements as of
March 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 are 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 Carry Forwards




Stock-based
Compensation




The
Company follows 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 Financial Accounting Standards No. 128,
"Earnings per Share." As of March 31, 2009 and 2008, there were no common share
equivalents outstanding.




Business
Segments




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






12






Fair
Value of Assets and Liabilities




Effective
June 1, 2008, the Company adopted Statement of Financial Accounting Standards
No. 157, Fair Value
Measurements (SFAS 157), which provides a framework for measuring fair
value under GAAP. SFAS 157 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. SFAS 157
requires that valuation techniques maximize the use of observable inputs and
minimize the use of unobservable inputs. SFAS 157 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 borrowings is categorized as level 1 under SFAS 157 in the
amounts of $313,056 and $310,194 at March 31, 2009 and December 31, 2008
respectively.




Recent
accounting pronouncements




In April
2009, the FASB issued FSP FAS 107-1 and APB 28-1, “InterimDisclosures about Fair Value of
Financial Instruments”, (“FSP FAS 107-1 and APB28-1”) which amends FASB
Statement No. 107, Disclosures about Fair Value of
Financial Instruments, to require disclosures about fair value of
financial instruments for interim reporting periods of publicly traded companies
as well as in annual financial statements. This FSP also amends APB Opinion
No. 28, Interim Financial
Reporting, to require those disclosures in summarized financial
information at interim reporting periods. This FSP shall be effective for
interim reporting periods ending after June 15, 2009, with early adoption
permitted for periods ending after March 15, 2009. The Company does not
believe the adoption of FSP FAS 107-1 and APB 28-1 will have a material impact
on its financial statements.




In April
2009, the FASB issued FSP FAS 115-2 and FAS 124-2, “Recognitionand Presentation of
Other-Than-Temporary Impairments”, (“FSP FAS 115-2 and FAS 124-2”) which
amends the other-than-temporary impairment guidance in U.S. GAAP for debt
securities to make the guidance more operational and to improve the presentation
and disclosure of other-than-temporary impairments on debt and equity securities
in the financial statements. This FSP shall be effective for interim and annual
reporting periods ending after June 15, 2009, with early adoption permitted
for periods ending after March 15, 2009. Earlier adoption for periods
ending before March 15, 2009 is not permitted. The Company does not believe
the adoption of FSP FAS 115-2 and FAS 124-2 will have a material impact on its
financial statements.








13










In April
2009, the FASB issued FSP No. FAS 157-4, “Determining Fair Value When the Volume
and Level of Activity for the Asset or Liability Have Significantly Decreased
and Identifying Transactions That Are Not Orderly” (“FSP FAS
157-4”).  FSP FAS 157-4 provides guidance on estimating fair value
when market activity has decreased and on identifying transactions that are not
orderly.  Additionally, entities are required to disclose in interim
and annual periods the inputs and valuation techniques used to measure fair
value.  This FSP is effective for interim and annual periods ending
after June 15, 2009.  The Company does not expect the adoption of FSP
FAS 157-4 will have a material impact on its financial condition or results of
operation.




In
December 2008, the FASB issued FSP No. FAS 140-4 and FIN 46(R)-8, “Disclosures
by Public Entities (Enterprises) about Transfers of Financial Assets and
Interests in Variable Interest Entities.”  This disclosure-only FSP
improves the transparency of transfers of financial assets and an enterprise’s
involvement with variable interest entities, including qualifying
special-purpose entities.  This FSP is effective for the first
reporting period (interim or annual) ending after December 15, 2008, with
earlier application encouraged.  The Company adopted this FSP
effective January 1, 2009.  The adoption of the FSP had no impact
on the Company’s results of operations, financial condition or cash
flows.




In
December 2008, the FASB issued FSP No. FAS 132(R)-1, “Employers’ Disclosures
about Postretirement Benefit Plan Assets” (“FSP FAS 132(R)-1”).  FSP
FAS 132(R)-1 requires additional fair value disclosures about employers’ pension
and postretirement benefit plan assets consistent with guidance contained in
SFAS 157.  Specifically, employers will be required to disclose
information about how investment allocation decisions are made, the fair value
of each major category of plan assets and information about the inputs and
valuation techniques used to develop the fair value measurements of plan assets.
This FSP is effective for fiscal years ending after December 15,
2009.  The Company does not expect the adoption of FSP FAS 132(R)-1
will have a material impact on its financial condition or results of
operation.




