UNITED
STATES
 SECURITIES
AND EXCHANGE COMMISSION
 Washington,
DC 20549
 
 
 FORM
10-Q
 
 
 T
              QUARTERLY
      REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
      1934
 
 For the
quarterly period ended June 30,
2008
 
 £
              TRANSITION
      REPORT PURSUANT TO 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
      1934
 
 For the
transition period from ________ to  ________
 
 
 Commission
file number: 000-51488
 
 
 PETROSEARCH
ENERGY CORPORATION
 (Exact
name of small business issuer as specified in its charter)
 
 
 NEVADA
              
              20-2033200(State
      or other jurisdiction of incorporation or organization)
              
              (IRS
      Employer Identification No.)
 
 
 675
Bering Drive, Suite 200
 Houston,
TX 77057
 (Address
of principal executive offices)
 
 (713)
961-9337
 (Issuer’s
telephone number)
 
 
 Indicate
by check mark whether the issuer: (i) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (ii)
has been subject to such filing requirements for the past 90 days.
 Yes TNo £
 
 Indicate
by check mark whether the issuer is a large accelerated filer, an accelerated
filer, a non-accelerated filer, or a smaller reporting company.  See
the definitions of “large accelerated filer”, “accelerated filer”, and “smaller
reporting company” in rule 12b-2 of the Exchange Act.
 
 Large
      accelerated filer £
              
              Accelerated
      filer £Non-accelerated
      filer   £
              
              Smaller
      reporting Company T
 
 Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).      Yes £No T
 
 State the
number of shares outstanding of each of the issuer’s classes of common stock, as
of the latest practicable date:  41,770,779 shares of $0.001 par value
common stock outstanding as of August 1, 2008
  
 
  PETROSEARCH
ENERGY CORPORATION
 
 FORM
10-Q
 For
The Quarter Ended June 30, 2008
 
 INDEX
  
 PART I - FINANCIAL
    INFORMATIONITEM 1.
              
              FINANCIAL
      STATEMENTSITEM 2.
              
              MANAGEMENT'S DISCUSSION AND ANALYSIS
      OR PLAN OF OPERATIONSITEM 4.
              
              CONTROLS AND
      PROCEDURESPART II - OTHER INFORMATIONITEM
      2.
              
              UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
      PROCEEDSITEM
      6.
              
              EXHIBITSSIGNATURES
  1
 Index
  ITEM1.
              FINANCIAL
      STATEMENTS
 PETROSEARCH
ENERGY CORPORATION
 CONSOLIDATED
BALANCE SHEETS
 June
30, 2008 and December 31, 2007
 
 ASSETS
              
              June 30,
                2008
                (Unaudited)
              
              
              December 31, 2007
                (See note)Current
      assets:Cash
              
              $
              4,653,792
              
              
              $
              8,033,611Accounts
      receivable:Joint
      owners-billed, net of allowance of $62,179 at June 30, 2008 and December
      31, 2007
              
              
              166,067
              
              
              
              203,671Joint
      owners-unbilled
              
              
              -
              
              
              
              3,568Oil
      and gas production sales
              
              
              238,192
              
              
              
              319,926Receivable
      from sale of Barnett Shale interest
              
              
              30,729,007
              
              
              
              -Prepaid
      expenses and other current assets
              
              
              794,715
              
              
              
              987,155Total
      current assets
              
              
              36,581,773
              
              
              
              9,547,931Property
      and equipment:Oil
      and gas properties, full cost method of accounting:Properties
      subject to amortization
              
              
              22,621,216
              
              
              
              33,235,534Properties
      not subject to amortization
              
              
              410,591
              
              
              
              7,099,601Other
      property and equipment
              
              
              153,031
              
              
              
              153,031Total
              
              
              23,184,838
              
              
              
              40,488,166Less
      accumulated depreciation, depletion and amortization
              
              
              (3,306,217
              )
              
              
              (3,266,658
              )Total
      property and equipment, net
              
              
              19,878,621
              
              
              
              37,221,508Prepaid
      oil and gas costs
              
              
              -
              
              
              
              1,432,906Other
      assets
              
              
              614,540
              
              
              
              834,287Total
      assets
              
              $
              57,074,934
              
              
              $
              49,036,632LIABILITIES AND
      STOCKHOLDERS’ EQUITYCurrent
      liabilities:Current
      portion of long-term debt
              
              $
              -
              
              
              $
              2,066,087Accounts
      payable
              
              
              1,159,071
              
              
              
              960,020Accrued
      liabilities for Barnett property costs
              
              
              -
              
              
              
              2,379,073Accrued
      liabilities
              
              
              226,688
              
              
              
              1,582,689Warrant
      liability
              
              
              149,150
              
              
              
              321,140Total
      current liabilities
              
              
              1,534,909
              
              
              
              7,309,009Long-term
      debt – Kallina
              
              
              -
              
              
              
              6,919,890Convertible
      debt
              
              
              14,843,455
              
              
              
              13,914,013Other
      long-term obligations
              
              
              676,724
              
              
              
              699,914Deferred
      tax liability
              
              
              2,930,120
              
              
              
              -Total
      liabilities
              
              
              19,985,208
              
              
              
              28,842,826Stockholders'
      equity:Preferred
      stock, par value $1.00 per share, 20,000,000 shares
      authorized:Series
      A  8% convertible preferred stock, 1,000,000 shares
      authorized;285,786 and 483,416 shares issued and outstanding at June 30,
      2008and December 31, 2007, respectively
              
              
              285,786
              
              
              
              483,416Series
      B convertible preferred stock, 100,000 shares authorized;43,000 shares
      issued and outstanding at June 30, 2008 and December 31,
    2007
              
              
              43,000
              
              
              
              43,000Common
      stock, par value $0.001 per share, 100,000,000 shares
      Authorized;  41,770,779 and 40,941,841 shares issued and
      outstanding at June 30, 2008 and December 31, 2007,
      respectively
              
              
              41,770
              
              
              
              40,941Additional
      paid-in capital
              
              
              34,076,059
              
              
              
              33,196,588Un-issued
      common stock
              
              
              181,250
              
              
              
              288,172Deferred
      compensation
              
              
              (134,375
              )
              
              
              -Retained
      earnings (accumulated deficit)
              
              
              2,596,236
              
              
              
              (13,858,311
              )Total
      stockholders' equity
              
              
              37,089,726
              
              
              
              20,193,806Total
      liabilities and stockholders' equity
              
              $
              57,074,934
              
              
              $
              49,036,632
 
 Note:  The
balance sheet at December 31, 2007 has been derived from the audited financial
statements at that date but does not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements.
 
 See
accompanying notes to unaudited condensed consolidated financial
statements.
  2
 Index
  PETROSEARCH
ENERGY CORPORATION
 UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 for
the three months and  six months ended June 30, 2008 and
2007
 
 Three
      Months Ended
                June
      30
              
              
              Six
      Months Ended
                June
      302008
              
              
              2007
              
              
              2008
              
              
              2007Oil
      and gas production revenues
              
              $
              545,465
              
              
              $
              373,544
              
              
              $
              1,099,898
              
              
              $
              736,520Operating
      costs and expenses:Lease
      operating and production taxes
              
              
              220,405
              
              
              
              265,598
              
              
              
              549,822
              
              
              
              342,891Depreciation,
      depletion and amortization
              
              
              203,265
              
              
              
              194,142
              
              
              
              464,223
              
              
              
              372,789General
      and administrative
              
              
              568,657
              
              
              
              701,382
              
              
              
              1,315,897
              
              
              
              1,440,472Total
      costs and expenses
              
              
              992,327
              
              
              
              1,161,122
              
              
              
              2,329,942
              
              
              
              2,156,152Operating
      loss
              
              
              (446,862
              )
              
              
              (787,578
              )
              
              
              (1,230,044
              )
              
              
              (1,419,632
              )Other
      income (expense):Interest
      income
              
              
              12,468
              
              
              
              94,665
              
              
              
              68,893
              
              
              
              157,443Interest
      expense
              
              
              (575,990
              )
              
              
              (464,220
              )
              
              
              (1,257,852
              )
              
              
              (899,020
              )Amortization
      of financing costs and debt discount
              
              
              (598,950
              )
              
              
              (540,432
              )
              
              
              (1,280,325
              )
              
              
              (866,819
              )Change
      in value of warrant liability
              
              
              103,279
              
              
              
              67,331
              
              
              
              171,990
              
              
              
              (204,611
              )Gain
      on sale of Barnett
              
              
              21,814,753
              
              
              
              -
              
              
              
              21,814,753
              
              
              
              -Gain
      on extinguishment of debt
              
              
              1,097,252
              
              
              
              -
              
              
              
              1,097,252
              
              
              
              -Total
      other income (expense)
              
              
              21,852,812
              
              
              
              (842,656
              )
              
              
              20,614,711
              
              
              
              (1,813,007
              )Income
      (loss) before provision for income taxes
              
              
              21,405,950
              
              
              
              (1,630,234
              )
              
              
              19,384,667
              
              
              
              (3,232,639
              )Deferred
      tax (expense)/benefit
              
              
              (2,930,120
              )
              
              
              -
              
              
              
              (2,930,120
              )
              
