**UNITED STATES**

**SECURITIES AND EXCHANGECOMMISSION**

**WASHINGTON, DC 20549**

 

FORM 10-K

 

(MarkOne)

x**   ANNUAL REPORT PURSUANT TO SECTION 13 OR15(d) OF THE SECURITIES**

**        EXCHANGE ACT OF 1934**

 

For thefiscal year ended: December 31, 2009

 

o**TRANSITION REPORT PURSUANT TO SECTION 13OR 15(d) OF THE SECURITIES**

**         EXCHANGE ACT OF 1934**

Commission File No.: 333-141993

 

**PETROCORP INC.**--------------------------------------------------------------------------(Exact Name of Registrant as Specified in Its Charter)

 
| DELAWARE

---------------------------------------------------------  (State or Other Jurisdiction of Incorporation

             or Organization) | 20-5134664

-----------------------------------------------  (I.R.S. Employer Identification No.) |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------|

** **

1065 Dobbs Ferry Road, White Plains, New York 10607

---------------------------------------------------------------------------

(Address of PrincipalExecutive Offices)

 

(914) 674-4373

-------------------------------------------------------------------

(Registrant’s Telephone Number, Including Area Code)

 

Securitiesregistered pursuant to Section 12(b) of the Act:  None

 

Securitiesregistered pursuant to Section 12(g) of the Act:  Common Stock, par value $.0001

 

Indicate by check markif the registrant is a well-known seasoned issuer, as defined in Rule 405 ofthe Securities Act.   Yeso   No x

 

Indicate by check markif the registrant is not required to file reports pursuant to Section 13 or15(d) of the Act.   Yeso   No x

 

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

 

Indicate by check mark if disclosure of delinquent filerspursuant to Item 405 of Regulation S-K (s 229.405) is not contained herein, andwill not be contained, to the best of registrant’s knowledge, in definitiveproxy or information statements incorporated by reference in Part III of thisForm 10-K or any amendment to this Form 

10-K.   o

 

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

 

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

 

Indicateby check mark whether the registrant is a shell company (as defined in Rule12b-2 of the Act).

  Yes  No x

 

The aggregate market value of the voting andnon-voting common equity held by non-affiliates of the registrant as of March 31,2010:  $12,200,000.

 

The numberof shares of the registrant’s common stock outstanding as of March 31, 2010: 22,680,000.

 

 

 

----

 

INDEX TO FORM 10-K ANNUAL REPORT

 

 

                                                                                         
|          |                                                                       |   | Page   |
|---------------|----------------------------------------------------------------------------|--------|--------|
| **PART  I**   |                                                                       |   |   |
| Item  1.      | Business                                                                   |   | 3      |
| Item  1A.     | Risk  Factors                                                              |   | 7      |
| Item  1B.     | Unresolved  Staff Comments                                                 |   | 13     |
| Item  2.      | Properties                                                                 |   | 13     |
| Item  3.      | Legal  Proceedings                                                         |   | 14     |
| **PART  II**  |                                                                       |   |   |
| Item  5.      | Market  for Registrant’s Common Equity, Related Stockholder Matters   |   |   |
|          | and  Issurer Purchases of Equity Securities                                |   | 15     |
| Item  6.      | Selected  Financial Data                                                   |   | 16     |
| Item  7.      | Management’s  Discussion and Analysis of Financial Condition and      |   |   |
|          | Results  of Operations                                                     |   | 16     |
| Item  7A.     | Quantitative  and Qualitative Disclosures about Market Risk                |   | 18     |
| Item  8.      | Financial  Statements and Supplementary Data                               |   | 19     |
| Item 9.       | Changes in and  Disagreements with Accountants on Accounting and           |   |   |
|          | Financial Disclosure                                                       |   | 19     |
| Item  9A(T)   | Controls  and Procedures                                                   |   | 19     |
| Item  9B      | Other  Information                                                         |   | 22     |
| **PART  III** |                                                                       |   |   |
| Item 10.      | Directors, Executive  Officers and Corporate Governance                    |   | 22     |
| Item  11.     | Executive  Compensation                                                    |   | 23     |
| Item  12.     | Security  Ownership of Certain Beneficial Owners and Management            |   |   |
|          | and  Related Stockholder Matters                                           |   | 25     |
| Item  13.     | Certain  Relationships and Related Transactions, and Director Independence |   | 26     |
| Item  14.     | Principal  Accountant Fees and Services                                    |   | 27     |
| **PART  IV**  |                                                                       |   |   |
| Item  15.     | Exhibits  and Financial Statement Schedules                                |   | 28     |
|          | Signatures                                                                 |   | 29     |
|          | Financial  Statements                                                      |   | F-1    |

 

 

 

2

----

**FORWARD-LOOKING STATEMENTS**

Thisreport contains forward-looking statements within the meaning of Section 27A ofthe Securities Act of 1933, as amended (the “Securities Act”), and Section 21Eof the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Allstatements other than statements of historical facts are forward-lookingstatements. You can find many of these statements by looking for words such as“believes,” “expects,” “anticipates,” “estimates,” “intends,” or similarexpressions used in this report.

 

These forward-lookingstatements are subject to numerous assumptions, risks and uncertainties.Factors which may cause our actual results, performance or achievements to bematerially different from any future results, performance or achievementsexpressed or implied by us in those statements include, among others, thefollowing:

 

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

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

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

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

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

|   | ● | other factors  discussed under Item 1A Risk Factors with the heading “Risks Related To Our  Business”. |
|--------|---------|------------------------------------------------------------------------------------------------------------------|

 

Because such statementsare subject to risks and uncertainties, actual results may differ materiallyfrom those expressed or implied by the forward-looking statements. You arecautioned not to place undue reliance on such statements, which speak only asof the date of this report.

 

**PART I**

 

References to “us”, “we”and “our” in this report refer to Petrocorp Inc. together with our subsidiaries.

 

**ITEM 1. BUSINESS.**

*** ***

***Background***

*** ***

We were incorporated as GD Conference Center,Inc. under the laws of Delaware on June 16, 2006. Prior to September 2007, theCompany’s business model provided telephonic conferencing services tobusinesses, organizations and individuals in North America.  Due to capital constraints and because its executives couldno longer serve the Company without compensation, the Company decided to changedirections.

 

On September 20, 2007, the Companyentered the oil and gas exploration and production business with theacquisition of three separate farm-out agreements from James Fitzsimons.  Mr.Fitzsimons also purchased 17,800,000 shares of the Company’s common stock fromcertain shareholders, resulting in him owning 84.5% of the Company’s thenoutstanding shares for $454,000.  Mr. Fitzsimons was elected a director of theCompany.

 

3

----

 

On October 19, 2007, the Companyamended its certificate of incorporation changing its name to “Petrocorp Inc.”and effectuated a five for one forward stock split which increased theauthorized common stock to 100,000,000 shares at $.0001 par value.  OnAugust 13, 2008, the Company’s board of directors approved a stock dividend onits outstanding common stock.  The ratio for the stock dividend was four sharesto each share owned (4:1).  All share and per share amounts have been restatedto reflect these common stock transactions.

 

During 2009 the Company changed its emphasis from an international oil and gascompany primarily to a US focused company because of current world economicconditions and lack of debt/capital financing.  The Company disposed of itsforeign oil and gas leases/permits in two separate transactions described below. The Company completed an extensive review of its Alaska and Oklahoma oil and gasleases, operations and recorded impairment charges of $639,813.

    

On June 12, 2009, theCompany exchanged its membership interest in Union Energy (Alberta) LLC, aColorado limited liability company, that owned eight contiguous sections(totaling 5,120 acres) of oil sands leases in the Peace River Oil Sands Area ofnorthern Alberta, Canada for 1,000,000 restricted shares of Tamm Oil and GasCorp.  The Company acquired these oil sands leases in May 2008 for $250,000.

 

On November 30, 2009, the Company sold oil andgas properties with a cost of $448,876 to Soladino Investments SA (“Soladino”),a Swiss corporation owned by our president, Mr. Fitzsimons for $596,551.  Thepurchase price was paid by cash of $96,551 and cancellation of $500,000 of itsnotes to Soladino.  The oil and gas properties were in Quebec, Canada and its wholly owned subsidiary Mac Oil SpA.  The Company recorded the $147,675 gain as acapital contribution.   

** **

***Our Current Business***

 

We are a US exploration stageCompany engaged in the acquisition, exploration and production, if warranted,development of prospective oil and gas properties.  We plan to conductexploration work on each of our current and future properties in order toascertain whether any of them possess commercially exploitable quantities ofoil and gas reserves.  The Company currently has significant lease holdings onthe North Slope of Alaska and oil and gas production in Oklahoma.  

      

**            Alaska**

 

On October 25, 2007, Union Energy(Alaska) LLC (“UEA”), our subsidiary, was the winning bidder for tracts 254,258 and 259 in the North Slope Areawide 2007 Competitive Oil and Gas LeaseSale.  The leases, covering 14,680 net acres, were issued on August 1, 2008,with a term of seven years and subject to a 12.5% royalty interest in favor of the Stateof Alaska.  UEA paid a total of $380,021 to the Stateof Alaska in respect of the leases.  These tracts are contiguous and theCompany believes, based upon current available geological data and maps fromthe public domain, to contain the Kavik gas field, discovered in 1969, whichhas been evaluated in detail by the U.S. Department of the Interior, U.SGeological Survey ("USGS").