In
October 2008, the FASB issued FSP No. FAS 157-3, “Determining the Fair Value of
a Financial Asset When the Market for That Asset is Not Active,” (“FSP FAS
157-3”), which clarifies application of SFAS 157 in a market that is not
active.  FSP FAS 157-3 was effective upon issuance, including prior
periods for which financial statements have not been issued.  The
adoption of FSP FAS 157-3 had no impact on the Company’s results of operations,
financial condition or cash flows.




In
September 2008, the FASB issued exposure drafts that eliminate qualifying
special purpose entities from the guidance of SFAS No. 140, “Accounting for
Transfers and Servicing of Financial  Assets and  Extinguishments of
Liabilities,” and  FASB  Interpretation 46 (revised December 2003),
“Consolidation of  Variable  Interest Entities − an
interpretation of ARB  No. 51,” as well as other
modifications.  While the proposed revised pronouncements have not
been finalized and the proposals are subject to further public comment, the
Company anticipates the changes will not have a significant impact on the
Company’s financial statements.  The changes would be effective March
1, 2010, on a prospective basis.




In June
2008, the FASB issued FASB Staff Position EITF 03-6-1, Determining Whether
Instruments Granted in Share-Based Payment Transactions Are Participating
Securities, ("FSP EITF 03-6-1"). FSP EITF 03-6-1 addresses whether instruments
granted in share-based payment transactions are participating securities prior
to vesting, and therefore need to be included in the computation of earnings per
share under the two-class method as described in FASB Statement of Financial
Accounting Standards No. 128, "Earnings per Share." FSP EITF 03-6-1 is effective
for financial statements issued for fiscal years beginning on or after December
15, 2008 and earlier adoption is prohibited. We are not required to adopt FSP
EITF 03-6-1; neither do we believe that FSP EITF 03-6-1 would have material
effect on our consolidated financial position and results of operations if
adopted.




In May
2008, the Financial Accounting Standards Board ("FASB") issued SFAS No. 162,
"The Hierarchy of Generally Accepted Accounting Principles". SFAS No. 162 sets
forth the level of authority to a given accounting pronouncement or document by
category. Where there might be conflicting guidance between two categories, the
more authoritative category will prevail. SFAS No. 162 will become effective 60
days after the SEC approves the PCAOB's amendments to AU Section 411 of the
AICPA Professional Standards. SFAS No. 162 has no effect on the Company's
financial position, statements of operations, or cash flows at this
time.








14




In March
2008, the Financial Accounting Standards Board, or FASB, issued SFAS No. 161,
Disclosures about Derivative Instruments and Hedging Activities--an amendment of
FASB Statement No. 133. This standard requires companies to provide enhanced
disclosures about (a) how and why an entity uses derivative instruments, (b) how
derivative instruments and related hedged items are accounted for under
Statement 133 and its related interpretations, and (c) how derivative
instruments and related hedged items affect an entity's financial position,
financial performance, and cash flows. This Statement is effective for financial
statements issued for fiscal years and interim periods beginning after November
15, 2008, with early application encouraged. The Company has not yet adopted the
provisions of SFAS No. 161, but does not expect it to have a material impact on
its consolidated financial position, results of operations or cash
flows.





In
December 2007, the SEC issued Staff Accounting Bulletin (SAB) No. 110 regarding
the use of a "simplified" method, as discussed in SAB No. 107 (SAB 107), in
developing an estimate of expected term of "plain vanilla" share options in
accordance with SFAS No. 123 (R), Share-Based Payment. In particular, the staff
indicated in SAB 107 that it will accept a company's election to use the
simplified method, regardless of whether the company has sufficient information
to make more refined estimates of expected term. At the time SAB 107 was issued,
the staff believed that more detailed external information about employee
exercise behavior (e.g., employee exercise patterns by industry and/or other
categories of companies) would, over time, become readily available to
companies. Therefore, the staff stated in SAB 107 that it would not expect a
company to use the simplified method for share option grants after December 31,
2007. The staff understands that such detailed information about employee
exercise behaviour may not be widely available by December 31, 2007.
Accordingly, the staff will continue to accept, under certain circumstances, the
use of the simplified method beyond December 31, 2007. The Company currently
uses the simplified method for "plain vanilla" share options and warrants, and
will assess the impact of SA B 110 for fiscal year 2009. It is not believed that
this will have an impact on the Company's consolidated financial position,
results of operations or cash flows.