              
              -Net
      Income (Loss)
              
              $
              18,475,830
              
              
              $
              (1,630,234
              )
              
              $
              16,454,547
              
              
              $
              (3,232,639
              )Basic
      and diluted net income (loss) per common share
              
              $
              .44
              
              
              $
              (0.04
              )
              
              $
              .40
              
              
              $
              (0.08
              )
 
 See
accompanying notes to unaudited condensed consolidated
financial statements.
  3
 Index
  PETROSEARCH
ENERGY CORPORATION
 UNAUDITED
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
 For
the six months ended June 30, 2008
 
 Series
      A
              
              
              Series
      B
              
              
              Additional
              
              
              Unissued
              
              
              
              
              
              
              
              
              Total
      Stock-Common Stock
              
              
              Preferred Stock
              
              
              Preferred Stock
              
              
              Paid-In
              
              
              Common
              
              
              Deferred
              
              
              Retained
              
              
              HoldersShares
              
              
              Amount
              
              
              Shares
              
              
              Amount
              
              
              Shares
              
              
              Amount
              
              
              Capital
              
              
              Stock
              
              
              Compensation
              
              
              Earnings
              
              
              EquityBalance
      at December 31, 2007
              
              
              40,941,841
              
              
              $
              40,941
              
              
              
              483,416
              
              
              $
              483,416
              
              
              
              43,000
              
              
              $
              43,000
              
              
              $
              33,196,588
              
              
              $
              288,172
              
              
              $
              -
              
              
              $
              (13,858,311
              )
              
              $
              20,193,806Issuance
      of common stock committed
              
              
              297,085
              
              
              
              298
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              287,874
              
              
              
              (288,172
              )
              
              
              
              
              
              
              
              
              
              
              -Common
      stock committed for board and employee compensation
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              181,250
              
              
              
              (181,250
              )
              
              
              
              
              
              
              -Common
      stock issued for interest expense
              
              
              501,448
              
              
              
              501
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              401,125
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              401,626Conversion
      of preferred stock to common stock
              
              
              30,405
              
              
              
              30
              
              
              
              (197,630
              )
              
              
              (197,630
              )
              
              
              
              
              
              
              
              
              
              
              197,600
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              -Additional
      costs of raising capital
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (7,128
              )
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (7,128
              )Amortization
      of deferred compensation
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              46,875
              
              
              
              
              
              
              
              46,875Net
      income
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              16,454,547
              
              
              
              16,454,547Balance
      at  June 30, 2008
              
              
              41,770,779
              
              
              $
              41,770
              
              
              
              285,786
              
              
              $
              285,786
              
              
              
              43,000
              
              
              $
              43,000
              
              
              $
              34,076,059
              
              
              $
              181,250
              
              
              $
              (134,375
              )
              
              $
              2,596,236
              
              
              $
              37,089,726
 
 See
accompanying notes to unaudited condensed consolidated financial
statements
  4
 Index
  PETROSEARCH
ENERGY CORPORATION
 UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 For
the six months ended June 30, 2008 and 2007
 
 
 2008
              
              
              2007Cash
      flows from operating activities:Net
      income (loss)
              
              $
              16,454,547
              
              
              $
              (3,232,639
              )Adjustments
      to reconcile net loss to net cash used in operating
      activities:Depletion,
      depreciation and amortization expense
              
              
              464,223
              
              
              
              372,789Stock-based
      compensation and interest expense
              
              
              401,626
              
              
              
              473,089Amortization
      of deferred rent
              
              
              (4,419
              )
              
              
              (2,454
              )Amortization
      of deferred compensation
              
              
              46,875
              
              
              
              -Amortization
      of debt discount and beneficial conversion feature
              
              
              1,037,224
              
              
              
              697,877Amortization
      of financing costs
              
              
              243,101
              
              
              
              168,942Accretion
      of asset retirement obligation
              
              
              16,191
              
              
              
              17,928Change
      in value of warrant liability
              
              
              (171,990
              )
              
              
              204,611Gain
      on sale of Barnett Shale
              
              
              (21,814,753
              )
              
              
              -Gain
      on extinguishment of debt
              
              
              (1,097,252
              )
              
              
              -Deferred
      tax expense
              
              
              2,930,120
              
              
              
              -Changes
      in operating assets and liabilities:Accounts
      receivable
              
              
              122,906
              
              
              
              81,826Prepaid
      expenses and other assets
              
              
              42,189
              
              
              
              (245,928
              )Accounts
      payable and accrued liabilities
              
              
              (255,709
              )
              
              
              (754,369
              )Trade
      note payable
              
              
              -
              
              
              
              (241,289
              )Net
      cash used in operating activities
              
              
              (1,585,121
              )
              
              
              (2,459,617
              )Cash
      flows from investing activities:Capital
      expenditures, including purchases and development of
      properties
              
              
              (1,452,570
              )
              
              
              (4,000,099
              )Proceeds
      from sale of Barnett Shale
              
              
              1,800,000
              
              
              
              -Net
      cash provided by (used in) investing activities
              
              
              347,430
              
              
              
              (4,000,099
              )Cash
      flows from financing activities:Additional
      costs of raising capital
              
              
              (7,128
              )
              
              
              -Proceeds
      from convertible debt
              
              
              -
              
              
              
              10,000,000Repayment
      of notes payable
              
              
              (2,135,000
              )
              
              
              (1,065,000
              )Net
      cash provided by (used in) financing activities
              
              
              (2,142,128
              )
              
              
              8,935,000Net
      increase (decrease) in cash and cash equivalents
              
              
              (3,379,819
              )
              
              
              2,475,284Cash
      and cash equivalents at beginning of period
              
              
              8,033,611
              
              
              
              3,715,618Cash
      and cash equivalents at end of period
              
              $
              4,653,792
              
              
              $
              6,190,902Supplemental
      disclosures of cash flow information:Interest
      paid
              
              $
              90,179
              
              
              $
              239,680Income
      taxes paid
              
              $
              -
              
              
              $
              -
 
 See
accompanying notes to unaudited condensed consolidated financial
statements
  5
 Index
  PETROSEARCH
ENERGY CORPORATION
 NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
 1.
              Interim Financial
      Statements
 
 The
accompanying interim unaudited condensed consolidated financial statements have
been prepared without audit pursuant to the rules and regulations of the U.S.
Securities and Exchange Commission.  Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with accounting principles generally accepted in the United States of America
have been condensed or omitted, pursuant to such rules and
regulations.  These unaudited condensed consolidated financial
statements should be read in conjunction with the audited financial statements
and notes thereto of Petrosearch Energy Corporation (the “Company”) for the year
ended December 31, 2007.  In the opinion of management, all
adjustments (consisting of normal recurring adjustments) considered necessary
for a fair presentation of financial position, results of operations and cash
flows for the interim periods presented have been included.  Operating
results for the interim periods are not necessarily indicative of the results
that may be expected for the respective full year.
 
 2.
              Income
      Taxes
 
 The
Company uses the liability method in accounting for income taxes. Under this
method, deferred tax assets and liabilities are determined based on differences
between financial reporting and income tax carrying amounts of assets and
liabilities and are measured using the enacted tax rates and laws that will be
in effect when the differences are expected to reverse.  A valuation
allowance, if necessary, is provided against deferred tax assets, based upon
management's assessment as to their realization.
 
 The
difference between the 35% federal statutory income tax rate and amounts shown
in the accompanying interim financial statements is primarily attributable to
the following: 1) utilization of net operating loss carry-forwards, 2) changes
in the valuation allowance for the Company’s deferred tax assets, 3) current
year differences in depreciation for tax and book, and 4) percentage depletion
carryforward for tax purposes which is not allowed for book
purposes.
 
 3.
              New Accounting
      Pronouncements
 
 The
following new accounting pronouncements have been issued in the second quarter
of 2008 and will be adopted by the Company on January 1, 2009 or earlier if
required:
 
 In
May 2008, the Financial Accounting Standards Board (“FASB”) issued
Statement of Financial Accounting Standards ("SFAS") No. 162, “The Hierarchy of Generally Accepted
Accounting Principles”, or SFAS No. 162. SFAS No. 162
identifies the sources of accounting principles and the framework for selecting
the principles to be used in the preparation of financial statements of
nongovernmental entities that are presented in conformity with generally
accepted accounting principles in the United States. SFAS No. 162 is
effective 60 days following the SEC’s approval of the Public Company
Accounting Oversight Board amendments to AU Section 411, The Meaning ofPresent Fairly
in Conformity With Generally Accepted Accounting Principles. We are currently
reviewing SFAS No. 162 and do not expect that this Statement will result in
a change in current practice.
 