 

On February 27, 2008, UEA was thewinning bidder for tracts 922, 923, 927, 988, 989, 990, 991, 992 and 925 in theState of Alaska North Slope Foothills Areawide 2008 Competitive Oil and GasLease Sale. The leases, covering 9,600 net acres, were issued on September 1,2008, with a term of 10 years and subject to a 12.5% royalty interest in favor of theState of Alaska.  UEA paid a total of $59,565 to theState of Alaska in respect of the leases.  These tracts are contiguous and theCompany believes, based upon current available geological data and maps from thepublic domain, to contain the East Kurupa gas field, discovered by Texaco in1976.  The USGS has been studying the potential for unconventionalover-pressured, continuous gas deposits in the Colville basin that contains theKurupa anticline and is now interpreting the East Kurupa well to haveencountered a thick section of over-pressured gas in Brookian strata.

 

4

----

 

 

Furthermore, any gas recovered fromour Alaska leases will not be salable unless or until a proposed North Slope gas pipeline is completed.  We have retained Frontier Land Inc. (an establishedland firm and a member of the American Association of Professional Landmen) toconduct negotiations with other leaseholders regarding their acreage and toacquire other land interests within the vicinity of our tracts.

 

**            Oklahoma**

 

On August 12, 2008, the Company acquired fromits President, James Fitzsimons, a 50% working interest (41.25% net revenueinterest) in the Snake Creek prospect, a 3,200 gross (3,022 net) acre gasdevelopment project located in northern Okmulgee County.  The Companyreimbursed Mr. Fitzsimons for his historic costs (acreage and drilling) byissuing a secured, non-interest bearing note, payable on demand for $210,917and assumed responsibility for all further costs.

 

On November 30, 2008, the Company acquired from Mr.Fitzsimons, a 100% working interest (81.25% net revenue interest) in theSpanish Peak prospect, a 2,041 gross (900 net) acre gas development projectlocated in Okmulgee County, Oklahoma.  The Company reimbursed Mr. Fitzsimonsfor his historic costs (acreage) by issuing a secured, non-interest bearingnote, payable on demand for $173,141 and assumed responsibility for all furthercosts.

 

On March 31, 2009, the Company purchased 171 oiland gas lease interests totaling 3,827 gross (2,666 net) acres in Okfuskee and Okmulgee Counties, Oklahoma from CH4 Energy, Inc., a company controlled by SoladinoInvestments SA at a cost of $583,823.  The Company reimbursed Soladino for itshistoric costs (acreage) by issuing a secured, non-interest bearing note,payable on demand for $583,823 and assumed responsibility for all furthercosts.

 

The Oklahoma leases are in areaswhich the Company believes are promising for oil and gas production althoughthe Company does not make any representations as to future profitableproduction, if any.  We have retained Keith Summar (a member of the AmericanAssociation of Petroleum Geologists) as a consultant to assist us in our Oklahoma operations.

* *

***Competition***

 

We operate in a highly competitive industry,competing with major oil and gas companies, independent producers andinstitutional and individual investors, which are actively seeking oil and gasproperties throughout the world together with the equipment, labor andmaterials required to operate properties. Most of our competitors havefinancial resources, staffs and facilities substantially greater than ours. Theprincipal area of competition is encountered in the financial ability toacquire good acreage positions and drill wells to explore for oil and gas,then, if warranted, drill production wells and install production equipment.Competition for the acquisition of oil and gas acreage is intense. Therefore,we may not be successful in acquiring and developing profitable properties in theface of this competition. No assurance can be given that sufficient oil and gasacreage will be available for acquisition and development.

 

 5

----

 

*** ***

***Government Regulation***

 

Oil and gas exploration and developmentcompanies are subject to various federal, state and local governmentalregulations, which may be changed from time to time in response to economic orpolitical conditions and can have a significant impact upon overall operations.Matters subject to regulation include permits for drilling operations, drillingbonds, reports concerning operations, the spacing of wells, unitization andpooling of properties, taxation, abandonment and restoration and environmentalprotection. These laws and regulations are under constant review for amendmentor expansion. Changes in these regulations could require us to expendsignificant resources to comply with new laws or regulations or changes tocurrent requirements and could have a material adverse effect on us.

 

***Oil and Gas Regulation***

 

The governmental laws and regulations whichcould have a material impact on our Company are as follows:

*** ***

***              *Drilling and Production**

 

These types of regulation include permitrequirements for the drilling of wells, drilling bonds and reports concerningoperations. Most states regulate one or more of the following: (i) the locationof wells; (ii) the method of drilling and casing wells; (iii) the rates ofproduction or "allowables"; (iv) the surface use and restoration ofproperties upon which wells are drilled; (v) the plugging and abandoning ofwells; and (vi) notice to surface owners and other third parties.

 

State laws may regulate the size and shape ofdrilling and spacing units or proration units governing the pooling of oil andnatural gas properties. Some states, including Oklahoma, allow forced poolingor integration of tracts to facilitate exploration while other states rely onvoluntary pooling of lands and leases. In some instances, forced pooling orunitization may be implemented by third parties and may reduce our interest inthe unitized properties. In addition, state conservation laws establish maximumrates of production from oil and natural gas wells, generally prohibit theventing or flaring of natural gas and impose requirements regarding theratability of production. These laws and regulations may limit the amount ofnatural gas and oil we can produce from our wells or limit the number of wellsor the locations at which we can drill. Moreover, each state generally imposesa production or severance tax with respect to the production and sale of oil,natural gas and natural gas liquids within its jurisdiction.

 

**Environmental Regulation**

 

Our activities will be subject to existingfederal, state and local laws and regulations governing environmental qualityand pollution control. Our operations will be subject to stringentenvironmental regulation by state and federal authorities including theEnvironmental Protection Agency ("EPA"). Such regulation can increasethe cost of such activities. In most instances, the regulatory requirementsrelate to water and air pollution control measures.

 

**Waste Disposal**

 

The Resource Conservation and Recovery Act("RCRA"), and comparable state statutes, affect oil and gasexploration and production activities by imposing regulations on thegeneration, transportation, treatment, storage, disposal and cleanup of"hazardous wastes" and on the disposal of non-hazardous wastes. Underthe auspices of the EPA, the individual states administer some or all of theprovisions of RCRA, sometimes in conjunction with their own, more stringentrequirements. Drilling fluids, produced waters, and most of the other wastesassociated with the exploration, development, and production of crude oil,natural gas, or geothermal energy constitute "solid wastes", whichare regulated under the less stringent non-hazardous waste provisions, butthere is no guarantee that the EPA or the individual states will not adopt morestringent requirements for the handling of non-hazardous wastes or categorizesome non-hazardous wastes as hazardous for future regulation.

 

6

----

 

*           ***    Air Emissions**

 

Our operations are subject to local, state andfederal regulations for the control of emissions of air pollution. Majorsources of air pollutants are subject to more stringent, federally imposedpermitting requirements. Administrative enforcement actions for failure tocomply strictly with air pollution regulations or permits are generallyresolved by payment of monetary fines and correction of any identifieddeficiencies.  Alternatively, regulatory agencies could require us to foregoconstruction, modification or operation of certain air emission sources.

 

**Clean Water Act**

 

The Clean Water Act ("CWA") imposesrestrictions and strict controls regarding the discharge of wastes, includingproduced waters and other oil and natural gas wastes, into waters of the United States, a term broadly defined. Permits must be obtained to discharge pollutantsinto federal waters. The CWA provides for civil, criminal and administrativepenalties for unauthorized discharges of oil, hazardous substances and otherpollutants. It imposes substantial potential liability for the costs of removalor remediation associated with discharges of oil or hazardous substances. Statelaws governing discharges to water also provide varying civil, criminal andadministrative penalties and impose liabilities in the case of a discharge ofpetroleum or it derivatives, or other hazardous substances, into state waters.In addition, the EPA has promulgated regulations that may require us to obtainpermits to discharge storm water runoff. In the event of an unauthorizeddischarge of wastes, we may be liable for penalties and costs.

** **

***Employees***

 

We have no employees as of the date of thisreport and anticipate that our operations will be conducted primarily throughthird party consultants and contractors rather than by employees.  We do notanticipate hiring a large number of employees.

*** ***

**Item 1A.  Risk Factors.**

 

You should carefullyconsider the risks described below, which constitute the material risks facing us. If any of the following risks actually occur, our business could be harmed. Youshould also refer to the other information about us contained in this Form10-K, including our financial statements and related notes.

 

***Risks Related to Our Business***

** **

**Our exploratory drilling operations may not besuccessful, our business may fail and investors may lose their entireinvestment in our Company.**

 

There can be no assurance that our futuredrilling activities will be successful. We may not recover all or any portionof our capital investment in the wells. Unsuccessful drilling activities wouldhave a material adverse effect upon our results of operations and financialcondition and would likely result in the ultimate failure of our businessoperations. The cost of drilling, completing, and operating wells is oftenuncertain, and a number of factors can delay or prevent drilling operationsincluding: (i) unexpected drilling conditions; (ii) pressure or irregularitiesin formation; (iii) equipment failures or accidents; (iv) adverse weatherconditions; and (iv) shortages or delays in availability of drilling rigs anddelivery of equipment. If our exploratory drilling operations are notsuccessful, our business may fail and investors may lose their entireinvestment in our Company.