In December 2007, the FASB issued SFAS No. 141
(Revised), “Business combinations.” This Statement will apply to all
transactions in which an entity obtains control of one or more businesses. SFAS
No. 141 (Revised) requires an entity to recognize the fair value of assets
acquired and liabilities assumed in a business combination; to recognize and
measure the goodwill acquired in the business combination or gain from a bargain
purchase and modifies the disclosure requirements. The Company is required to
prospectively adopt the provisions of SFAS No. 141 (Revised) for business
combinations for which the acquisition date is on or after January 1, 2009.
Early adoption of SFAS No. 141 (Revised) is prohibited.





In
December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
Consolidated Financial Statements – an amendment of ARB No. 51.” This Statement
will apply to all entities that prepare consolidated financial statements
(except not-for-profit organizations) and will affect those which have an
outstanding noncontrolling interest (or minority interest) in their subsidiaries
or which have to deconsolidate a subsidiary. This Statement changes the
classification of a non-controlling interest; establishing a single method of
accounting for changes in the parent company’s ownership interest that does not
result in deconsolidation and requires a parent company to recognize a gain or
loss when a subsidiary is deconsolidated. The Company is required to
prospectively adopt the provisions of SFAS No. 160 in the first quarter of 2009,
except for the presentation and disclosure requirements which shall be applied
retrospectively. Early adoption of SFAS No. 160 is prohibited.








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 March 31, 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.


15





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
three months period ended March 31, 2009, sales to three unrelated customers
represented 55.4 %, 42.2% and 2.4% of total revenue (over three months ended
March 31, 2008 – sales to four unrelated customers represented 48.8 %, 36.0%,
13.0% and 2.2 of total revenue).





Note
5 - Inventories.





Inventories
are summarized as follows:





As
      of March 31, 2009
                      (unaudited)
                    
                    
                    As
      of December 31, 2008Inventories
      of crude oil (less valuation allowance $40,077 and $90,241 as of March 31,
      2009 and 2008, respectively)
                    
                    $
                    20,572
                    
                    
                    $
                    23,608Raw
      materials
                    
                    
                    84,275
                    
                    
                    
                    97,564$
                    104,847
                    
                    
                    $
                    121,171





Note
6 - Prepaid taxes and expenses.





Prepaid
taxes and expenses include:





As
      of March 31, 2009
                    (unaudited)
                  
                  
                  As
      of December 31, 2008VAT
      receivable
                  
                  $
                  378,863
                  
                  
                  $
                  432,160Current
      Income Tax Receivables
                  
                  
                  205
                  
                  
                  
                  115Other
      taxes receivable
                  
                  
                  11,399
                  
                  
                  
                  19,249Deferred
      expenses
                  
                  
                  120
                  
                  
                  
                  241$
                  390,587
                  
                  
                  $
                  451,765










16







Note
7 - Prepaid and other assets





Prepaid
and other assets include:





As
      of March 31, 2009
                        (unaudited)
                      
                      
                      As
      of December 31, 2008Prepayments
                      
                      
                      13,682
                      
                      
                      
                      10,773Loans
      to related parties
                      
                      
                      -
                      
                      
                      
                      2,550Advances
      to Employees
                      
                      
                      25,000
                      
                      
                      
                      -$
                      38,682
                      
                      
                      $
                      13,323





Note
8 -  Accounts payable





Accounts
payable are summarized as follows:





As
      of March 31, 2009
                    (unaudited)
                  
                  
                  As
      of December 31, 2008Trade
      accounts payable
                  
                  $
                  211,948
                  
                  
                  $
                  234,183Wages
      and salaries payable
                  
                  
                  60,862
                  
                  
                  
                  33,810Other
      accounts payable
                  
                  
                  93,780
                  
                  
                  
                  47,631$
                  366,589
                  
                  
                  $
                  315,624







Note
9 -  Borrowings





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





As
      of March 31, 2009
                    (unaudited)
                  
                  
                  As
      of December 31, 2008Interest
      free, unsecured loan from Tintrade Limited ($300,000 is overdue, for
      disclosure see Note 11)
                  
                  
                  300,000
                  
                  
                  
                  300,000Interest
      free, unsecured loans from members of staff
                  
                  
                  13,056
                  
                  
                  
                  10,194$
                  313,056
                  
                  
                  $
                  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.