 In
April 2008, the FASB issued FASB Staff Position (“FSP”) No. FAS 142-3,
“Determination of the Useful
Life of Intangible Assets”, or FSP No. FAS 142-3. FSP No. FAS
142-3 amends the factors that should be considered in developing renewal or
extension assumptions used to determine the useful life of a recognized
intangible asset under FASB Statement No. 142 “Goodwill and Other Intangible
Assets”, or FASB No. 142. The intent of this FSP is to improve the
consistency between the useful life of a recognized intangible asset under FASB
No. 142 and the period of expected cash flows used to measure the fair
value of the asset under FASB Statement No. 141 “Business Combinations”and
other U.S. generally accepted accounting principles. FSP No. FAS 142-3 is
effective for financial statements issued for fiscal years beginning after
December 15, 2008, and interim periods within those fiscal years. Early
adoption is prohibited. The implementation of this standard will not have an
impact on our consolidated financial position or results of
operations.
  6
 Index
  In
May 2008, the FASB issued FASB Staff Position No. APB 14-1,
“Accounting for Convertible Debt Instruments That May Be Settled in Cash upon
Conversion (Including Partial Cash Settlement)”, or FSP No. APB 14-1. FSP
No. APB 14-1 clarifies that convertible debt instruments that may be
settled in cash upon conversion (including partial cash settlement) are not
addressed by paragraph 12 of APB Opinion No. 14 “Accounting for Convertible
Debt and Debt Issued with Stock Purchase Warrants”. Additionally, the FSP
specifies that issuers of such instruments should separately account for the
liability and equity components in a manner that will reflect the entity’s
nonconvertible debt borrowing rate when interest cost is recognized in
subsequent periods. FSP No. APB 14-1 is effective for financial statements
issued for fiscal years beginning after December 15, 2008, and interim
periods within those fiscal years. The implementation of this standard will not
have an impact on our consolidated financial position or results of
operations.
 
 In
June 2008, the FASB issued FASB Staff Position No. EITF 03-6-1,
“Determining Whether Instruments Granted in Share-Based Payment Transactions Are
Participating Securities”, or FSP No. EITF 03-6-1. FSP No. 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 earnings allocation in computing earnings per share, or EPS, under the
two-class method described in paragraphs 60 and 61 of FASB Statement
No. 128, “Earnings per Share”, or FASB No. 128. The guidance in this
FSP applies to the calculation of EPS under FASB No. 128 for share-based
payment awards with rights to dividends or dividend equivalents. FSP
No. EITF 03-6-1 is effective for financial statements issued for fiscal
years beginning after December 15, 2008, and interim periods within those
years. All prior-period EPS data presented should be adjusted retrospectively to
conform with the provisions of this FSP. Early application is not permitted. The
implementation of this standard will not have an impact on our consolidated
financial position or results of operations.
 
 4.
              Stock
      Warrants
 
 The
Company has periodically issued incentive stock warrants to executives,
officers, directors and employees to provide additional incentives to promote
the success of the Company’s business and to enhance the ability to attract and
retain the services of qualified persons.  Warrants have also been
issued as part of capital financing transactions.  The issuances of
such warrants are approved by the Board of Directors.  The exercise
price of a warrant granted is determined by the fair market value of the stock
on the date of grant.  The Company issues shares of authorized common
stock upon the exercise of the warrant.
 
 The
Company accounts for its stock warrant activity under the guidance provided by
Statement of Financial Accounting Standards No, 123R (“SFAS
123(R)”).  SFAS 123(R) requires all share-based payments to
employees, including grants of employee stock warrants, to be recognized as
stock-based compensation expense in the Company’s Consolidated Statements of
Operations based on their fair values.  For purposes of determining
compensation expense associated with stock warrants, the fair value of the
Company’s stock is determined based upon the Black-Scholes option pricing
model.
 
 During
the second quarter of 2008, no warrants were issued.  For warrants
granted during the second quarter of 2007, the fair value of such warrants was
estimated at the date of grant using a Black-Scholes option-pricing model with
the following assumptions:
 
 2007Dividend
      yield
              -0-Expected
      volatility
              105%Risk
      free interest
              4.52%Expected
      lives
              4
      years
  7
 Index
  The
Black-Scholes option valuation model was developed for use in estimating fair
value of traded options or warrants that have no vesting restrictions and are
fully transferable.  In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility.  Because the Company’s stock warrants have characteristics
significantly different from those of traded options/warrants, and because
changes in the subjective input assumptions can materially affect the fair value
estimate, in management’s opinion, the existing models do not necessarily
provide a reliable single measure of the fair value of its stock
warrants.
 
 A summary
of the Company’s stock warrant activity and related information for the three
months ended June 30, 2008 follows:
 
 Number
      ofSharesUnderWarrant
              
              
              ExercisePrice
              
              
              WeightedAverageExercisePrice
              
              WeightedAverageGrantDate
      FairValue($/share)(2)
              TotalIntrinsic
                ValueWarrantExercises
      (1)Warrants
      outstanding atDecember
      31, 2007
              
              
              20,304,828
              
              
              $
              .92-$2.00
              
              
              $
              1.41Issued
              
              
              -Exercised
              
              
              -Expired
              
              
              (150,000
              )
              
              $
              1.95
              
              
              $
              1.95Warrants
      outstanding at
                June
      30, 2008
              
              
              20,154,828
              
              
              $
              .92-$2.00
              
              
              $
              1.40
 
 All
outstanding stock warrants are exercisable and fully vested at June 30,
2008.  A summary of outstanding stock warrants at June 30, 2008
follows:
 
 Number
      ofCommonStockEquivalents
              
              ExpirationDate
              
              RemainingContractedLife(Years)
              
              WeightedAverageRemainingContractualTerm
      (Years)
              
              ExercisePrice
              
              
              WeightedAverageExercisePrice
              
              AggregateIntrinsicValue(1)20,000
              
              August 2008
              
              
              .13
              
              
              
              $
              1.95
              
              
              $
              1.954,851,969
              
              November 2008
              
              
              .38
              
              
              
              $
              0.98-$1.95
              
              
              $
              1.931,060,714
              
              February 2010
              
              
              1.58
              
              
              
              $
              2.00
              
              
              $
              2.001,982,145
              
              November 2010
              
              
              2.38
              
              
              
              $
              1.50
              
              
              $
              1.505,225,000
              
              January 2011
              
              
              2.50
              
              
              
              $
              1.40
              
              
              $
              1.40575,000
              
              October 2011
              
              
              3.29
              
              
              
              $
              .92
              
              
              $
              .926,440,000
              
              December 2011
              
              
              3.42
              
              
              
              $
              .92
              
              
              $
              .9220,154,828
              
              
              
              
              
              
              2.24
              
              
              
              
              
              
              
              
              $-0-
 
 (1)
              The
      intrinsic value of a warrant is the amount by which the current market
      value of the underlying stock exceeds the exercise price of the warrant,
      or the market price at the end of the period less the exercise
      price.
 (2)
              The
      weighted average grant date fair value is determined by using the Black
      Scholes Option Pricing Model as described
above.
  8
 Index
 
 The
following table provides a detail of stock-based compensation incurred during
the six months ended June 30, 2008 and 2007:
 
 Six
      Months EndedJune
      30,2008
              
              
              2007Restricted
      stock – Interest Expense
              
              $
              401,626
              
              
              $
              125,139Restricted
      stock – General and Administrative
              
              
              -
              
              
              
              117,151Restricted
      stock – Property Costs
              
              
              -
              
              
              
              645,000Committed
      restricted stock
              
              
              181,250
              
              
              
              230,799Total
      stock-based compensation
              
              $
              582,876
              
              
              $
              1,118,089Less
      amounts capitalized
              
              
              (134,375
              )
              
              
              (645,000
              )Stock
      compensation expense, net of amounts capitalized
              
              $
              448,501
              
              
              $
              473,089
 
 Amounts
capitalized in 2008 are for prepaid expenses or unamortized deferred
compensation. Amounts capitalized in 2007 are for property costs.  The
above table excludes common stock issued for cash, warrants issued in financing
arrangements, debt discounts recorded in equity, and common stock issued for
exercise of warrants.
 
 5.
              Related Party
      Transactions
 
 Please
see Note 11 herein for discussion of the sale of the Barnett Shale interest to
Cinco County Barnett Shale LLC, a partner in the DDJET Limited LLP
partnership.
 
 6.
              Non-Cash Investing and
      Financing Activities
 
 During
the six months ended June 30, 2008 and 2007, the Company engaged in non-cash
financing and investing activities as follows:
 
 Six
      Months EndedJune
      30,2008
              
              
              2007Receivable
      for sale of Barnett Shale interest
              
              $
              30,729,007
              
              
              
              -Reduction
      of prepaid drilling for development of oil and gasProperties
              
              $
              1,432,906
              
              
              
              -Change
      in property costs associated with asset retirement
    obligation
              
              $
              58,036
              
              
              
              -Issuance
      of common stock for acquisition of property
              
              
              -
              
              
              $
              645,000Increase
      in accounts payable and accrued liabilities for property
    costs
              
              $
              339,665
              
              
              $
              698,203Beneficial
      conversion feature on convertible debt
              
              
              -
              
              
              $
              2,667,968Issuance
      of warrants with debt
              
              
              -
              
              
              $
              2,667,968Issuance
      of convertible debt for financing costs
              
              
              -
              
              
              $
              450,000
  9
 Index
  7.
              Earnings Per
      Share
 
 The
Company has adopted SFAS No. 128, which provides for calculation of "Basic" and
"Diluted" earnings per share.  Basic earnings per share includes no
dilution and is computed by dividing net income available to common shareholders
by the weighted average common shares outstanding for the
period.  Diluted earnings per share reflect the potential dilution of
securities that could share in the earnings of an entity similar to fully
diluted earnings per share. Following is a reconciliation of the numerators and
denominators of the basic and diluted EPS computations for the three and six
months ended June 30, 2008 and 2007:
  Three
      Months Ended
                June
      30,
              