 

7

----

 

 

**Oil and gas exploration and development involvesmany operating risks. If we were to experience any of these problems, it couldhave a material, adverse effect on our operations and possibly cause us to goout of business and investors to lose their entire investment in our Company.**

 

Our exploration activities will be subject tomany risks, including the risk that we may not discover commercially productivereservoirs. Exploration for oil and natural gas can be unprofitable, not onlyfrom failing to discover reserves, but from productive wells that do notproduce sufficient revenues to return a profit. In addition, our explorationactivities may be curtailed, delayed or cancelled as a result of other factors,including:

 

•fires;

•explosions;

•blow-outs and surfacecratering;

•uncontrollable flows ofunderground natural gas, oil, or formation water;

•natural disasters;

•facility and equipmentfailures;

•title problems;

•shortages or delays inthe delivery of equipment and services;

•abnormal pressureformations; and,

•environmental hazardssuch as natural gas leaks, oil spills, pipeline ruptures and discharges oftoxic gases.

 

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

 

•injury or loss of life;

•severe damage to anddestruction of property, natural resources or equipment;

•pollution and otherenvironmental damage;

•clean-upresponsibilities;

•regulatoryinvestigation and penalties;

•suspension of ouroperations; or,

•repairs necessary toresume operations.

 

We may be affected by any of these events morethan larger companies, since we have limited working capital. We have notobtained any liability insurance for our operations at this time. If we were toexperience any of these problems, it could have a material, adverse effect onour operations and could cause us to go out of business and investors to losetheir entire investment in our Company.

** **

**The operations and the potential profitabilityof oil and gas exploration and development companies often depend upon factorsbeyond our control. If our operations and potential profitability arenegatively impacted because of these factors, our business could suffer andinvestors could lose all or part of their investment in our Company.**

 

The potential profitability of oil and gasproperties is dependent upon many factors beyond our control. For instance,world prices and markets for oil and gas are unpredictable, highly volatile andpotentially subject to governmental price fixing, pegging and controls, or anycombination of these and other factors, responding to changes in domestic,international, political, social, and economic environments. Additionally, dueto worldwide economic uncertainty, the availability and cost of funds and otherexpenses have become increasingly difficult, if not impossible, to project.These and other changes and events may materially affect our financialperformance.

 

8

----

 

Adverse weather conditions can also hinderdrilling operations. A productive well may become uneconomic in the event wateror other deleterious substances are encountered which impair or prevent theproduction of oil and/or gas from the well. In addition, production from anywell may be unmarketable if it is impregnated with water or other deleterioussubstances. The marketability of oil and gas, which may be acquired ordiscovered will be affected by numerous factors beyond our control. Thesefactors include, but are not limited to, the proximity and capacity of oil andgas pipelines and processing equipment, market fluctuations of prices, taxes,royalties, land tenure, allowable production and environmental protection.These factors cannot be accurately predicted. If our operations and potentialprofitability are negatively impacted because of these factors, our businesscould suffer and investors could lose all or part of their investment in our Company.

 

**The oil and gas industry is highly competitiveand there is no assurance that we will be successful in acquiring further oiland gas exploration prospects and hiring qualified personnel. If we do notcompete successfully in these areas, our operations will likely suffer and our Companywill likely be unsuccessful.**

 

The oil and gas industry is intenselycompetitive, and we compete with other companies that have greater resources.Many of these companies not only explore for and produce oil and natural gas,but also carry on refining operations and market petroleum and other productson a regional, national or worldwide basis. These companies may be able to paymore for productive oil and natural gas properties and exploratory prospects ordefine, evaluate, bid for and purchase a greater number of properties andprospects than our financial or human resources permit. In addition, thesecompanies may have a greater ability to continue exploration activities duringperiods of low oil and natural gas market prices. Our larger competitors may beable to absorb the burden of present and future laws and regulations moreeasily than we can, which would adversely affect our competitive position. Ourability to acquire additional properties and to discover reserves in the futurewill be dependent upon our ability to evaluate and select suitable propertiesand to consummate transactions in a highly competitive environment.  Thesecompanies also may be better able to attract the qualified personnel requiredto run a successful oil and gas exploration company.

 

**Oil and gas operations are subject tocomprehensive regulation which may cause substantial delays or require capitaloutlays in excess of those anticipated causing an adverse effect on us.**

 

Oil and gas operations are subject to federal,state, and local laws relating to the protection of the environment, includinglaws regulating removal of natural resources from the ground and the dischargeof materials into the environment.  Oil and gas operations are also subject tofederal, state, and local laws and regulations which seek to maintain healthand safety standards by regulating the design and use of drilling methods andequipment.  Various permits from government bodies are required for drillingoperations to be conducted; no assurance can be given that such permits will bereceived. Environmental standards imposed by federal, state, or localauthorities may be changed and any such changes may have material adverseeffects on our activities. Moreover, compliance with such laws may causesubstantial delays or require capital outlays in excess of those anticipated,thus causing an adverse effect on us. Additionally, we may be subject to liabilityfor pollution or other environmental damages which we may elect not to insureagainst due to prohibitive premium costs and other reasons. To date we have notbeen required to spend material amounts on compliance with environmentalregulations.  However, we may be required to do so in future and this mayaffect our ability to expand or maintain our operations.

 

9

----

 

**Oil and gas exploration and developmentactivities are subject to certain environmental regulations which may preventor delay the commencement or continuance of our operations.**

 

Our oil and gas exploration and developmentactivities will be subject to certain federal, state and local laws andregulations relating to environmental quality and pollution control. Such lawsand regulations increase the costs of these activities and may prevent or delaythe commencement or continuance of a given operation. Compliance with theselaws and regulations has not had a material effect on our operations orfinancial condition to date. Specifically, we are subject to legislationregarding emissions into the environment, water discharges and storage anddisposition of hazardous wastes. In addition, legislation has been enactedwhich requires well and facility sites to be abandoned and reclaimed to thesatisfaction of state authorities. However, such laws and regulations arefrequently changed and we are unable to predict the ultimate cost ofcompliance.

*** ***

***Risks Related to Our Company***

** **

**If we do not continue to obtain additionalfinancing, our business will fail.**

 

Our current operating funds are less thannecessary to commence and complete all intended test wells on the Oklahoma and Alaska properties covered by our oil and gas leases. Therefore, we will needto obtain additional financing in order to complete our business plan.  Wecurrently have limited operations and we have minimal oil and gas sales.

 

As of December 31, 2009, we have cash on hand ofapproximately $38,510 representing the remaining proceeds of our six financingtransactions and loans from our president.  In order to commence and completeall intended test wells on the Oklahoma properties covered by the oil and gasleases, we anticipate that we will need to spend a minimum of $250,000.  Exploration(and if successful, development) of the Alaska prospects is unlikely tocommerce until the next decade and it is impossible to forecast these costs atthis time.  Nevertheless, we will require substantial additional financing tocover such costs.  Furthermore, we will require additional financing to sustainour business operations if we are not successful in earning revenues oncedrilling is complete.

 

We do not currently have any arrangements forfinancing and may not be able to find such financing. Our ability to obtainadditional financing will be subject to a number of factors, including themarket price for oil and gas, the success of our initial test wells and generalmarket conditions. These factors will make the timing, amount, terms orconditions of financing uncertain and additional financing may be unavailableto us.  If we do not obtain additional financing, our business will fail.

 

**We are a new entrant into the oil and gasindustry without a profitable or long operating history. We do not have any significantincome producing oil and gas properties and we have limited financialresources. We have not yet commenced our exploration activities nor have wegenerated any significant revenue since our incorporation. There is no means bywhich investors can evaluate our potential for success and there is no assurancethat we will ever operate profitably.**

 

We have a limited operating history and must beconsidered in the exploration stage. Our Company's operations will be subjectto all the risks inherent in the establishment of an exploration stageenterprise and the uncertainties arising from the absence of a significantoperating history. Potential investors should be aware of the difficultiesnormally encountered by oil and gas exploration and development companies andthe high rate of failure of such enterprises, especially those with a limitedoperating history such as ours. The likelihood of success must be considered inlight of the problems, expenses, difficulties, complications and delaysencountered in connection with the oil and gas exploration that we plan toundertake. These potential problems include, but are not limited to,unanticipated problems relating to exploration, and additional costs andexpenses that may exceed current estimates. The expenditures to be made by usin our oil and gas exploration may not result in the discovery of oil and gasreserves. If the results of our exploration do not reveal commercially viableoil or gas reserves, we may decide to abandon our leasehold interests andacquire new oil and gas interests for exploration or cease operations. Theacquisition of additional oil and gas interests will be dependent upon uspossessing capital resources in order to purchase such interests. If no fundingis available, we may be forced to abandon our operations. No assurance can be giventhat we will ever operate on a profitable basis.

 

10

----

 

Potential investors should be aware of thedifficulties normally encountered by new resource companies and the high rateof failure of such enterprises. There is a high risk that our business willfail.

 

**Because our directors have other businessinterests, they may not be able or willing to devote a sufficient amount oftime to our business operations, causing our business to suffer and possiblyfail**.

 

Our directors intend to spend a minority oftheir business time providing their services to us. While they presentlypossess adequate time to attend to our interests, it is possible that thedemands on our directors from their other obligations could increase, or thedemands of our business operations could increase, with the result that theywould no longer be able to devote sufficient time to the management of ourbusiness. If this happens, our Company will not likely perform to its potentialand may fail.

 

**Prospects that we decide to drill may not yield naturalgas or oil in commercially viable quantities. If this happens, our businesswill likely fail and investors would likely lose their entire investment in ourCompany.**

 

None of our properties covered by the oil andgas leases/permits have yet been fully evaluated by the Company. We will notknow for certain, prior to drilling and testing, whether natural gas or oilwill be present in those properties or, if present, whether natural gas or oilwill be present in sufficient quantities to recover drilling or completioncosts or to be economically viable. The cost of drilling, completing andoperating any well is uncertain and any wells we drill may not be productive.If we never find commercially viable resources of oil and gas, our businesswill fail and investors will likely lose their entire investment in our Company.