17







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 March 31, 2009
                    (unaudited)
                  
                  
                  As
      of December 31, 2008
                  
                  
                  As
      of March 31, 2009
                    (unaudited)
                  
                  
                  As
      of December 31, 2008
                  
                  
                  As
      of March 31, 2009
                    (unaudited)
                  
                  
                  As
      of December 31, 2008Property,
      plant and equipment
                  
                  $
                  392
                  
                  
                  $
                  544
                  
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  392
                  
                  
                  $
                  544Proved
      Oil and Gas properties
                  
                  
                  18,572
                  
                  
                  
                  31,441
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  18,572
                  
                  
                  
                  31,441Inventories
                  
                  
                  8,015
                  
                  
                  
                  21,658
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  8,015
                  
                  
                  
                  21,658Accounts
      payable
                  
                  
                  1,111
                  
                  
                  
                  3,088
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  1,111
                  
                  
                  
                  3,088Assets
      retirement obligations
                  
                  
                  26,552
                  
                  
                  
                  33,798
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  26,552
                  
                  
                  
                  33,798Borrowings
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (8,527
                  )
                  
                  
                  (11,846
                  )
                  
                  
                  (8,527
                  )
                  
                  
                  (11,846
                  )Deferred
      tax assets/(liabilities)
                  
                  $
                  54,642
                  
                  
                  $
                  90,529
                  
                  
                  $
                  (8,527
                  )
                  
                  $
                  (11,846
                  )
                  
                  $
                  46,115
                  
                  
                  $
                  78,683





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







18






Note
11 - Assets retirement obligations





As
      of March 31, 2009
                    (unaudited)
                  
                  
                  As
      of December 31, 2008Beginning
      asset retirement obligation
                  
                  $
                  566,279
                  
                  
                  $
                  616,185Liabilities
      incurred
                  
                  
                  -
                  
                  
                  
                  -Liabilities
      settled
                  
                  
                  -
                  
                  
                  
                  -Accretion
      expense
                  
                  
                  11,143
                  
                  
                  
                  61,059Revision
      to estimated cash flows
                  
                  
                  -
                  
                  
                  
                  -Foreign
      currency translation
                  
                  
                  (77,160
                  )
                  
                  
                  (110,965
                  )Ending
      asset retirement obligation
                  
                  $
                  500,262
                  
                  
                  $
                  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.








Note
12 - 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 Common Shares 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
Auxerre Trading Ltd. owns 107,406,000 common shares or approximately 51% of the
outstanding common shares.






19






Note
13 - Operating lease





The
following is a schedule by years of future minimum rental payments required
under operating lease that have initial or remaining noncancelable lease terms
in excess of one year as of March 31, 2009:





9
      months ended December 31, 2009
                
                $
                45,522Year
      ended December 31, 2010
                
                
                -$
                45,522








The
Company rents office space and the monthly rental as at March 31, 2009 was $
2,470. The Monthly Rental is paid on or before the first day of each month. The
Tenancy Agreement expires in December 2009. 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 March 31, 2009
was $2,588. The Monthly Rental is paid on or before the first day of each month.
The Land Lease Agreement expires in December 2009. The Company has the exclusive
right to extend the term of the Lease through to December 2014 whereas the Owner
has the right to revise the Monthly Rental.








Note
14 - Related party transactions





In the
three month period ended March 31, 2009, related parties paid for expenses on
behalf of the Company. The related parties are entities owned by a major
shareholder of Premier Energy Corp. In the three month period ended March 31,
2008 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.





Balances
with related parties are set out below:





As
      of March 31, 2009
                        (unaudited)
                      
                      
                      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
                      
                      $
                      118,262
                      
                      
                      $
                      136,911Payable
      to companies under common control, non interest bearing
                      
                      
                      13,056
                      
                      
                      
                      10,194Long-term
      related party payables
                      
                      
                      78,962
                      
                      
                      
                      -Total
      payable to related parties
                      
                      $
                      210,280
                      
                      
                      $
                      147,105








20





Note
15 - 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
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.





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.








21





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.





Employment
Agreement




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 March 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 March 31, 2009 the Company
recorded accrued salary of $45,833.





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





22









Item
2.  Management's Discussion and Analysis of Financial Condition and
Results of Operations





Forward-looking
Information





This
quarterly report contains forward-looking statements. For this purpose, any
statements contained herein that are not statements of historical fact may be
deemed to be forward-looking statements. These statements relate to future
events or to our future financial performance. In some cases, you can identify
forward-looking statements by terminology such as "may," "will," "should,"
"expects," "plans," "anticipates," "believes," "estimates," "predicts,"
"potential" or "continue" or the negative of such terms or other comparable
terminology. These statements are only predictions. Actual events or results may
differ materially. There are a number of factors that could cause our actual
results to differ materially from those indicated by such forward-looking
statements. See our annual report in current filing 8-K/A for the year ended
December 31, 2008 filed with the SEC on February 27, 2009.