              
              Six
      Months Ended
                June
      30,2008
              
              
              2007
              
              
              2008
              
              
              2007Basic
      EPS:Net
      income (loss)
              
              $
              18,475,830
              
              
              $
              (1,630,234
              )
              
              $
              16,454,547
              
              
              $
              (3,232,639
              )Less:
      Preferred stock dividends (1)
              
              
              (7,911
              )
              
              
              (9,668
              )
              
              
              (17,579
              )
              
              
              (19,336
              )Net
      income (loss) available to common stockholders
              
              $
              18,467,919
              
              
              $
              (1,639,902
              )
              
              $
              16,436,968
              
              
              $
              (3,251,975
              )Weighted
      average shares of common stock
              
              
              41,748,228
              
              
              
              39,253,000
              
              
              
              41,488,815
              
              
              
              38,992,889Basic
      net income (loss) per share
              
              $
              .44
              
              
              $
              (0.04
              )
              
              $
              .40
              
              
              $
              (0.08
              )Diluted
      EPS:Income
      (loss) available to common stockholders
              
              $
              18,467,919
              
              
              $
              (1,639,902
              )
              
              $
              16,436,968
              
              
              $
              (3,251,975
              )Plus
      assumed conversions
              
              
              7,911
              
              
              
              9,668
              
              
              
              17,579
              
              
              
              19,336Net
      income (loss) used for diluted EPS
              
              $
              18,475,830
              
              
              $
              (1,630,234
              )
              
              $
              16,454,547
              
              
              $
              (3,232,639
              )Weighted
      average shares of common stock
              
              
              41,748,228
              
              
              
              39,253,000
              
              
              
              41,488,815
              
              
              
              38,992,889Plus
      effect of dilutive securities:Convertible
      preferred stock
              
              
              81,054
              
              
              
              -
              
              
              
              87,636
              
              
              
              -Weighted
      average shares used for Diluted EPS
              
              
              41,829,282
              
              
              
              39,253,000
              
              
              
              41,576,451
              
              
              
              38,992,889Diluted
      net income (loss) per share
              
              $
              .44
              
              
              $
              (0.04
              )
              
              $
              .40
              
              
              $
              (0.08
              )
 (1)
Dividends are undeclared
 
 For the
three and six month period ended June 30, 2007, potential dilutive securities
had an anti-dilutive effect and were not included in the calculation of diluted
net loss per common share.  For the three and six months ended June
30, 2007, these securities included in-the-money warrants for the purchase of
2,572,264 and 2,043,093 common shares, respectively, and preferred stock
convertible into 94,218 common shares.
 
 8.
              Legal
      Proceedings
 
 On April
11, 2007, the Company was served with a lawsuit filed against it titled Cause
No. 2007-16502; D. John Ogren, R. Bradford Perry and Chester Smitherman v.
Petrosearch Corporation; 133rdJudicial District Court, Harris County, Texas.  The plaintiffs
are three (3) Series A Preferred shareholders who derived their original shares
from Texas Commercial Resources, Inc. (“TCRI”) and became Series A Preferred
shareholders of Petrosearch Energy Corporation as a result of the prior
mergers.  The plaintiffs have alleged that Petrosearch Corporation
(and TCRI, its predecessor) failed to pay accrued, cumulative dividends and
refused to allow conversion of their Series A Preferred Stock into Common
Stock.    The plaintiffs have alleged breach of contract,
fraud and violation of Section 33 of the Texas Securities Act and have requested
the award of actual and exemplary damages, interest and attorneys’
fees.   The lawsuit likewise requests the Court to compel the
payment of accrued dividends and the examination of the Company’s books and
records. The Company denies the factual allegations made in the lawsuit and
intends to vigorously defend against the claims made therein.  An
estimate of possible loss or range of possible loss cannot be made at this
time.  The Company is in the process of discovery in the lawsuit at
this time.  In July 2008, the Company entered into mediation with the
plaintiffs without success.
  10
 Index
  The
Company currently is not a party to any other material pending legal
proceedings.
 
 9.
              Fair
      Value Measurements
  The
Company adopted FAS 157 on January 1, 2008.  FAS 157, among other
things, defines fair value, establishes a consistent framework for measuring
fair value and expands disclosure for each major asset and liability category
measured at fair value on either a recurring or nonrecurring
basis.  FAS 157 clarifies that fair value is an exit price,
representing the amount that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market
participants.  As such, fair value is a market-based measurement that
should be determined based on assumptions that market participants would use in
pricing an asset or liability.  As a basis for considering such
assumptions, FAS 157 establishes a three-tier fair value hierarchy, which
prioritizes the inputs used in measuring fair value as follows:
 
 Level
      1.
              
              Observable
      inputs such as quoted prices in active markets for identical assets or
      liabilities;Level
      2.
              
              Inputs,
      other than quoted prices included within Level 1, that are observable
      either directly or indirectly; andLevel
      3.
              
              Unobservable
      inputs in which there is little or no market data, which require the
      reporting entity to develop its own
assumptions.
 
 As of
June 30, 2008, the Company’s assets and liabilities that are measured at fair
value on a recurring basis include the following:
 
 Fair Value Measurements
    UsingTotal
              
              Quoted Prices in Active
Markets
                (Level 1)
              
              Significant Other Observable
      Inputs
                (Level 2)
              
              
              Significant Unobservable
Inputs
                (Level 3)Warrant
      liability
              
              $
              149,150
              
              —
              
              $
              149,150
              
              
              
              —
 
 10.
              Extinguishment of
      Debt
 
 Project
Financing
 
 In
November 2006, the Company signed a Securities Purchase Agreement and Secured
Term Note with Laurus Master Fund, Ltd to provide financing for the drilling of
its Kallina 46 #1 well and payment of the future completion costs for the
Kallina 46 #1 well.  The November 2006 financing was specifically
recourse to the Kallina 46 #1 well and the associated lease acreage
only.
  11
 Index
  In April
2006, it was determined that the Kallina 46 #1 well was uneconomic and the
decision was made that the well needed to be plugged and abandoned. In May 2008
the Company received a full release of all the liens, security interests,
rights, claims and benefits of every kind in, on and under the November 2006
Secured Term Note with Laurus Master Fund, Ltd, as well as that same release on
all the other collateral documents associated with that financing.  As
part of this transaction, the Company conveyed their interest in the Kallina
46#1 well and the associated lease acreage to a third party.
 
 As a
result of the legal release described above, the debt related to the Laurus
financing has been extinguished on the financial statements of the Company in
May, 2008.  In addition, the accrued interest, unamortized debt
discount, and unamortized financing costs have also been written-off as well as
the net book value of the Kallina well.
 
 The gain
on extinguishment of this debt was accounted for according to APB 26, “Early
Extinguishment of Debt”.  A difference between the reacquisition price
and the net carrying amount of the extinguished debt was recognized as a gain in
the amount of $1,097,252 in the accompanying statements of operations for the
three and six months ended June 30, 2008.
 
 Revolving
Credit Agreement
 
 On April
1, 2008 the total outstanding balance of the revolving credit facility became
due and a payment of $1,602,500 was paid in full to Fortuna Energy, which closed
out the revolving credit facility as of that date.  Pursuant to the
revolving credit agreement, and as part of being paid back in full, Fortuna
Energy returned to the Company all of the overriding royalties related to the
Company’s assets that were issued to Fortuna Energy.  The most
significant override relates to a 2% override of the Company’s net interest in
the Company’s North Dakota, Gruman project.
  11.
              Sale of Barnett Shale
      Interest
 
 In
December 2006, through the Company’s wholly owned subsidiary, Barnett
Petrosearch LLC, (“Barnett Petrosearch”) the Company joined in the formation of
a partnership, DDJET Limited LLP (“DDJET”), for the development of a natural gas
integrated venture to explore and develop assets in the Barnett Shale. The
Company owned a 5.54% interest in DDJET along with partners Metroplex Barnett
Shale LLC, a wholly owned subsidiary of Exxon Mobil Corporation, and Cinco
County Barnett Shale LLC, a privately held Dallas-based company
(“Cinco”).
 
 On
February 11, 2008 the Company executed an authorization for the general partner
of the Partnership to immediately commence a sales marketing program to
interested potential purchasing parties in order to fully assess the current
market value of the Partnership.  On June 25, 2008 the Company
executed a binding agreement for the sale of its limited partnership interest in
DDJET to Cinco for a cash purchase price of $36,000,000.  On June 26,
2008 Cinco paid to Barnett Petrosearch the required $1,800,000 non-refundable
deposit to be applied to the purchase price and fulfilled all the other
necessary requirements to bind both Cinco and Petrosearch to the
sale.  On July 18, 2008 the Company received the balance of the
proceeds of the sale in the amount of $30,729,008.  These proceeds
were net of the $1,800,000 down payment previously received from Cinco and
$3,470,992 of costs previously owed by the Company which were assumed by Cinco
pursuant to the June 25, 2008 agreement.
 