 

**Our Alaska prospects are in areas believed tocontain gas, but presently lacking gas transportation facilities**.

 

While our Alaska prospects are in areas that arepromising for gas discovery, there are no existing pipeline facilitiesavailable to transport any gas they may produce to market.  Unless suchfacilities are built and available to us, our gas would be “stranded gas” withlittle or no market value.  The Company believes that a pipeline facility willbe built within the terms of our leases, however, whether a pipeline is built,the timing of the construction of the pipeline and whether and on what termsthe pipeline is made available to transport our gas are all matters beyond our controlwhich could have significant impacts on our future results.

 

**James Fitzsimons, our president, owns SoladinoInvestments SA, a Swiss corporation, that owns approximately 78.5% of our commonstock and this interest could conflict with other investors, which could causeother investors to lose all or part of their investment.**

 

James Fitzsimons, our president and a director, ownsSoladino Investments SA, a Swiss corporation that owns 17,800,000 shares of ourcommon stock, or 78.5% of the Company’s issued and outstanding shares. Due to thisstock ownership, James Fitzsimons is able to substantially influence allmatters requiring shareholder approval, including the election of directors andapproval of significant corporate transactions.  Such concentration ofownership may also have the effect of delaying or preventing a change incontrol, which may be to the benefit of our management but not in the interestof the shareholders.  This stock ownership and potential effective control onall matters relating to the business and operations of our Company couldeliminate the possibility of shareholders changing the management in the eventthat the shareholders did not agree with the conduct of the officers anddirectors. Additionally, the shareholders would potentially not be able toobtain the necessary shareholder vote to effect any change in the course ofbusiness of our Company.  This lack of shareholder control could prevent theshareholders from removing from the board of directors any directors who arenot managing the Company with sufficient skill to make it profitable, whichcould prevent us from becoming profitable and cause investors to lose all orpart of their investment in our Company.

 

11

----

 

***Risks Related to Our Securities***

** **

**If a liquid market for our common stock does notdevelop, shareholders may be unable to sell their shares.**

 

There is currently no liquid market for ourcommon stock and no certainty that a liquid market will develop. While ourcommon stock is quoted for trading on the OTC Bulletin Board, there has onlybeen sporadic trading of our common stock. If a liquid market is not developedfor our shares, it will be difficult for shareholders to sell their stock.

** **

**A purchaser of our stock is purchasing pennystock which limits his or her ability to sell the stock.**

 

Our shares of common stock are considered pennystock under the Exchange Act. The shares will remain penny stock for theforeseeable future. The classification of penny stock makes it more difficultfor a broker-dealer to sell the stock into a secondary market, thus limitinginvestment liquidity. Any broker-dealer engaged by the purchaser for thepurpose of selling his or her shares in our Company will be subject to rules15g-1 through 15g-10 of the Exchange Act. Rather than creating a need to complywith those rules, some broker-dealers will refuse to attempt to sell pennystocks such as ours.

 

**We do not intend to pay dividends and there willbe less ways in which you can make a gain on any investment in our Company.**

 

We have never paid any cash dividends andcurrently do not intend to pay any dividends for the foreseeable future. To theextent that we require additional funding currently not provided for in ourfinancing plan, our funding sources may likely prohibit the payment of a dividend.

 

**Our board of directorsis authorized to issue shares of preferred stock, which may have rights andpreferences detrimental to the rights of the holders of our common shares**.

 

We are authorized to issue up to 1,000,000shares of preferred stock, $.0001 par value.  To date we have not issued anyshares of preferred stock and have no plans to do so.  Our preferred stock maybear such rights and preferences, including dividend and liquidationpreferences, as the board of directors may fix and determine from time totime.  Any such preferences may operate to the detriment of the rights of theholders of our common shares.

** **

**Our Articles of Incorporation provide forindemnification of officers and directors at our expense and limit theirliability which may result in a major cost to us and hurt the interests of ourshareholders because corporate resources may be expended for the benefit ofofficers and/or directors.**

 

12

----

 

Our Articles of Incorporation and applicable Delaware law provide for the indemnification of our directors, officers, employees, andagents, under certain circumstances, against attorney's fees and other expensesincurred by them in any litigation to which they become a party arising fromtheir association with or activities on our behalf.  We will also bear theexpenses of such litigation or any of our directors, officers, employees, oragents, upon such person's promise to repay us, therefore, if it is ultimatelydetermined that any such person should not have been entitled toindemnification this indemnification policy could result in substantialexpenditures by us, which we will be unable to recoup.

 

We have been advised that, in the opinion of theSEC, indemnification for liabilities arising under federal securities laws isagainst public policy as expressed in the Securities Act of 1933 and is,therefore, unenforceable.  In the event that a claim for indemnificationagainst these types of liabilities, other than the payment by us of expensesincurred or paid by a director, officer or controlling person in the successfuldefense of any action, suit or proceeding, is asserted by a director, officeror controlling person in connection with the securities registered in our SB-2,we will (unless in the opinion of our counsel, the matter has been settled bycontrolling precedent) submit to a court of appropriate jurisdiction, thequestion whether indemnification by us is against public policy as expressed inthe Securities Act and will be governed by the final adjudication of suchissue. The legal process relating to this matter if it were to occur is likelyto be very costly and may result in us receiving negative publicity, either ofwhich factors is are likely to materially reduce the market and price for ourshares, if such a market ever develops.

 

**ITEM 1B.  UNRESOLVED STAFF COMMENTS.**

** **

None

 

**ITEM2.  PROPERTIES.**

*** ***

***Leasehold Acreage***

 

The Company ownsinterests in oil and gas acreage in the locations set forth below as ofDecember 31, 2009 and 2008.  These ownership interests generally take the formof working interests in oil and gas leases or licenses that have varying terms.

 
|                         | December 31, 2009 |   | December 31, 2008 |   |
|------------------------------|-------------------|--------|-------------------|--------|
|   State or Country      | Gross             |   | Net               |   | Gross |   | Net |   |
|   Alaska                |              | 24,280 |              |   | 24,280 |   |   | 24,280 |   |   | 24,280 |   |
|   Oklahoma              |              | 7,204  |              |   | 4,929 |   |   | 6,379 |   |   | 2,809 |   |
|   Canada  (1)      |              | -      |              |   | - |   |   | 286,713 |   |   | 286,713 |   |
|   Italy  (1)       |              | -      |              |   | - |   |   | - | (2) |   | - | (2) |
|   Netherlands  (1) |              | -      |              |   | - |   |   | - | (3) |   | - | (3) |
|   Total                 |              | 31,484 |              |   | 29,209 |   |   | 317,372 |   |   | 313,802 |   |

 

(1)** **On November 30, 2009, the Companysold $448,876 of its foreign oil and gas leases to Soladino Investments SA, anentity owned and controlled by the president and the majority stockholder of theCompany, for $596,551 by (i) the cancellation of $500,000 of notes and (ii) acash payment of $96,551.  The sales price over the cost basis of $147,675was booked as additional paid in capital.

*** ***

(2)**  **On January 20, 2009, the Government of Italy made the preliminary awards of the competitive oil and gas exploration licenses, "Fiorenzuola D'Arda" located in the Po Valley and "Montottone" located in the Marche region, in favor of Mac Oil SpA, our former subsidiary.On March 24, 2009, the Government of Italy made the preliminary award of the competitive oil and gas exploration license, "Melzo" located in the Po Valley, also in favor of Mac Oil SpA.  On September 17, 2009, the Government of Italy made the preliminary award of the competitive oil and gas exploration license, "San Grato" located in the Po Valley, again in favor of Mac Oil SpA. The four Italy licenses cover a net surface area of 132,900 hectares (328,181 acres).

        

        The Company also had two competitive oil and gas exploration license applications pending awaiting adjudication by the Ministry of Economic Development in Italy covering a net surface area of 98,332 hectares (242,982 acres).

 

(3)**  **The Company had one license application pending covering a net surface area of 45,037 hectares (111,288 acres).

 

 

13

----

 

*** ***

***Leasehold Acreage Costs***

* *

The Company has capitalized leasehold acreage costs in undeveloped oil andnatural gas acreage in the locations set forth below:

 
|                       | December 31, |
|----------------------------|--------------|
|                       | 2009         |   | 2008 |
| State or Country           |         |   |   |   |   |
| Alaska                     | $            |   442,086 |   | $ |     442,086 |
| Oklahoma  (1)         |         | 760,029 |   |   | 520,050 |
| Canada  (2), (3),	(4) |         | - |   |   | 277,130 |
| Italy  (3),	(4)       |         | - |   |   | 228,867 |
| Netherlands  (3)      |         | - |   |   | 25,760 |
| Total                      | $            | 1,202,115 |   | $ | 1,493,893 |

 

(1)  The Oklahoma oil and gas leasehold costs are net of a 2009 impairment charge of$622,966. 

                    

(2)   On June 12, 2009, the Company exchanged itsmembership interest in Union Energy (Alberta) LLC, a Colorado limited liabilitycompany, that owned eight contiguous sections (totaling 5,120 acres) of oilsands leases in the Peace River Oil Sands Area of northern Alberta, Canada for1,000,000 restricted shares of Tamm Oil and Gas Corp.  The Company acquiredthese oil sands leases in May 2008 for $250,000.