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. Moreover, we do not assume responsibility for the accuracy and
completeness of such forward-looking statements. We are under no duty to update
any of the forward-looking statements after the date of this report to conform
such statements to actual results.





RESULTS
OF OPERATIONS





The
following discussion and analysis summarizes the results of operations of the
Company for the three-month periods ended March 31, 2009 and 2008.





COMPARISON
OF THREE MONTHS ENDED MARCH 31, 2009 AND 2008





Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations.




The
following Management’s Discussion and Analysis of Financial Condition and
Results of Operations (“MD&A”) is intended to help the reader understand
Premier Energy Corp., our operations, and our present business environment. This
MD&A should be read in conjunction with “Item 1. Financial Statements” of
this report on Form 10-Q.




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




•
            
            Executive Summary –an
      executive summary of our results of operations for the first quarter ended
      March 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 unaudited condensed consolidated results of
      operations for each of the three months ended March 31, 2009 and
      2008, which have been presented in its unaudited condensed 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.




EXECUTIVE
SUMMARY




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




•
            
            Net
      revenues for the three months ended March 31, 2009 decreased 47.2% to
      $0.07 million from $0.13 million in the comparable period in
      2008.




•
            
            Deterioration
      in current ratio (defined as current assets divided by current
      liabilities) of 0.60 to 0.96 at March 31, 2009 as compared to 0.67 to 0.77
      at December 31, 2008.




•
            
            Gross
      profit margin increased 78.8% points for the three months ended
      March 31, 2009 to (27.2)% from (128,2)% in the comparable period in
      2008, primarily resulting from a effective costs
    management.








23






•
            
            General
      and administrative expenses as a percentage of revenue were 210.8% and
      27.9% for the three months ended March 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 66%, value falling from $0.11
      million at the prior the three month period ended March 31, 2008 to $0.04
      million at March 31, 2009.




CRITICAL
ACCOUNTING ESTIMATES




Our
unaudited condensed 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 Unaudited Condensed 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




In April
2009, the FASB issued FSP FAS 107-1 and APB 28-1, “InterimDisclosures about Fair Value of
Financial Instruments”, (“FSP FAS 107-1 and APB28-1”) which amends FASB
Statement No. 107, Disclosures about Fair Value of
Financial Instruments, to require disclosures about fair value of
financial instruments for interim reporting periods of publicly traded companies
as well as in annual financial statements. This FSP also amends APB Opinion
No. 28, Interim Financial
Reporting, to require those disclosures in summarized financial
information at interim reporting periods. This FSP shall be effective for
interim reporting periods ending after June 15, 2009, with early adoption
permitted for periods ending after March 15, 2009. The Company does not
believe the adoption of FSP FAS 107-1 and APB 28-1 will have a material impact
on its financial statements.




In April
2009, the FASB issued FSP FAS 115-2 and FAS 124-2, “Recognitionand Presentation of
Other-Than-Temporary Impairments”, (“FSP FAS 115-2 and FAS 124-2”) which
amends the other-than-temporary impairment guidance in U.S. GAAP for debt
securities to make the guidance more operational and to improve the presentation
and disclosure of other-than-temporary impairments on debt and equity securities
in the financial statements. This FSP shall be effective for interim and annual
reporting periods ending after June 15, 2009, with early adoption permitted
for periods ending after March 15, 2009. Earlier adoption for periods
ending before March 15, 2009 is not permitted. The Company does not believe
the adoption of FSP FAS 115-2 and FAS 124-2 will have a material impact on its
financial statements.




In April
2009, the FASB issued FSP No. FAS 157-4, “Determining Fair Value When the Volume
and Level of Activity for the Asset or Liability Have Significantly Decreased
and Identifying Transactions That Are Not Orderly” (“FSP FAS
157-4”).  FSP FAS 157-4 provides guidance on estimating fair value
when market activity has decreased and on identifying transactions that are not
orderly.  Additionally, entities are required to disclose in interim
and annual periods the inputs and valuation techniques used to measure fair
value.  This FSP is effective for interim and annual periods ending
after June 15, 2009.  The Company does not expect the adoption of FSP
FAS 157-4 will have a material impact on its financial condition or results of
operation.