 The
transaction significantly altered the relationship between capitalized costs and
proved reserves, and there is substantial economic difference between the
properties sold and the properties retained. As a result, a gain of $21,814,753
has been generated by the sale of the Company’s interest in DDJET.
  The
following represents the unaudited proforma effect on the unaudited condensed
consolidated statement of operations for the six months ended June 30, 2008 as
if the transaction occurred on January 1, 2008:
  12
 Index
  As Reported
              
              
              Proforma
                Adjustments
              
              
              Proforma
                (Unaudited)Oil
      and gas production revenue
              
              $
              1,099,898
              
              
              $
              (783,253
              )
              
              $
              316,645Cost
      and expense
              
              
              2,329,942
              
              
              
              (312,065
              )
              
              
              2,017,877Operating
      loss
              
              
              (1,230,044
              )
              
              
              (471,188
              )
              
              
              (1,701,232
              )Other
      income (expense);Interest
      income
              
              
              68,893
              
              
              
              -
              
              
              
              68,893Interest
      expense
              
              
              (1,257,852
              )
              
              
              236,173
              
              
              
              (1,021,679
              )Amortization
      of financing costs and debt discount
              
              
              (1,280,325
              )
              
              
              -
              
              
              
              (1,280,325
              )Change
      in value of warrant liability
              
              
              171,990
              
              
              
              -
              
              
              
              171,990Gain
      on sale of Barnett
              
              
              21,814,753
              
              
              
              (36,762
              )
              
              
              21,777,991Gain
      on extinguishment of debt
              
              
              1,097,252
              
              
              
              -
              
              
              
              1,097,252Other
      income (expense); net
              
              
              20,614,711
              
              
              
              199,411
              
              
              
              20,814,122Net
      income before provision for income tax
              
              
              19,384,667
              
              
              
              (271,777
              )
              
              
              19,112,890Deferred
      tax expense
              
              
              (2,930,120
              )
              
              
              92,404
              
              
              
              (2,837,716
              )Net
      income (loss)
              
              $
              16,454,547
              
              
              $
              (179,373
              )
              
              $
              16,275,174Basic
      and diluted net loss per common share
              
              $
              0.40
              
              
              $
              0.00
              
              
              $
              0.39
 
  12.
              Subsequent
      Events
 
 Convertible
Securities
 
 As of
June 30, 2008, the Company had convertible debt outstanding with a balance of
$14,843,455, net of unamortized debt discount on the notes of
$3,931,545.  These convertible notes were repaid in full on July 21,
2008 as was accrued interest through July 21, 2008.  Cash payments to
the note holders, including interest, totaled $18,837,617.  The
unamortized debt discount of $3,931,545 and the unamortized financing costs of
$774,471 will be expensed in the third quarter of 2008 when the debt was
repaid.
  13
 Index
  Item2.
              Management’s
      Discussion and Analysis or Plan of
Operation
 
 FORWARD
LOOKING STATEMENTS
  Statements
contained herein and the information incorporated by reference herein may be
forward-looking statements within the meaning of Section 21E of the Securities
Exchange Act of 1934 (the "Exchange Act"). Forward-looking statements can be
identified by the use of forward-looking terminology such as, but not limited
to, "may," "will," "expect," "anticipate," "estimate," "would be," "believe," or
"continue" or the negative or other variations of comparable
terminology.  We intend such forward-looking statements to be covered
by the safe harbor provisions applicable to forward-looking statements contained
in Section 21E of the Exchange Act. Such statements (none of which is intended
as a guarantee of performance) are subject to certain assumptions, risks and
uncertainties, which could cause our actual future results, achievements or
transactions to differ materially from those projected or anticipated. Such
risks and uncertainties are set forth herein.
 
 Forward-looking
statements include statements concerning plans, objectives, goals, strategies,
future events, or performance and underlying assumptions and other statements,
which are other than statements of historical facts. These statements are
subject to uncertainties and risks including, but not limited to, product and
service demands and acceptance, changes in technology, economic conditions, the
impact of competition and pricing, and government regulation and approvals.
Petrosearch cautions that assumptions, expectations, projections, intentions, or
beliefs about future events may, and often do, vary from actual results and the
differences can be material. Some of the key factors which could cause actual
results to vary from those Petrosearch expects include changes in natural gas
and oil prices, the timing of planned capital expenditures, availability of
acquisitions, uncertainties in estimating proved reserves and forecasting
production results, operational factors affecting the commencement or
maintenance of producing wells, the condition of the capital markets generally,
as well as our ability to access them, and uncertainties regarding environmental
regulations or litigation and other legal or regulatory developments affecting
our business.
 
 Our
expectations, beliefs and projections are expressed in good faith and are
believed to have a reasonable basis, including without limitation, our
examination of historical operating trends, data contained in our records and
other data available from third parties. There can be no assurance, however,
that our expectations, beliefs or projections will result, be achieved, or be
accomplished. Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date
hereof.  We undertake no duty to update these forward-looking
statements.
 
 OVERVIEW
– CORPORATE STRATEGY
 
 We
believe we have been successful over the past few years with our plan of
solidifying the financial strength of the Company and improving the quality of
our oil and gas assets, some of which have been sold resulting in significant
gain to the Company.  We have also been able to put financings
together to enable us to develop these assets.   The sale of our
Barnett Shale project has put the Company into a strong financial position with
a significant cash balance, no debt, significant reserves and positive retained
earnings.  Our current asset portfolio is primarily made up of a North
Texas Panhandle water flood project (the “Water Flood”) that has potential for
multiple years of growth.
 
 The Water
Flood is a resource play, which will allow us to re-invest our capital into the
project to enhance the rate of return, revenue growth and reserve
growth.  The sale of our Barnett Shale asset has also given us the
necessary capital to continue to develop this core project.  The
development plan for the Water Flood allows for us to effectively align our
financing needs with the capital needs of the project, therefore, allowing us to
efficiently manage the amount and timing of our capital
expenditures.  We have also completed the disposition of non-core
assets that did not meet our risk/reward parameters.  We believe the
continued execution of this plan will enable us to continue to focus on the
development of our Water Flood, as well as to continue to pursue strategic
alternatives for the Company in order to create value for the
shareholders.    Management believes the development of the
Water Flood should have a significant impact on our production, revenues and
cash flows in the future.
  14
 Index
  LIQUIDITY
AND CAPITAL RESOURCES
 
 Since
inception, we have primarily financed our operating and investing cash flow
needs through private offerings of equity securities, sales of crude oil and
natural gas, and the use of debt instruments such as convertible notes and
revolving credit facilities.  We have also recently sold one of our
main projects, the Barnett Shale project, for cash.  The proceeds
from, and the utilization of, all these methods have been, and Management
believes will continue to be, sufficient to keep the operations funded and the
business plan moving forward.
 
 Convertible
Securities
 
 On
November 9, 2007 we executed, with a group of accredited investors, a series of
Note and Warrant Purchase Agreements for the sale of  $8,100,000, 8%
Senior Secured Convertible Promissory Notes and three year warrants to purchase
1,928,571 shares of our common stock at an exercise price of $1.50 per share for
total gross proceeds to us of $8,100,000.   Upon closing the
transaction, we also issued the Convertible Note and the Warrant, and executed a
Pledge and Security Agreement and a Registration Rights
Agreement.  These convertible notes were repaid in full on July 21,
2008.  In exchange for cancelling the note and releasing the
collateral the note holders were paid the outstanding principal and accrued
interest through July 21, 2008.  Currently, there is no outstanding
debt related to these convertible notes.
 
 On
February 1, 2007, we executed a Note and Warrant Purchase Agreement for the sale
of a $10,000,000 8% Senior Secured Convertible Promissory Note with RCH Petro
Investors, LP (“RCH”) and a four year warrant to purchase 5,000,000 shares of
our common stock at an exercise price of $1.40 per share for total gross
proceeds to us of $10,000,000.   We completed the transaction and
received funding on February 7, 2007.  Upon closing, we issued the
Convertible Note and the Warrant, and executed a Pledge and Security Agreement
and a Registration Rights Agreement. This convertible note precluded the Company
from incurring indebtedness in excess of fifty percent (50%) of the PV-10 value
of the Company’s total proved reserves, plus the fair market value of the leases
and pipeline assets associated with the Company’s Barnett Shale
assets.  This convertible note was repaid in full on July 21,
2008.  In exchange for cancelling the note and releasing the
collateral the note holder was paid the outstanding principal and accrued
interest through July 21, 2008.  Currently, there is no outstanding
debt related to this convertible note.
 
 Project
Financings
 
 In
November 2006, we signed a Securities Purchase Agreement and Secured Term Note
with Laurus Master Fund, Ltd to provide financing for the drilling of our
Kallina 46 #1 well and payment of the future completion costs for the Kallina 46
#1 well.   We formed a subsidiary, Garwood Petrosearch Inc., to
hold our interest in the Kallina Lease and the Kallina 46 #1
well.  Also, as a part of the financing arrangement,
Garwood  issued Laurus a Warrant to acquire, upon payout of the Note
indebtedness, 45% of Garwood’s outstanding common stock such that upon exercise
of the Warrant, Garwood would be owned 55% by us and 45% by Laurus.
 