 

(3)  On November 30, 2009, the Company sold itsforeign oil and gas leases with a cost of $448,876 to Soladino Investments SAfor $596,551.

 

(4)  At December 31, 2009, the Company wrote off $7,978 and $8,669 of remainingCanadian and Italian oil and gas leasehold costs as an impairment charge,respectively. 

 

***Oil and Gas DrillingActivity***

 

We own working interests in five gross producing oil wells and seven grossproducing gas wells at December 31, 2009.  Of the five gross producing oilwells two were dual completions (oil and gas).  At December 31, 2009, wehad no wells in progress.  The Company currently does not have sufficient production records tocompute the quantities of proved oil and gas reserves as required by SECRegulation S-X, Rule 4-10(a).

*** ***

***Corporate Offices***

 

Our officeis located at 1065 Dobbs Ferry Road, White Plains, NY 10607 and our telephonenumber is (914) 674-4373.  Should we require a regular permanent office we will attemptto locate one in the vicinity of our leases and we believe that suitableproperties are available at reasonable costs.

 

**ITEM 3.  LEGALPROCEEDINGS.**

 

We currently have no legal proceedings pending nor have anylegal proceeding been threatened against us or any of our officers, directorsor control persons of which we are aware.

 

14

----

 

# PARTII

## ITEM 5.  MARKET for REGISTRANT’S COMMON EQUITY and ISSURERPURCHASES of EQUITY SECURITIES.

*** ***

***Stock Split/Dividends***

 

On August 13, 2008, the Company’s board ofdirectors approved a stock dividend on its outstanding common stock.  The ratiofor the stock dividend was four shares to each share owned (4:1).

 

***Market Information***

 

Our common stock trades on the Over the CounterBulletin Board under the symbol “PTCP”.  The following table sets forth for theperiods indicated the high and low prices per share of our common stock asquoted by the OTCBB, respectively:

*** ***

|                              |   | Price Range of       |
|-----------------------------------|--------|----------------------|
|                              |   | Common Stock **(1)** |
|                              |   | High                 |   | Low |
| **Year Ended December 31,  2009** |   |                 |   |   |   |   |
| Fourth Quarter **  **   |   | $                    | 2.50 |   | $ | 2.50 |
| Third Quarter                |   | $                    | 2.50 |   | $ | 2.25 |
| Second Quarter               |   | $                    | 2.25 |   | $ | 2.25 |
| First Quarter                |   | $                    | 2.25 |   | $ | 2.10 |
| ** **                        |   |                 |   |   |   |   |
| **Year Ended December 31,  2008** |   |                 |   |   |   |   |
| Fourth Quarter **  **   |   | $                    | 2.10 |   | $ | 2.10 |
| Third Quarter                |   | $                    | 2.20 |   | $ | 2.10 |
| Second Quarter               |   | $                    | 1.80 |   | $ | 1.80 |
| First Quarter                |   | $                    | - |   | $ | - |

 

***Reports to Shareholders***

 

We plan tofurnish our shareholders with an annual report for each fiscal year endingDecember 31 containing financial statements audited by our independentcertified public accountants.  Additionally, we may, in our sole discretion,issue unaudited quarterly or other interim reports to our shareholders when wedeem appropriate.  We intend to maintain compliance with the periodic reportingrequirements of the Securities Exchange Act of 1934.

 

***Holders***

 

As of March 31, 2009, we had five shareholders of record and 22,680,000common shares issued and outstanding.  The number of holders does not include theshareholders for whom shares are held in a "nominee" or"street" name.

** **

***Dividend Policy***

 

We have not declared or paid any dividends on our commonstock to date.  We anticipate that any future earnings will be retained asworking capital and used for business purposes.  Accordingly, it is unlikelythat we will declare or pay any such dividends in the foreseeable future.

 

15

----

 

***SecuritiesAuthorized for Issuance under Equity Compensation Plans***

 

None

 

***Recent Salesof Unregistered Securities***

 

On March 18, 2008, the Company sold 800,000shares of its common stock to one investor at $1.25 per share (an aggregate of$1,000,000).  The shares were sold in transactions exempt from registrationunder Regulation S of the Securities Act of 1933, as amended.  The shares arenot registered under the Securities Act or any state securities laws and,unless so registered, may not be offered or sold except pursuant to anapplicable exemption from the registration requirements of the Securities Actand applicable state securities laws.  The purchasers of the shares representedthat they were acquiring the shares for their own account, for investment, andthat the purchasers were not US Persons within the meaning of Regulation S. The Company has no obligation to register the resale of the shares under theSecurities Act.  The proceeds from the sale of the shares will be used forworking capital purposes.

 

## ITEM 6.  SELECTED FINANCIAL DATA.

 

Not applicable

 

## ITEM 7. MANAGEMENT’S DISCUSSION and ANALYSIS of FINANCIAL CONDITIONS and REULTS OFOPERATION.

***Overview***

We caution you that reliance on any forward-looking statementinvolves risks and uncertainties, and that although we believe the assumptionson which our forward-looking statements are based are reasonable, any of thoseassumptions could prove to be inaccurate, and as a result, the forward-lookingstatements based on those assumptions could be incorrect.  In light of theseand other uncertainties, you should not conclude that we will necessarilyachieve any plans and objectives or projected financial results referred to inany of the forward-looking statements.  We do not undertake to release theresults of any revisions of these forward-looking statements to reflect futureevents or circumstances.  Some of the factors that may cause actual results,developments and business decisions to differ materially from thosecontemplated by such forward-looking statements include the following:
| •   | our ability to raise additional  capital and secure additional financing;                 |
|---------------|-------------------------------------------------------------------------------------------|
| •   | anticipated trends in our  financial condition and results of operations;                 |
| •   | our ability to hire and retain key  employees;                                            |
| •   | Risks related to diverting  management’s attention from ongoing business operations. |
```
***Background***
```

Prior to September 2007, the Company’s businessmodel provided telephonic conferencing services to businesses, organizationsand individuals in North America.  Due to capitalconstraints and because its executives could no longer serve the Companywithout compensation, the Company decided to change directions.

 

During 2009 the Company changed its emphasis from an International oil and gascompany primarily to a US focused company because of current world economicconditions and lack of debt/capital financing.  The Company disposed of itsforeign oil and gas leases/permits in two separate transactions described below. The Company completed an extensive review of its Alaska and Oklahoma oil and gasleases, operations and recorded  impairment charges of $639,813.

 

16

----

 

    

***Plan of Operation***

 

Our plan of operation for 2010 is to continuedrilling test wells on our Oklahoma oil and gas leases.  We anticipate the costof these programs will be approximately $250,000, however, this figure could bereduced, possibly substantially, by third-party working interest participation,arising particularly as a result of spacing and pooling applications andhearings.

 

During 2010 we also anticipate spending $100,000on administrative expenses, including fees payable in connection with ourcompliance reporting obligations as a public company, such as legal, accountingand audit fees.

 

Total expenditures in 2010 therefore could be atleast $350,000.  We have limited cash on hand to cover some of these expensesand will require additional funding.  We anticipate this additional fundingwill be provided in the form of equity financing from the sale of our commonstock, sale of our Tamm Oil and Gas Corp (“TAMO”) stock or loans from ourmajority stockholder. We cannot provide investors with any assurance thatadditional funds will be raised.  Currently, we do not have any arrangements inplace for future equity financings.

 

We are in the process of determining ourpersonnel needs. We intend to hire consultants over the course of the nexttwelve months.  To attract qualified personnel, we intend to offer percentagesof the Company’s working interest in its oil and gas properties.

 

***Results of Operations***

 

For the year ended December 31, 2009, we had revenues of $70,961, oil and gasexploration costs of $210,641 and incurred a loss of $1,237,259, as compared torevenues of $24,151, oil and gas exploration costs of $28,297 and a loss of$346,414 in 2008. Salaries in 2009 and 2008 were $120,000.  Professional fees in2009 were $238,680 as compared to $156,368 in 2008.  General andadministrative expenses for 2009 were $26,918 as compared to $36,985 in 2008.

 

The Company disposed of its foreign oil and gas leases/permits in two separatetransactions described below.  The Company completed an extensive review ofits Alaska and Oklahoma oil and gas leases, operations and recorded animpairment charge of $639,813.

 

In addition, we incurredinterest expense of $72,895 in 2009 as compared to $30,633 in 2008.

** **

***Liquidity and Capital Resources***

 

On March 31, 2009, theCompany purchased 171 oil and gas lease interests totaling 3,827 gross (2,666net) acres in Okfuskee and Okmulgee Counties, Oklahoma from CH4 Energy, Inc., acompany controlled by Soladino Investments SA at a cost of $583,823.  TheCompany reimbursed Soladino for its historic costs (acreage) by issuing asecured, non-interest bearing note, payable on demand for $583,823 and assumedresponsibility for all further costs.

** **

On June 12, 2009, theCompany exchanged its membership interest in Union Energy (Alberta) LLC, aColorado limited liability company, that owned eight contiguous sections(totaling 5,120 acres) of oil sands leases in the Peace River Oil Sands Area ofnorthern Alberta, Canada for 1,000,000 restricted shares of Tamm Oil and Gas Corp. The Company acquired these oil sands leases in May 2008 for $250,000.

 

17

----

 

Soladino Investments SA, a Swiss corporationowned by our president, loaned the Company $182,094 on August 19, 2009 and$100,000 on October 13, 2009.  The notes are secured, non-interest bearing andpayable on demand.