24






In
December 2008, the FASB issued FSP No. FAS 140-4 and FIN 46(R)-8, “Disclosures
by Public Entities (Enterprises) about Transfers of Financial Assets and
Interests in Variable Interest Entities.”  This disclosure-only FSP
improves the transparency of transfers of financial assets and an enterprise’s
involvement with variable interest entities, including qualifying
special-purpose entities.  This FSP is effective for the first
reporting period (interim or annual) ending after December 15, 2008, with
earlier application encouraged.  The Company adopted this FSP
effective January 1, 2009.  The adoption of the FSP had no impact
on the Company’s results of operations, financial condition or cash
flows.




In
December 2008, the FASB issued FSP No. FAS 132(R)-1, “Employers’ Disclosures
about Postretirement Benefit Plan Assets” (“FSP FAS 132(R)-1”).  FSP
FAS 132(R)-1 requires additional fair value disclosures about employers’ pension
and postretirement benefit plan assets consistent with guidance contained in
SFAS 157.  Specifically, employers will be required to disclose
information about how investment allocation decisions are made, the fair value
of each major category of plan assets and information about the inputs and
valuation techniques used to develop the fair value measurements of plan assets.
This FSP is effective for fiscal years ending after December 15,
2009.  The Company does not expect the adoption of FSP FAS 132(R)-1
will have a material impact on its financial condition or results of
operation.




In
October 2008, the FASB issued FSP No. FAS 157-3, “Determining the Fair Value of
a Financial Asset When the Market for That Asset is Not Active,” (“FSP FAS
157-3”), which clarifies application of SFAS 157 in a market that is not
active.  FSP FAS 157-3 was effective upon issuance, including prior
periods for which financial statements have not been issued.  The
adoption of FSP FAS 157-3 had no impact on the Company’s results of operations,
financial condition or cash flows.




In
September 2008, the FASB issued exposure drafts that eliminate qualifying
special purpose entities from the guidance of SFAS No. 140, “Accounting for
Transfers and Servicing of Financial  Assets and  Extinguishments of
Liabilities,” and  FASB  Interpretation 46 (revised December 2003),
“Consolidation of  Variable  Interest Entities − an
interpretation of ARB  No. 51,” as well as other
modifications.  While the proposed revised pronouncements have not
been finalized and the proposals are subject to further public comment, the
Company anticipates the changes will not have a significant impact on the
Company’s financial statements.  The changes would be effective March
1, 2010, on a prospective basis.




In June
2008, the FASB issued FASB Staff Position EITF 03-6-1, Determining Whether
Instruments Granted in Share-Based Payment Transactions Are Participating
Securities, ("FSP EITF 03-6-1"). FSP EITF 03-6-1 addresses whether instruments
granted in share-based payment transactions are participating securities prior
to vesting, and therefore need to be included in the computation of earnings per
share under the two-class method as described in FASB Statement of Financial
Accounting Standards No. 128, "Earnings per Share." FSP EITF 03-6-1 is effective
for financial statements issued for fiscal years beginning on or after December
15, 2008 and earlier adoption is prohibited. We are not required to adopt FSP
EITF 03-6-1; neither do we believe that FSP EITF 03-6-1 would have material
effect on our consolidated financial position and results of operations if
adopted.




In May
2008, the Financial Accounting Standards Board ("FASB") issued SFAS No. 162,
"The Hierarchy of Generally Accepted Accounting Principles". SFAS No. 162 sets
forth the level of authority to a given accounting pronouncement or document by
category. Where there might be conflicting guidance between two categories, the
more authoritative category will prevail. SFAS No. 162 will become effective 60
days after the SEC approves the PCAOB's amendments to AU Section 411 of the
AICPA Professional Standards. SFAS No. 162 has no effect on the Company's
financial position, statements of operations, or cash flows at this
time.




In March
2008, the Financial Accounting Standards Board, or FASB, issued SFAS No. 161,
Disclosures about Derivative Instruments and Hedging Activities--an amendment of
FASB Statement No. 133. This standard requires companies to provide enhanced
disclosures about (a) how and why an entity uses derivative instruments, (b) how
derivative instruments and related hedged items are accounted for under
Statement 133 and its related interpretations, and (c) how derivative
instruments and related hedged items affect an entity's financial position,
financial performance, and cash flows. This Statement is effective for financial
statements issued for fiscal years and interim periods beginning after November
15, 2008, with early application encouraged. The Company has not yet adopted the
provisions of SFAS No. 161, but does not expect it to have a material impact on
its consolidated financial position, results of operations or cash
flows.