 It was
decided in April 2006 that the Kallina 46#1 well was uneconomic and the decision
was made that the well needed to be plugged and abandoned. In May 2008 the
Company received a full release of all the liens, security interests, rights,
claims and benefits of every kind in, on and under the November 2006 Secured
Term Note with Laurus Master Fund, Ltd, as well as that same release on all the
other collateral documents associated with that financing.  The
November 2006 financing was specifically recourse to the Kallina 46#1 well and
the associated lease acreage only.  The debt related to the Laurus
financing has been extinguished on the financial statements of the Company in
May, 2008 as well as any interest that was charged in relation to the Note has
been derecognized in that same period.
 
 As part
of this transaction, the Company has conveyed their interest in the Kallina 46#1
well and the associated lease acreage to a third party along with the Company’s
interest in the Pintail #1 well, Pintail Flats #1 well and the associated
acreage of Pintail and Pintail Flats.  Also as a part of this
transaction, the Company has transferred operatorship of all the existing and
future wells in this SW Garwood Prospect to the third party. In exchange for the
conveyance of the wells and acreage and the transfer of operatorship, the
Company received nominal cash consideration, and the third party has assumed the
liability of plugging the Kallina 46#1 well.
  15
 Index
  Revolving
Credit Agreement
 
 As of
April 1, 2008 the total outstanding balance of the revolving credit facility
became due and a payment of $1,602,500 was paid in full to Fortuna Energy, which
closed out the revolving credit facility as of that date.  Pursuant to
the revolving credit agreement and as part of being paid back in full, Fortuna
Energy returned to the Company all of the overriding royalties related to the
Company’s assets that were issued to Fortuna Energy.  The most
significant override relates to a 2% override of the Company’s net interest in
the North Dakota, Gruman project.
  As part
of the original amended revolving credit agreement terms, we agreed to issue to
Fortuna 475,000 warrants with a five year life and a strike price of $0.92 per
share.  The Warrants contain a “put” provision which allows Fortuna to
“put” the warrants to the Company at a price of $0.65 per warrant for two (2)
years, which “put” period shall commence 180 days after issuance. Additionally,
as part of the transaction, we agreed to issue 100,000 new warrants, which
expire 5 years from the date of issue, at a price of $0.92 per
share.
  Joint
Ventures
 
 We
continue to strive to develop relationships with institutions to participate in
our prospects.  Management believes this will reduce our capital risk
and increase the diversity of the projects in which we use our own
capital.  We intend to establish these drilling partnership
relationships with terms that are standard in the oil and gas
industry.
 
 CURRENT
PROJECTS AND CAPITAL REQUIREMENTS
 
 CORE
PROPERTIES:
 
 Barnett Shale Project -- In
December 2006, through our wholly owned subsidiary, Barnett Petrosearch LLC, we
joined in the formation of a partnership, DDJET Limited LLP (“DDJET”), for the
development of a natural gas integrated venture to explore and develop assets in
the Barnett Shale. We owned a 5.54% interest in DDJET along with partners
Metroplex Barnett Shale LLC (a wholly owned subsidiary of Exxon Mobil
Corporation), and Cinco County Barnett Shale LLC (a privately held Dallas-based
company).
 
 On
February 29, 2008 we announced that we executed an authorization for the general
partner of the Partnership to immediately commence a sales marketing program to
interested potential purchasing parties in order to fully assess the current
market value of the Partnership.  On June 25 we executed a binding
agreement for the sale of our limited partnership interest in DDJET to Cinco
County Barnett Shale LLC, one of the other two partners in DDJET, for a cash
purchase price of $36,000,000.  On June 26, 2008 Cinco paid to Barnett
Petrosearch the required $1,800,000 non-refundable deposit to be applied to the
purchase price and fulfilled all the other necessary requirements to bind both
Cinco and Petrosearch to the sale.  On July 18, 2008 the Company
received the balance of the proceeds of the sale of $30,729,008, the net amount
after deducting the $1,800,000 down payment previously received from Cinco and
$3,470,992 of costs previously owed by the Company which were assumed by Cinco
pursuant to the June 25, 2008 agreement.
 
 North Texas/Panhandle Water Flood
Project -In November 2005, we acquired a 100% working interest in 1,755
acres in the Quinduno Field in Roberts County, Texas, in the Anadarko Basin. The
project is focused on infill drilling and the implementation of a water flood on
the property. Our leases at Quinduno have a large established resource base of
over 23 million barrels of original oil in place.  Since its discovery
in 1953, approximately 5.1 million barrels have been produced using primary
production.
 
 One
infill well has been drilled to date. We have an ongoing program to enter each
of the 19 old wells that have not been plugged. So far, we have entered nine of
these older wells to determine their mechanical status and establish potential
productivity or injectivity. Two of these wells have been equipped and are now
capable of producing and two more have been converted for water
injection.  Further, two of the plugged wells have been re-entered but
we were unable to complete them for water injection. We have prepared a detailed
study and development plan for the field. As of December 31, 2007, our
independent engineers, Ryder Scott, estimated our net share of proved oil
reserves extractable by water flood at 1.5 million barrels of oil
equivalent.  Slightly deeper than the water flood zone, the Moore
County Limestone formation has undrilled exploration potential that may be
tested in a future well.
  16
 Index
  To
provide adequate water for injection, in November 2006 we executed a water
supply agreement with a landowner in the leasehold, which allows us to draw
fresh water from the aquifer underlying the landowner’s property. In that same
month, we received approval from the Panhandle Groundwater Authority District
(“PGAD”) to produce up to 5,000 barrels per day from the aquifer for use in the
flood.  This permit has since expired but we do not expect any
difficulty obtaining a new permit prior to initiating water injection in August
of this year.  We received the approval from the PGAD over the protest
filed with the PGAD by the Canadian River Municipal Water Authority (“CRMWA”)
attempting to preserve the freshwater for local municipal use only in the area
in which we own the rights to the fresh water.  We also applied to the
Texas Railroad Commission to amend a previously granted saltwater injection
permit to include fresh water injection. On January 5, 2007 we received a letter
from the Texas Railroad Commission (“TRRC”) informing us of a protest by CRMWA
contesting our application for fresh water injection in the Quinduno Field water
flood.   However, as of November 7, 2007, CRMWA has withdrawn
their protest and request for hearing as part of an agreement with CRMWA that
addresses their concerns with our use of fresh water for enhanced oil
recovery.  This agreement also prevents CRMWA from protesting future
efforts to obtain approval from PGAD to produce the underlying fresh water
aquifer,
 
 In
January 2008 we signed an agreement with Complete Production Services Inc.
(“CPS”), an international oilfield service company which provides that CPS, at
its sole expense, will design and construct a water treatment facility no later
than 90 days from the effective date of the agreement that will be capable of
treating all of our production water up to a maximum of 10,000 bbls per day and
likewise treat and provide to the Company a minimum of 5,000 bbls per day
of  production water from third party sources.  We, in turn,
have committed to be capable of injecting not less than 2,000 bbls of treated
water per day derived from third party production water within 30 days after the
facility is opened, and have further committed to be capable of injecting not
less than 5,000 bbls of treated water per day derived from third party
production water within 180 days after the facility opens, in addition to
re-injecting our own treated production water from the oil and gas lease it
operates.  We will be required to pay a scaled management fee to CPS
commencing on the date the facility opens on the basis of the volume of treated
and re-injected water derived from our production.  We have received
permits to add a sufficient number of wells to the existing permit to meet our
obligation to inject the volumes that CPS will make
available.  Further, we will continue to apply the appropriate number
of wells to the existing flood permit to continue with the development of the
flood.   We do not anticipate any difficulty with obtaining
future approvals.
 
 We have
recently commenced the first phase of the water flood project which entails the
conversion to water injection of two existing wells (work now completed) and the
attempted re-entry of two previously plugged wells.  The two
re-entries were unsuccessful.  Two additional existing wells will be
converted in their place.  These conversions will allow us to begin
enhanced oil recovery and to satisfy our water injection obligations pursuant to
the agreement signed with CPS that is finalizing construction of the water
treatment and supply facility on our lease.  That agreement requires
us to be capable of injecting 2,000 barrels of treated water within 30 days of
the water treatment facility being completed.
 
 SW Garwood, Colorado County, Texas
– In May 2008 (as discussed herein) we conveyed our interest in the three
drilled wells and the associated acreage in this SW Garwood prospect to an
unaffiliated third party.  As a part of that transaction, we also
transferred operatorship of all the existing and future wells in this SW Garwood
prospect to that third party. In exchange for the conveyance of the wells and
acreage and the transfer of operatorship, the Company received nominal cash
consideration as well as the third party’s assumption of the liability of
plugging the Kallina 46 #1 well.
 