 

On November 30, 2009, the Company sold oil andgas properties with a cost of $448,876 to Soladino Investments SA for$596,551.  The purchase price was paid by cash of $96,551 and cancellation of$500,000 of its notes to Soladino.  The oil and gas properties were in Quebec, Canada and its wholly owned subsidiary Mac Oil SpA.  The Company recorded the$147,675 gain as a capital contribution.   

 

At December 31, 2009, the Company has $1,099,975in notes (four) payable to Soladino Investments SA.  The notes are secured by theCompany’s oil and gas leases, are non interest bearing and payable upon demand.

 

Our Company's principal cash requirements arefor exploration expenses which we anticipate will rise as we proceed to determinethe feasibility of developing our current or future property interests.  As ofDecember 31, 2009, we had cash of $38,510 and negative working capital of$820,289.  Our net cash provided by financing activities from June 19, 2006(inception) to December 31, 2009 was $2,273,017.

** **

We anticipate that additional funding will beprovided in the form of equity financing from the sale of our common stock,sale of our Tamm Oil and Gas Corp (“TAMO”) stock or loans from our majoritystockholder.  We cannot provide investors with any assurance that additionalfunds will be raised.  Currently, we do not have any arrangements in place forfuture equity financings.

*** ***

***Seasonality and Inflation***

 

We do not believe that our business will beseasonal to any material extent except that exploratory operations,particularly in Alaska, may be hampered by severe winter weather conditions. Since energy costs are a key component of inflation, we do not believe that ourresults will be materially impacted by inflation in the current fiscal year.

 

*Critical Accounting Policies*

 

Financial Reporting Release No. 60 of the SEC encouragesall companies to include a discussion of critical accounting policies ormethods used in the preparation of the financial statements.  There are no materialrevenue generating activities that give rise to significant assumptions orestimates. Our most critical accounting policies relate to the accounting anddisclosure of related party transactions. Our financial statements filed aspart of this annual report include a summary of the significant accountingpolicies and methods used in the preparation of our financial statements.

 

***Off-Balance Sheet Arrangements***

 

We do not have any off-balance sheet arrangements that haveor are reasonably likely to have a current or future effect on our financialcondition, changes in financial condition, revenues or expenses, results ofoperations, liquidity, capital expenditures or capital resources that ismaterial to investors.

 

**ITEM 7A.  QUANTITATIVE andQUALITATIVE DISCLOSURES about MARKET RISK.**

 

Not applicable.

 

18

----

 

## ITEM 8.  FINANCIAL STATEMENTS and SUPPLEMENTARY DATA.

 

Our financial statements for the years ended December 31,2009 and 2008, and the reports thereon of Li & Company, respectively areincluded in this annual report.

 

## ITEM 9.  CHANGES in and DISAGREEMENTS with ACCOUNTANTS onACCOUNTING and FINANCIAL DISCLOSURE.

 

None.

 

### **ITEM 9A(T).  CONTROLS and PROCEDURES.**

** **

***Disclosure Controls andProcedures***

 

Regulations under the SecuritiesExchange Act of 1934 (the “Exchange Act”) require public companies to maintain“disclosure controls and procedures,” which are defined as controls and otherprocedures that are designed to ensure that information required to bedisclosed by the issuer in the reports that it files or submits under theExchange Act is recorded, processed, summarized and reported, within the timeperiods specified in the Securities and Exchange Commission's rules andforms.  Disclosure controls and procedures include, withoutlimitation, controls and procedures designed to ensure that informationrequired to be disclosed by an issuer in the reports that it files or submitsunder the Exchange Act is accumulated and communicated to the issuer'smanagement, including its principal executive and principal financial officers,or persons performing similar functions, as appropriate to allow timelydecisions regarding required disclosure.

 

We conducted an evaluation, with theparticipation of our Chief Executive Officer and Chief Financial Officer, ofthe effectiveness of our disclosure controls and procedures as of December 31,2009.  Based on that evaluation, our Chief Executive Officer andChief Financial Officer have concluded that as of December 31, 2009, ourdisclosure controls and procedures were not effective at the reasonableassurance level due to the material weaknesses described below.

 

In light of the material weaknessesdescribed below, we performed additional analysis and other post-closingprocedures to ensure our financial statements were prepared in accordance withgenerally accepted accounting principles.  Accordingly, we believethat the financial statements included in this report fairly present, in allmaterial respects, our financial condition, results of operations and cashflows for the periods presented.

 

A material weakness is a controldeficiency (within the meaning of the Public Company Accounting Oversight Board(PCAOB) Auditing Standard No. 2) or combination of control deficiencies thatresult in more than a remote likelihood that a material misstatement of theannual or interim financial statements will not be prevented ordetected.  Management has identified the following two materialweaknesses which have caused management to conclude that, as of December 31,2009, our disclosure controls and procedures were not effective at thereasonable assurance level:

 

1.           Wedo not have written documentation of our internal control policies andprocedures.  Written documentation of key internal controls overfinancial reporting is a requirement of Section 404 of the Sarbanes-Oxley Actwhich is applicable to us for the year ending December 31, 2009.  Managementevaluated the impact of our failure to have written documentation of ourinternal controls and procedures on our assessment of our disclosure controlsand procedures and has concluded that the control deficiency that resultedrepresented a material weakness.

 

19

----

 

                 2.           Wedo not have sufficient segregation of duties within accounting functions, whichis a basic internal control.  Due to our size and nature, segregationof all conflicting duties may not always be possible and may not beeconomically feasible.  However, to the extent possible, theinitiation of transactions, the custody of assets and the recording of transactionsshould be performed by separate individuals.  Management evaluatedthe impact of our failure to have segregation of duties on our assessment ofour disclosure controls and procedures and has concluded that the controldeficiency that resulted represented a material weakness.

 

To address these materialweaknesses, management performed additional analyses and other procedures toensure that the financial statements included herein fairly present, in allmaterial respects, our financial position, results of operations and cash flowsfor the periods presented.

 

***Management's Report on Internal Control Over Financial Reporting***

 

Our management is responsible forestablishing and maintaining adequate internal control over financialreporting.  Internal control over financial reporting is defined inRule 13a-15(f) or 15d-15(f) promulgated under the Exchange Act as a processdesigned by, or under the supervision of, the issuer’s principal executive andprincipal financial officers and effected by the issuer’s board of directors,management and other personnel, to provide reasonable assurance regarding thereliability of financial reporting and the preparation of financial statementsfor external purposes in accordance with accounting principles generallyaccepted in the United States of America and includes those policies andprocedures that:

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

 

 

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

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

 

 

 

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

 

As of the end of our most recentfiscal year, management assessed the effectiveness of our internal control overfinancial reporting based on the criteria for effective internal control overfinancial reporting established in Internal Control—Integrated Framework issuedby the Committee of Sponsoring Organizations of the Treadway Commission("COSO") and SEC guidance on conducting suchassessments.  Based on that evaluation, they concluded that, asof December 31, 2009, such internal control over financial reporting was noteffective.  This was due to deficiencies that existed in the designor operation of our internal control over financial reporting that adverselyaffected our internal controls and that may be considered to be materialweaknesses.

 

20

----

 

The matters involving internalcontrol over financial reporting that our management considered to be materialweaknesses under the standards of the Public Company Accounting Oversight Boardwere: (1) lack of a functioning audit committee due to a lack of a majority ofindependent members and a lack of a majority of outside directors on our boardof directors, resulting in ineffective oversight in the establishment andmonitoring of required internal controls and procedures; and (2) inadequatesegregation of duties consistent with control objectives of having segregationof the initiation of transactions, the recording of transactions and thecustody of assets.  The aforementioned material weaknesses wereidentified by our Chief Financial Officer in connection with the review of ourfinancial statements as of December 31, 2009.

 

Management believes that thematerial weaknesses set forth in items (1) and (2) above did not have an effecton our financial results.  However, management believes that the lack of afunctioning audit committee and the lack of a majority of outside directors onour board of directors results in ineffective oversight in the establishmentand monitoring of required internal controls and procedures, which could resultin a material misstatement in our financial statements in future periods.

 

This annual report does not includean attestation report of the Company's registered public accounting firmregarding internal control over financial reporting.  Management'sreport was not subject to attestation by the Company's registered publicaccounting firm pursuant to temporary rules of the SEC that permit the Companyto provide only the management's report in this annual report.

 

***Management's Remediation Initiatives***

 

In an effort to remediate theidentified material weaknesses and other deficiencies and enhance our internalcontrols, we have initiated, or plan to initiate, the following series ofmeasures:

 

We will increase our personnelresources and technical accounting expertise within the accounting functionwhen funds are available to us. First, we will create a position to segregateduties consistent with control objectives of having separate individualsperform (i) the initiation of transactions, (ii) the recording of transactionsand (iii) the custody of assets. Second, we will create a senior positionto focus on financial reporting and standardizing and documenting ouraccounting procedures with the goal of increasing the effectiveness of theinternal controls in preventing and detecting misstatements of accountinginformation. Third, we plan to appoint one or more outside directors to ourboard of directors who shall be appointed to an audit committee resulting in afully functioning audit committee who will undertake the oversight in theestablishment and monitoring of required internal controls and procedures suchas reviewing and approving estimates and assumptions made by management whenfunds are available to us. We anticipate the costs of implementing theseremediation initiatives will be approximately $50,000 to $100,000 a year inincreased salaries, legal and accounting expenses.

 

Management believes that theappointment of one or more outside directors, who shall be appointed to a fullyfunctioning audit committee, will remedy the lack of a functioning auditcommittee and a lack of a majority of outside directors on our Board.