25





In
December 2007, the SEC issued Staff Accounting Bulletin (SAB) No. 110 regarding
the use of a "simplified" method, as discussed in SAB No. 107 (SAB 107), in
developing an estimate of expected term of "plain vanilla" share options in
accordance with SFAS No. 123 (R), Share-Based Payment. In particular, the staff
indicated in SAB 107 that it will accept a company's election to use the
simplified method, regardless of whether the company has sufficient information
to make more refined estimates of expected term. At the time SAB 107 was issued,
the staff believed that more detailed external information about employee
exercise behavior (e.g., employee exercise patterns by industry and/or other
categories of companies) would, over time, become readily available to
companies. Therefore, the staff stated in SAB 107 that it would not expect a
company to use the simplified method for share option grants after December 31,
2007. The staff understands that such detailed information about employee
exercise behaviour may not be widely available by December 31, 2007.
Accordingly, the staff will continue to accept, under certain circumstances, the
use of the simplified method beyond December 31, 2007. The Company currently
uses the simplified method for "plain vanilla" share options and warrants, and
will assess the impact of SA B 110 for fiscal year 2009. It is not believed that
this will have an impact on the Company's consolidated financial position,
results of operations or cash flows.







In
December 2007, the FASB issued SFAS No. 141 (Revised), “Business combinations.”
This Statement will apply to all transactions in which an entity obtains control
of one or more businesses. SFAS No. 141 (Revised) requires an entity to
recognize the fair value of assets acquired and liabilities assumed in a
business combination; to recognize and measure the goodwill acquired in the
business combination or gain from a bargain purchase and modifies the disclosure
requirements. The Company is required to prospectively adopt the provisions of
SFAS No. 141 (Revised) for business combinations for which the acquisition date
is on or after January 1, 2009. Early adoption of SFAS No. 141 (Revised) is
prohibited.





In
December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
Consolidated Financial Statements – an amendment of ARB No. 51.” This Statement
will apply to all entities that prepare consolidated financial statements
(except not-for-profit organizations) and will affect those which have an
outstanding noncontrolling interest (or minority interest) in their subsidiaries
or which have to deconsolidate a subsidiary. This Statement changes the
classification of a non-controlling interest; establishing a single method of
accounting for changes in the parent company’s ownership interest that does not
result in deconsolidation and requires a parent company to recognize a gain or
loss when a subsidiary is deconsolidated. The Company is required to
prospectively adopt the provisions of SFAS No. 160 in the first quarter of 2009,
except for the presentation and disclosure requirements which shall be applied
retrospectively. Early adoption of SFAS No. 160 is prohibited.




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.







26








RESULTS
OF OPERATIONS




Three
Months Ended March 31, 2009 and 2008







The
following summarizes our operational highlights during three months ended March
31, 2009:





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 forthree months ended March
31, 2009 and March 31, 2008 (in US Dollars):





For
      three months ended March 31,2009
                    
                    
                    2008(unaudited)
                    
                    
                    (unaudited)Oil
      revenue
                    
                    $
                    68,416
                    
                    
                    $
                    129,509Net
      Oil sold (Bbls)
                    
                    
                    6,948
                    
                    
                    
                    5,817Average
      price of oil sold (per bbl)
                    
                    $
                    9.85
                    
                    
                    $
                    22.26Average
      production and transportation cost (per bbl)
                    
                    $
                    18.06
                    
                    
                    $
                    70.33





During
three months ended March 31, 2009, the Company’s domestic oil revenues were down
by 47.2%, due to decreased oil production by 11.7% and decrease of selling price
by 55.8%.





The
Company’s domestic oil operating expenses decreased 30.6%, value falling from
$0.58 million at the prior the three month period ended March 31, 2008 to $0.36
million at March 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
three months ended March 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
March 31, 2009 there has been no significant material developments.




Results
of Operations achieved during three months ended March 31, 2009 Compared to
three months ended March 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.





We had
net loss from continuing operations for the three months ended March 31, 2009 of
$0.37 million compared to a net income of $0.39 million for the same period in
2008. Factors contributing to the $0.2 million increase in net income from three
months ended March 31, 2008 to three months ended March 31, 2009 included the
following:





·
            Oil
      production net of our interest  for three months ended March 31,
      2009 was 5,199 Bbls resulting in $68,416 worth of oil sales, at an average
      wellhead price of $9.72 per Bbls for the three months ended March 31,
      2009.·
            In
      2008, our net production was 5,891 Bbls resulting in $129,509 worth of oil
      sales, at an average wellhead price of
$21.98.





·
            The
      11.7% decrease in production volumes resulted from abandonment of oil
      production from Wells 108, 130 and 133 due to operating necessity of
      workover activities.