 OTHER
PROJECT AREAS:
 
 Gruman Prospect, Stark County, North
Dakota -On March 28, 2006, we spudded the Gruman 18-3 well intended to
be either an increased density well if it proved to be up dip of the Gruman 18-1
producing well or a water injection well if it was down dip. The well reached
total depth of 9,890 feet on April 14, 2006, and was completed as an injection
well.  In October 2006, we undertook certain remedial work on the
Gruman 18-1 which improved the production on the well.
  17
 Index
  On
February 1, 2007, we began injecting produced water into the Gruman 18-3 well.
The result has been to reduce the cost of operating the Gruman 18-1 by
eliminating the need to truck produced water to a disposal facility. We are
considering supplementing this injection with water from the Dakota formation
for pressure maintenance in the mound. We have established that the Gruman 18-3
is in pressure communication with the Gruman 18-1 and both wells appear to be
affected by activities in one or more of the surrounding fields also producing
from the same formation. These third party activities appear to have resulted in
a rapid decline of reservoir pressure making further testing or stimulation of
the Gruman 18-3 necessary to achieve the desired future injection rates to
support further recovery of oil from the Gruman 18-1. Proved developed reserves
in the prospect to our share of the well as of December 31, 2007, were 215 Mbo
and 68 MMcf of natural gas, as estimated by a third party engineering firm,
McCartney Engineering, LLC.
 
 Mississippi Tuscaloosa Prospects --We have identified five Tuscaloosa oil prospects in the Mississippi
Inland Salt Basin, in Yazoo County, comprising a maximum of 2,295 acres and up
to 18 potential drilling locations.  Approximately 55% of the entire
prospect acreage has been leased. We have signed a farm-out agreement with an
industry partner to co-develop these prospects with us.  The farm-out
agreement requires the operator, our industry partner, to commence drilling of
the first well in the prospect prior to October 1 2008.  We will
receive a carried interest for 12.5% through casing point of the first well, at
which time we will have the option to purchase up to another 12.5% interest in
the well at cost.  For all future wells, we will have the same working
interest as we choose on the first well.  It is contemplated that
there will be 2-3 wells drilled in this prospect.
 
 RESULTS
OF OPERATIONS
 
 The
following discussion and analysis of our financial condition and results of
operations should be read in conjunction with the financial statements and
accompanying notes and the other financial information appearing elsewhere in
this filing.
 
 The
factors that most significantly affect our results of operations are: (i) the
sale prices of crude oil and natural gas; (ii) the amount of production sales;
and (iii) the amount of lease operating expenses. Sales of production and level
of borrowings are significantly impacted by our ability to maintain or increase
production and reserves from existing oil and gas properties through exploration
and development activities.
 
 For
the three months ended June 30, 2008 compared to the three months ended June 30,
2007
 
 Revenues
 
 Consolidated
oil and gas production revenue for the three months ended June 30, 2008 was
$545,465 versus $373,544 for the three months ended June 30,
2007.  This represents a 46% increase in revenue in the first quarter
of 2008 over the first quarter of 2007.  As expected, this increase
was the result of an increase in revenue from our Barnett Shale project of
$269,671 over those periods, which was partially offset by decreased production
in our Gruman – North Dakota well, and our SW Garwood project.  The
Gruman well continues to have pump and motor assembly issues.  This,
along with the unexpected decline in reservoir pressure previously discussed,
has severely affected our ability to produce the well during the
quarter.  Various water source alternatives are being considered to
supplement the injection well volume which is expected to return the Gruman 18-1
wells to rates on the order of 100 bopd or more.
 
 See below
for revenue detail by property from the first quarter of 2008 compared to the
first quarter of 2007.
  18
 Index
  2008
                
                
                %
      of
                
                
                2007
                
                
                %
      of2nd
      Qtr
                
                
                Total
                
                
                2nd
      Qtr
                
                
                TotalBarnett
      Shale
                
                $
                455,457
                
                
                
                83
                %
                
                $
                185,786
                
                
                
                50
                %Gruman
      - North Dakota
                
                
                23,760
                
                
                
                4
                %
                
                
                59,630
                
                
                
                16
                %SW
      Garwood
                
                
                14,635
                
                
                
                3
                %
                
                
                70,341
                
                
                
                19
                %Panhandle
      - Water Flood
                
                
                -
                
                
                
                0
                %
                
                
                4,286
                
                
                
                1
                %Oklahoma
                
                
                47,218
                
                
                
                9
                %
                
                
                31,649
                
                
                
                8
                %Other
                
                
                4,395
                
                
                
                1
                %
                
                
                21,852
                
                
                
                6
                %Total
                
                $
                545,465
                
                
                
                100
                %
                
                $
                373,544
                
                
                
                100
                %
 
 To
further explain the increase in revenue from the first quarter of 2007 to the
first quarter of 2008, we have provided the following break-out of production
and prices for the two years.
 
 2Q
      2008
              
              
              
              2Q
      2007Barrels
      of Oil
              
              
              678
              
              
              
              1,547Price
      per Barrel
              
              $
              116.70
              
              
              $
              63.33MCF
      of Gas
              
              
              49,396
              
              
              
              37,335Price
      per MCF
              
              $
              9.33
              
              
              $
              6.94Total
      Barrels of Oil Equivalent
              
              
              8.910
              
              
              
              7,769
 
 As noted
in the above table, the increase in oil and gas prices also played a role in the
increase in revenue since 2007.  The total effect on revenue from the
price increases was approximately $172,202.
 
 Lease
Operating and Production Tax Expense
 Lease
operating and production tax expenses for the quarters ended June 30, 2008 and
2007 were $220,405 and $265,598, respectively.  These expenses relate
to the costs that are incurred to operate and maintain our wells and related
production equipment, including the costs applicable to the operating costs of
support equipment and facilities.  Lease operating expenses decreased
due to the fact that there were expenses in the second quarter of 2007 related
to the Gruman 18-1 well that were not needed in that same period in
2008.  This explains why although revenue for the second quarter of
2008 was significantly higher than revenue for the second quarter of 2007, the
lease operating expenses for that same period in 2008 were lower than in
2007.
 
 Depletion,
Depreciation and Amortization
 
 Costs for
depletion, depreciation and amortization for the quarters ended June 30, 2008
and 2007, were $203,265 and $194,142, respectively.  The increase is
mainly due to an increase in total barrels of oil equivalent production during
the quarter ended June 30, 2008 as compared to the same period in
2007.  Given the fact that depletion is calculated by multiplying the
net amortizable costs times the units of production in the related period
relative to the total proved reserves, the depletion amount for the second
quarter of 2008 was higher than the depletion for the same period in
2007.
  19
 Index
  General
and Administrative Expenses
 
 General
and administrative expenses for the quarters ended June 30, 2008 and 2007, were
$568,657 and $701,382, respectively.  The decrease in total general
and administrative expense was mainly due to the decrease in legal
expenses.  The decrease in general and administrative expenses was
also due to a slight decrease in travel costs, corporate expenses related to
investor relations, third party contractors and office expenses.  A
summary listing of general and administrative expenses is provided
below.
 
 2nd
      Quarter
              
              
              2nd
      Quarter2008
              
              
              2007Personnel
      Costs
              
              $
              298,488
              
              
              $
              287,788Travel,
      Meals, and Entertainment
              
              
              7,044
              
              
              
              25,250Corporate
      Expenses
              
              
              60,069
              
              
              
              96,647Accounting,
      Legal, and Professional Fees
              
              
              78,897
              
              
              
              153,636Third
      Party Consultants and Contractors
              
              
              54,942
              
              
              
              61,038Office
      Expenses
              
              
              42,639
              
              
              
              50,901Other
              
              
              26,578
              
              
              
              26,122Total
      General and Administrative
              
              $
              568,657
              
              
              $
              701,382
 
 Operating
Loss
 
 We
generated an operating loss of $(446,862), or $(0.01) per share, for the quarter
ended June 30, 2008, compared to an operating loss of $(787,578), or $(0.02) per
share, for the quarter ended June 30, 2007. The $340,716 variance is related
mainly to a significant increase in revenues, coupled with a decrease in lease
operating expenses and general and administrative expenses.
 
 Other
Income (Expense)
 
 The
$22,695,468 increase from $(842,656) in other expense for the quarter ended June
30, 2007 to $21,852,812 in other income for the quarter ended June 30, 2008 is
due mainly to the gain of $21,814,753 related to the sale of the DDJET interest
in the Barnett Shale.   There was also a $1,097,252 gain on the
extinguishment of debt related to the forgiveness of the non-recourse project
financing related to the Company’s Kallina 46 #1 well in the SW Garwood
project.  These gains were partially offset by nominal increases in
interest expense and the amortization of the debt discount.
 
 For
the six months ended June 30, 2008 compared to the six months ended June 30,
2007
 
 Revenues
 
 Consolidated
oil and gas production revenue for the six months ended June 30, 2008 was
$1,099,898 versus $736,520 for the six months ended June 30,
2007.  This represented a 49% increase in revenue in the six months
ended June 30, 2008 over the same period in  2007.  As
expected, this increase is primarily due to the increase in the production from
our Barnett Shale project.    The effects of this increase
were partially offset by a decline in revenue from our Gruman North Dakota well
of approximately $61,000 or 26% and a decline in revenue of approximately
$106,000 from our SW Garwood properties.  The Gruman well continues to
have pump and motor assembly issues.  This, along with the unexpected
decline in reservoir pressure previously discussed, has severely affected our
ability to produce the well during the quarter.  Various water source
alternatives are being considered to supplement the injection well volume which
is expected to return the Gruman 18-1 wells to rates on the order of 100 bopd or
more.
 