 

We anticipate that these initiativeswill be at least partially, if not fully, implemented by December 31, 2010.

*** ***

*** ***21

----

 

***Changes in Internal Controlover Financial Reporting***

 

There have been no changes in ourinternal control over financial reporting (as such term is defined in Rules13a-15(f) and 15d-15 (f) under the Exchange Act) during the fourth quarter of2009 that have materially affected, or are reasonably likely to materiallyaffect, our internal control over financial reporting.

*** ***

### **ITEM 9B.  OTHER INFORMATION.**

** **

On November 30, 2009, the Company sold oil andgas properties with a cost of $448,876 to Soladino Investments SA for$596,551.  The purchase price was paid by cash of $96,551 and cancellation of$500,000 of its notes to Soladino.  The oil and gas properties were in Quebec, Canada and its wholly owned subsidiary Mac Oil SpA.  The Company recorded the$147,675 gain as a capital contribution.   

 

**PART 1II**

##  

## ITEM 10.  DIRECTORS, EXECUTIVE OFFICERS and CORPORATEGOVERNANCE.

 

Our directors and officers as of March 31, 2010 are:

 

 

| **Name**          | **  Age**                                | **Position(s) with the   Company**  |
|-------------------|-----------------------------------------------|-------------------------------------|
| James Fitzsimons  |         49 | Director, CEO and President **(1)** |
| Stephen M. Siedow |         59 | Director and CFO **(1)**            |
| Frank J. Hariton  |         61 | Secretary                           |

```
 
```

```
**(1) **Mr. Siedow was appointed CFO on March 16, 2009 effective March 1, 2009.
```

```
 
```

***James Fitzsimons***has been a director ofour Company since September 20, 2007.  Mr. Fitzsimons is an elected member ofthe Schweizerische Vereinigung von Petroleum-Geologen und Ingeneuren (SwissAssociation of Petroleum Geologists and Engineers) and during the past fiveyears has been employed by Reta Holding SA of Paradiso, Switzerland, alsoserving on the board of directors of Kapital Finanz und Treuhand Gesellshaft(Capital Finance and Trust Company) a licensed and regulated asset and fundmanagement company and a full member of SECA (Swiss Private Equity &Corporate Finance Association).  Mr. Fitzsimons has been active in the mineralextraction industry for over 15 years, and has been involved in the Oklahoma oil and gas industry for over five years.  Mr. Fitzsimons received a Bachelor ofLaws degree from University College London.  His industry knowledge comes fromdirect experience of the oil and gas business both in Europe and the United States.

 

***Stephen M. Siedow*** has been a director ofour Company since December 2007.  Mr. Siedow is a member of the AmericanInstitute of Certified Public Accountants and the Colorado Society of CertifiedPublic Accountants.  From 1974 to 1982 he was with the audit department ofErnst & Young, Certified Public Accountants in Denver, Colorado and in1982, he formed Stephen M. Siedow, PC a professional accounting firm providingauditing, management consulting and tax services to corporations, partnerships andindividuals.  Mr. Siedow specializes in public and SEC accounting and hasexperience in industries including construction, mining, oil and gas, andmergers/acquisitions.

 

22

----

 

***Frank J. Hariton*** has been secretary ofour Company since September 2007 and is an attorney in private practice in New York State.  Mr. Hariton received his BA (1971) and JD (1974) from Case Western Reserve   University.

 

***Family Relationships***

 

There are no family relationshipsamong our officers or directors.

 

***Involvement in Certain Legal Proceedings***

 

None of our directors, directornominees or executive officers has been involved in any transactions with us orany of our directors, executive officers, affiliates or associates that arerequired to be disclosed pursuant to the rules and regulations of the SEC otherthan as set forth in “Item 13. Certain Relationships and Related Transactions,and Director Independence” below.  None of the directors, director designees orexecutive officers to our knowledge has been convicted in a criminal proceeding,excluding traffic violations or similar misdemeanors, or has been a party toany judicial or administrative proceeding during the past five years thatresulted in a judgment, decree or final order enjoining the person from futureviolations of, or prohibiting activities subject to, federal or statesecurities laws, or a finding of any violation of federal or state securitieslaws, except for matters that were dismissed without sanction or settlement.

 

***Termof Office***

 

The term of office ofthe current directors shall continue until new directors are elected orappointed.

*** ***

***Committees of the Boardand Financial Expert***

 

We do not have aseparately-designated audit or compensation committee of the Board or any otherBoard-designated committee. Audit and compensation committee functions areperformed by our Board of Directors. We will form such committees in the futureas the need for such committees may arise. In addition, at this time we havedetermined that we do not have an “audit committee financial expert” as definedby the SEC on our Board.

*** ***

***Codeof Ethics***

 

Due to itssmall size, the Company has not adopted a code of ethics.  The Company will adopt a code of ethics for our senior officers,including our principal executive officer, principal financial officer,principal accounting officer or controller and any person who may performsimilar functions.  As required by SEC rules, we will report the nature of anychange or waiver of our code of ethics.

 

## ITEM 11. EXECUTIVE COMPENSATION.

```
***Compensation of Executive Officers***
```

Thefollowing table sets forth information concerning the compensation of our namedexecutive officers for the fiscal years ended December 31, 2009 and 2008;provided, however, any payments to these officers were paid as consultants, notemployees, of the Company, as the Company has not yet hired full or part-timeemployees. We may, once we are operational, implement employee benefits thatwill be generally available to all employees and subsidiary employees,including medical, dental and life insurance benefits and a 401(k) retirementsavings plan.  Except as listed below, there were no bonuses, other annualcompensation, restricted stock awards or stock options/SARs or any othercompensation paid to the named executive.

 

23

----

 
| **Name and   Principal Position**

                      |   | **Year**

  | **    Salary**

**       ($)**

  | **   Bonus**

**     ($)**

  | **Stock**

**Award**

**($)**

  | **Option   Awards**

**($)**

  | **Non-Equity**

**Incentive   Plan**

**Compensation**

**($)**

  | **Change in**

**Pension**

**Value and**

**Nonqualified**

**Deferred**

**Compensation**

**Earnings**

**($)**

  | **All Other**

**Compensation**

**($)**

  | **Total**

**($)**

  |
|---------------------------------------------------------------|--------|------------------|-------------------------------------------------------------------------------------|------------------------------------------------------------------|---------------------------------------|--------------------------------------|-------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------|----------------------------|
|                                                          |   |             |                                                                                |                                                             |                                  |                                 |                                                                    |                                                                                                                       |                                             |                       |
| James  Fitzsimons,

CEO,  President, CFO and Director **(1)** |   | 2009             | $120,000                                                                            |                                                             |                                  |                                 |                                                                    |                                                                                                                       |                                             | $120,000                   |
|                                                          | 2008   | $120,000         |                                                                                |                                                             |                                  |                                 |                                                                    |                                                                                                                       | $120,000                                         |
|                                                          |   |             |                                                                                |                                                             |                                  |                                 |                                                                    |                                                                                                                       |                                             |
|                                                          |   |             |                                                                                |                                                             |                                  |                                 |                                                                    |                                                                                                                       |                                             |                       |
| Stephen M.  Siedow,

CFO and Director  **(2)**                |   | 2009

2008       | $-0-

$-0-                                                                          |                                                             |                                  |                                 |                                                                    |                                                                                                                       |                                             | $-0-

$-0-                 |
|                                                          |   |             |                                                                                |                                                             |                                  |                                 |                                                                    |                                                                                                                       |                                             |                       |
| Frank J.  Hariton,

Secretary **(3)**                         |   | 2009             | $-0-                                                                                |                                                             |                                  |                                 |                                                                    |                                                                                                                       |                                             | $-0-                       |
|                                                          | 2008   | $-0-             |                                                                                |                                                             |                                  |                                 |                                                                    |                                                                                                                       | $-0-                                             |
|                                                          |   |             |                                                                                |                                                             |                                  |                                 |                                                                    |                                                                                                                       |                                             |                       |
| **(1**)    |   | James Fitzsimons has  been******the  Company’s CEO and President since December 17, 2007.  Mr. Fitzsimons was CFO  of our Company from December 17, 2007 through March 16, 2009.  Mr. Fitzsimons  was first elected a director of our Company on September 20, 2007. |
|------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|       |   |                                                                                                                                                                                                                                                                                |
| **(2**)    |   | Stephen M. Siedow has been a director  since December 2007.  Mr. Siedow was appointed CFO on March 16, 2009 effective March  1, 2009.  The  Company paid Mr. Siedow $68,300 for accounting/consulting fees in 2009 and $77,700  in 2008.                                  |
|       |   |                                                                                                                                                                                                                                                                                |
| **(3**)    |   | Frank J. Hariton has been the  Company’s secretary since September 2007.  Mr. Hariton was paid $30,000 for  legal services in 2009 and $26,500 in 2008.                                                                                                                   |
| ** ** |   |                                                                                                                                                                                                                                                                                |

***Compensation of Directors***

 

The Company has no standard arrangements in place orcurrently contemplated to compensate the Company’s directors for their serviceas directors or as members of any committee of directors.

*** ***

***Employment Agreements***

 

We do not have employment agreementswith any of our executive officers or directors.  We have verbal understandingswith our executive officers regarding monthly retainers and reimbursement foractual out-of-pocket expenses.

 

***Termination ofEmployment***

 

There are no compensatoryplans or arrangements, including payments to be received from the Company, withrespect to any person named in the Summary Compensation Table set forth abovethat would in any way result in payments to any such person because of his orher resignation, retirement or other termination of such person’s employmentwith us.