Our
marketing and transportation expenses and production taxes (mineral extraction
tax) for three months ended March 31, 2009 decreased to $67,631 (75% over three
months ended March 31, 2008).





General
and administrative expenses increased from $36,122 for the three months ended
March 31, 2008 to $144,246 for the three months ended March 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 to compliance with SEC reporting
      rules and requirements.





27








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
parent and by borrowings. In the future, we anticipate we will be able to
provide the necessary liquidity by the revenues generated from the sales of
crude oil due to increased production, however, if we do not generate sufficient
sales revenues we will continue to finance our operations through equity and/or
debt financings.





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
by July and full work-over on additional two shut-in wells by the end of 2009.
The aim is to increase production rate in this year from the present 60 bopd to
the expected 400 bopd from the existing wells. Local Russian Contractors, Almaz
Service and ServiceNefteGaz, specializing in oil well work-over and
modernization, have begun mobilization of the equipment needed to start work by
mid-May at the North-Kopanskoye Oilfield.





Subject
to the availability of funds, the current plans also call for other concurrent
work, including drilling and completion of three new production wells in 2009 at
the North-Kopanskoye Oilfield at an estimated cost of approximately $23,000,000.
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
termsto 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 2009 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.




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 10Q .





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.









28





Cash Flows and Capital
Expenditures





Our
capital budget for 2009 is currently estimated at $19.3 million for the
planned work over of four existing wells and drilling of three new wells in the
North Kopanskoye Field and $8.5 million for the oil field
construction  of surface facilities. Our planned 2009 development and
exploration expenses could also increase if any of the operations associated
with our properties experience cost overruns.


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.




Item
3.  Quantitative and Qualitative Disclosures About Market
Risk





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





Item
4.  Controls and Procedures




Evaluation
of Disclosure Controls and Procedures




Based on
an evaluation under the supervision and with the participation of the Company’s
management, the Company’s principal executive officer and principal financial
officer have concluded that the Company’s disclosure controls and procedures as
defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of
1934, as amended (“Exchange Act”) were not effective as of March 31, 2009
to ensure that information required to be disclosed by the Company in reports
that it files or submits under the Exchange Act is (i) recorded, processed,
summarized and reported within the time periods specified in the Securities and
Exchange Commission rules and forms and (ii) accumulated and communicated
to the Company’s management, including its principal executive officer and
principal financial officer, as appropriate to allow timely decisions regarding
required disclosure.  Our disclosure controls and procedures were not
effective as the Company did not have the needed accounting personnel to perform
required functions.  In order to remediate this weakness, during the
second quarter of 2009, the Company engaged an independent consultant to
evaluate its needs and provide needed accounting services.






Changes
in Internal Control Over Financial Reporting




There
were no changes in the Company’s internal control over financial reporting
during the quarter ended March 31, 2009, which were identified in connection
with management’s evaluation required by paragraph (d) of Rules 13a-15 and
15d-15 under the Exchange Act, that have materially affected, or are reasonably
likely to materially affect, the Company’s internal control over financial
reporting.








29







PART
II - OTHER INFORMATION




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





Item
1(A).  Risk Factors





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





Item
2.  Unregistered Sales of Equity Securities and Use of
Proceeds





Unless otherwise noted, the issuances noted below are all
considered exempt from registration by reason of Section 4(2) of the Securities
Act of 1933, as amended, and/or Rule 506 as promulgated under Regulation
D:





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”).




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.





Item 3.  Defaults Upon Senior
Securities





None.




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





None.





Item
5.  Other Information





None.





Item
6.  Exhibits





31.1
              Certification
      of the Chief Executive Officer pursuant to Section 302 of theSarbanes-Oxley
      Act of 2002





31.2
              Certification
      of the Chief Financial Officer pursuant to Section 302 of theSarbanes-Oxley
      Act of 2002





32
              Certification
      of the Chief Executive Officer and Chief Financial Officer pursuant to
      U.S.C. Section 1350 as adopted pursuant to Section 906 of the
      Sarbanes-Oxley Act of 2002









30





SIGNATURES





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






PREMIER ENERGY
      CORP.Dated:
      May 13, 2009By:
      /s/ Anton ProdonavicAnton
      Prodonavic, Chief Executive Officer and Director (Principal Executive
      Officer)


Company NameBy:/s/ Alexey
      GoleshevAlexey
      Goleshev, Chief Financial Officer and Director (Principal Financial
      Officer)