 See below
for revenue detail by property for the six months ended June 30, 2008 compared
to the six months ended June 30, 2007.
  20
 Index
 
 2008
                
                
                %
      of
                
                
                2007
                
                
                %
      of6-Months
                
                
                Total
                
                
                6-Months
                
                
                TotalBarnett
      Shale
                
                $
                783,253
                
                
                
                71
                %
                
                $
                235,702
                
                
                
                32
                %Gruman
      - North Dakota
                
                
                175,052
                
                
                
                16
                %
                
                
                236,511
                
                
                
                32
                %SW
      Garwood
                
                
                29,219
                
                
                
                3
                %
                
                
                135,210
                
                
                
                18
                %Panhandle
      - Water Flood
                
                
                257
                
                
                
                0
                %
                
                
                9,534
                
                
                
                1
                %Oklahoma
                
                
                95,789
                
                
                
                9
                %
                
                
                71,982
                
                
                
                10
                %Other
                
                
                16,328
                
                
                
                1
                %
                
                
                47,581
                
                
                
                6
                %Total
                
                $
                1,099,898
                
                
                
                100
                %
                
                $
                736,520
                
                
                
                100
                %
 
 To
further explain the increase in revenue from the first six months of 2007 to the
first six months of 2008 we have provided the following break-out of production
and prices for the two years.
 
 2008 6-Mos
              
              
              2007 6-MosBarrels
      of Oil
              
              
              2,683
              
              
              
              5,444Price
      per Barrel
              
              $
              100.14
              
              
              $
              56.24MCF
      of Gas
              
              
              95,467
              
              
              
              56,889Price
      per MCF
              
              $
              8.44
              
              
              $
              6.69Total
      Barrels of Oil Equivalent
              
              
              18,594
              
              
              
              14,925
 
 As noted
in the above table, the increase in oil and gas prices also played a role in the
increase in revenue since 2007.  The total effect on revenue from the
price increases was approximately $353,231.
 
 Lease
Operating and Production Tax Expense
 Lease
operating and production tax expenses for the six months ended June 30, 2008 and
2007 were $549,822 and $342,891, respectively.  These expenses relate
to the costs that are incurred to operate and maintain our wells and related
production equipment, including the costs applicable to the operating costs of
support equipment and facilities.  Lease operating expenses increased
significantly due to 12 additional Barnett Shale wells coming on-line since the
first six months of 2007.  In addition, repair and maintenance type
work was required on the Pintail and Gruman wells in the first six months of
2008 causing total lease operating expenses for these two wells to
increase.
 
 Depletion,
Depreciation and Amortization
 
 Costs for
depletion, depreciation and amortization for the six months ended June 30, 2008
and 2007, were $464,223 and $372,789, respectively.  The increase is
mainly due to an increase in total barrels of oil equivalent production in the
six months ended June 30, 2008, as compared to the same period in
2007.  Given the fact that depletion is calculated by multiplying the
net amortizable costs times the units of production in the related period
relative to the total proved reserves, the depletion amount for the first six
months of 2008 was higher than the depletion for the same period in
2007.
 
 General
and Administrative Expenses
 
 General
and administrative expenses for the six months ended June 30, 2008 and 2007,
were $1,315,897 and $1,440,472, respectively.  The decrease in
administrative expenses were related to a decrease in personnel costs of $87,400
due mainly to bonuses issued in the first quarter 2007 that were not issued in
2008, a decrease in corporate expenses related to a decrease in cost of investor
relations and a decrease in third party consultants related to a decrease in the
use of accounting consultants in 2008 as opposed to 2007.  These
decreases were partially offset by an increase in legal fees related to ongoing
litigation.  A summary listing of general and administrative expenses
is provided below.
  21
 Index
 
 6/30/2008
              
              
              6/30/2007YTD Total
              
              
              YTD TotalPersonnel
      Costs
              
              $
              596,973
              
              
              $
              684,373Travel,
      Meals, and Entertainment
              
              
              14,985
              
              
              
              36,586Corporate
      Expenses
              
              
              117,837
              
              
              
              160,743Accounting,
      Legal, and Professional Fees
              
              
              353,448
              
              
              
              270,882Third
      Party Consultants and Contractors
              
              
              96,057
              
              
              
              138,497Office
      Expenses
              
              
              100,878
              
              
              
              108,288Other
              
              
              35,719
              
              
              
              41,103Total
      General and Administrative
              
              $
              1,315,897
              
              
              $
              1,440,472
 
 Operating
Loss
 
 We
generated an operating loss of $(1,230,044), or $(0.03) per share, for the six
months ended June 30, 2008, compared to an operating loss of $(1,419,632), or
$(0.04) per share, for the six months ended June 30, 2007.  The
$189,588 variance is related mainly to an increase in revenues related to our
Barnett Shale asset and a decrease in general and administrative costs partially
offset by an increase in lease operating costs and DD&A
expense.
 
 Other
Income (Expense)
 
 The
$22,427,718 increase from $(1,813,007) in other expense for the six months ended
June 30, 2007 to $20,614,711 in other income for the six months ended June 30,
2008 is due mainly to the gain of $21,814,753 gain related to the sale of the
DDJET interest in the Barnett Shale.   There was also a
$1,097,252 gain on the extinguishment of debt related to the forgiveness of the
non-recourse project financing related to the Company’s Kallina 46 #1 well in
the SW Garwood project.  These gains were partially offset by nominal
increases in interest expense and the amortization of the debt
discount.
 
 Off-Balance
Sheet Arrangements
 
 We had no
off-balance sheet arrangements during the fiscal quarter ended June 30,
2008.
 
 
 Item4.
              Controls
      and Procedures
 
 Evaluation
of Disclosure Controls and Procedures
 
 Petrosearch
Energy Corporation’s Chief Executive Officer and Chief Financial Officer
performed an evaluation of the Company’s disclosure controls and procedures.
Disclosure controls and procedures include, without limitation, controls and
procedures designed to ensure that information required to be disclosed by an
issuer in the reports that it files or submits under the Securities Exchange Act
of 1934 is accumulated and communicated to the issuer’s management, including
its Chief Executive Officer and Chief Financial Officer, as appropriate to allow
timely decisions regarding required disclosure. Based on this evaluation, the
Chief Executive Officer and Chief Financial Officer have concluded that the
Company’s disclosure controls and procedures are effective as of June 30,
2008.
  22
 Index
  Changes
in internal controls
 
 There has
been no change in our internal control over financial reporting during the
quarter ended June 30, 2008 that has materially affected, or is reasonably
likely to materially affect, our internal control over financial
reporting.
 
 Limitations
on the Effectiveness of Internal Controls
 
 Our
management does not expect that our disclosure controls and procedures or our
internal control over financial reporting will necessarily prevent all fraud and
material error. An internal control system, no matter how well conceived and
operated, can provide only reasonable, not absolute, assurance that the
objectives of the control system are met. Further, the design of a control
system must reflect the fact that there are resource constraints, and the
benefits of controls must be considered relative to their costs. Because of the
inherent limitations in all control systems, no evaluation of controls can
provide absolute assurance that all control issues and instances of fraud, if
any, within the Company have been detected. These inherent limitations include
the realities that judgments in decision-making can be faulty, and that
breakdowns can occur because of simple error or mistake. Additionally, controls
can be circumvented by the individual acts of some persons, by collusion of two
or more people, or by management override of the internal control. The design of
any system of controls also is based in part upon certain assumptions about the
likelihood of future events, and there can be no assurance that any design will
succeed in achieving its stated goals under all potential future conditions.
Over time, control may become inadequate because of changes in conditions, or
the degree of compliance with the policies or procedures may
deteriorate.
 
 
 PART
II--OTHER INFORMATION
 
 Item2.
              Unregistered
      Sales of Equity Securities and Use of
Proceeds
 
 During
the three months ended June 30, 2008 we completed the following transactions in
reliance upon exemptions from registration under the Securities Act of 1933, as
amended (the "Act") as provided in Section 4(2) thereof. All certificates issued
in connection with these transactions were endorsed with a restrictive legend
confirming that the securities could not be resold without registration under
the Act or an applicable exemption from the registration requirements of the
Act. We believe that each person was a “qualified” investor within the meaning
of the Act and had knowledge and experience in financial and business matters,
which allowed them to evaluate the merits and risks of our
securities.  We believe each person was knowledgeable about our
operations and financial condition.
 
 On April
1, 2008 we issued 501,448 restricted common shares valued at $401,626 to 14 of
our convertible note holders for payment of quarterly interest relating to the
first quarter of 2008.
  23
 Index
  Item6.
              Exhibits
 
 
 Exhibit Number
              Description of Exhibit31.1
              Rule 13a-14(a) Certification of Chief Executive
      Officer31.2
              Rule 13a-14(a) Certification of Chief Financial
      Officer32.1
              Section 1350 Certification of Chief Executive
      Officer32.2
              Section 1350 Certification of Chief Financial
      Officer
  24
 Index
  SIGNATURES
 
  In
accordance with the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
  
 Petrosearch
Energy Corporation
 
 Date:  August 6, 2008
 
 
 By:
              /s/ Richard DoleRichard
      DoleChief
      Executive Officer, President and ChairmanBy:
              /s/ David CollinsDavid
      CollinsChief
      Financial Officer, Chief Accounting Officer and Principal Financial
      Officer