 

24

----

 

***Employee Benefit Plans***

 

None

 

***Indemnification of Directors and Executive Officers and Limitationof Liability***

 

Pursuant tothe General Corporation Law of Delaware our Certificate of Incorporationprovides that no director will have any personal liability to us or to any ofour shareholders for monetary damages for breach of fiduciary duty as adirector; provided, however, that this exclusion does not eliminate or limitthe liability of a director (i) for any breach of the director's duty ofloyalty to us or our shareholders, (ii) for acts or omissions not in good faithor which involve intentional misconduct or a knowing violation of law, (iii)under §174 of the General Corporation Law of Delaware, or (iv) for anytransaction from which the director derived an improper personal benefit.

 

## ITEM 12.   SECURITY OWNERSHIP ofCERTAIN BENEFICIAL OWNERS and MANAGEMENT and RELATED STOCKHOLDER MATTERS.

***SecurityOwnership of Certain Beneficial Owners***

*** ***

The following table setsforth, as of March 31, 2010, the stock ownership of (i) each of our namedexecutive officers and directors, (ii)all executive officers and directors as agroup, and (iii) each person known by us to be a beneficial owner of 5% or moreof our common stock.  No person listed below has any option, warrant or otherright to acquire additional securities from us, except as may be otherwisenoted.  We believe that all persons named in the table have sole voting andinvestment power with respect to all shares of common stock beneficially ownedby them except as stated therein.

 

| *Name and Address*                    | * *   | *Amount & Nature*                 | * *   |                                     |
|---------------------------------------|------------|---------------------------------------|------------|------------------------------------------|
| *of Beneficial*                       | * *   | *of Beneficial*                       | * *   | *Percent*                                |
| *Owner **(1)***                       | * *   | *Ownership **(2)  ** * | * *   | *of Class*                               |
|                                  |       |                                  |       |                                     |
| **James Fitzsimons  (3)**        | ** ** | **17,800,000**                        | ** ** | **78.5%**                                |
| Selnaustrasse 3                       |       |                                  |       |                                     |
| 8001 Zurich                           |       |                                  |       |                                     |
| Switzerland                           |       |                                  |       |                                     |
| ** **                            | ** ** |                                  |       |                                     |
| **Stephen M. Siedow**                 | ** ** | **-0-**                               | ** ** | **      -0- %** |
| 13047 W. Iliff Drive                  |       |                                  |       |                                     |
| Lakewood, CO  80228              |       |                                  |       |                                     |
|                                  |       |                                  |       |                                     |
| **Frank J. Hariton**                  | ** ** | **-0-**                               | ** ** | **      -0- %** |
| 1065 Dobbs Ferry Road                 |       |                                  |       |                                     |
| White Plains, NY  10607          |       |                                  |       |                                     |
|                                  |       |                                  |       |                                     |
| **Soladino Investments SA  (3)** | ** ** | **17,800,000**                        | ** ** | **78.5%**                                |
| Via Quadrellas 4                      |       |                                  |       |                                     |
| CH-7500 St.                           |       |                                  |       |                                     |
| Moritz, Switzerland                   |       |                                  |       |                                     |
|                                  |       |                                  |       |                                     |
| **All officers and directors**        | ** ** | **17,800,000**                        | ** ** | **78.5%**                                |
| as a group (3 persons)                |       |                                  |       |                                     |

 

25

----

 

| **(1**) |   | Beneficial ownership  is determined in accordance with the Rule 13d-3(a) of the Securities Exchange  Act of 1934, as amended, and generally includes voting or investment power  with respect to securities.  Except as subject to community property laws,  where applicable, the person named above has sole voting and investment power  with respect to all shares of our common stock shown as beneficially owned by  him.                                            |
|---------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| **(2**) |   | The beneficial  ownership percent in the table is calculated with respect to the number of  outstanding shares 22,680,000 of the Company’s common stock as of March 31,  2010, and each stockholder’s ownership is calculated as the number of shares  of common stock owned plus the number of shares of common stock into which  any preferred stock, warrants, options or other convertible securities owned  by that stockholder can be converted within 60 days. |
|    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| **(3**) |   | Soladino Investments  SA is a Swiss corporation owned by James Fitzsimons**.**                                                                                                                                                                                                                                                                                                                                                                                                  |

 

The term “namedexecutive officer” refers to our principal executive officer, our two mosthighly compensated executive officers other than the principal executiveofficer who were serving as executive officers at the end of 2009, and twoadditional individuals for whom disclosure would have been provided but for thefact that the individuals were not serving as executive officers of the Companyat the end of 2009.

*** ***

***Changes in Control***

 

We know of nocontractual arrangements which may at a subsequent date result in a change ofcontrol in the Company.

 

## ITEM 13.  CERTAIN RELATIONSHIPS and RELATED TRANSACTIONS,and DIRECTOR INDEPENDENCE.

*** ***

***CertainRelationships and Transactions with Related Persons***

 

On August 12, 2008, the Company acquired fromits president, James Fitzsimons, a 50% working interest (41.25% net revenueinterest) in the Snake Creek prospect, a 3,200 gross (3,022 net) acre gasdevelopment project located in northern Okmulgee County, Oklahoma.  The Companyreimbursed Mr. Fitzsimons for his historic costs (acreage and drilling) byissuing a secured, non-interest bearing note, payable on demand for $210,917and assumed responsibility for all further costs.

** **

On November 30, 2008, the Company acquired fromMr. Fitzsimons, a 100% working interest (81.25% net revenue interest) in theSpanish Peak prospect, a 2,041 gross (900 net) acre gas development projectlocated in Okmulgee County, Oklahoma.  The Company reimbursed Mr. Fitzsimonsfor his historic costs (acreage) by issuing a secured, non-interest bearingnote, payable on demand for $173,141 and assumed responsibility for all furthercosts.

** **

On December 1, 2008, James Fitzsimonstransferred his 78.5% stock ownership in Petrocorp Inc. and three outstandingpromissory notes (totaling $734,058) to Soladino Investments SA (“Soladino”), aSwiss corporation owned by Mr. Fitzsimons.  The Company issued Soladino a$734,058 note, whichis secured by the Company’s oil and gas leases, is non interest bearing andpayable upon demand.

 

On March 31, 2009, the Company purchased 171 oiland gas lease interests totaling 3,827 gross (2,666 net) acres in Okfuskee and Okmulgee Counties, Oklahoma from CH4 Energy, Inc., a company controlled by SoladinoInvestments SA at a cost of $583,823.  The Company reimbursed Soladino for itshistoric costs (acreage) by issuing a secured, non-interest bearing note, payableon demand for $583,823 and assumed responsibility for all further costs.

 

26

----

 

Soladino loaned the Company $182,094 on August19, 2009 and $100,000 on October 13, 2009.  The notes are secured, non-interestbearing and payable on demand.

** **

On November 30, 2009, the Company sold oil andgas properties with a cost of $448,876 to Soladino Investments SA for$596,551.  The purchase price was paid by cash of $96,551 and cancellation of$500,000 of its notes to Soladino.  The oil and gas properties were in Quebec, Canada and its wholly owned subsidiary Mac Oil SpA.  The Company recorded the$147,675 gain as a capital contribution.   

 

At December 31, 2009, the Company has $1,099,975in secured, non-interest bearing notes (four), payable on demand with itsmajority stockholder Soladino.  During the years ended December 31, 2009 and2008, the Company imputed interest expense related to these notes of $72,895and $30,274, respectively.  Interest was imputed at an implied rate of 6% perannum and the amounts were recorded as capital contributions by the Company.

** **

The Company was provided management services byour president, Mr. Fitzsimons during 2009 and 2008 at no cost.  The Companyrecorded the $120,000 estimated value of these services as compensation expenseand as a capital contribution.

 

The Company was provided accounting services byMr. Siedow, our chief financial officer.  Mr. Siedow was paid $68,300 in 2009and $77,700 in 2008 for these services.

** **

The Company was provided legal andadministrative services and office space by Mr. Hariton, our corporatesecretary.  Mr. Hariton was paid $30,000 in 2009 and $26,500 in 2008 for theseservices.

** **

***Director******Independence***

 

Our current directors are James Fitzsimons and Stephen Siedow.  We are not currently subject tocorporate governance standards defining the independence of our directors.  Wehave not yet adopted an independence standard or policy, although we intend todo so in the near future. Accordingly, the Company’s Board currently determinesthe independence of each Director and nominee for election as a Director.  TheBoard has determined that none of the Company’s directors currently qualifiesas an independent director.  We do not list the “independent” definition we useon our Internet website.

##  

## ITEM 14.  PRINCIPAL ACCOUNTANT FEES and SERVICES.

 

***Audit Fees***

 

The aggregate fees billed by the Company’s auditors forprofessional services rendered in connection with the audit of the Company’sannual financial statements and reviews of the financial statements included inthe Company’s Form 10-Q or services that are normally provided by theaccountant in connection with statutory and regulatory filings or engagementsfor fiscal years 2009 and 2008 were $17,500 and $14,000, respectively.

 

***Audit Related Fees***

 

None

 

27

----

 

***Tax Fees***

 

None

 

***All Other Fees***

 

None

** **

***Pre-ApprovalPolicies and Procedures***

 

The board ofdirectors has not adopted any pre-approval policies and approves allengagements with the Company’s auditors prior to performance of services bythem.

 

## PART 1V

 

## ITEM 15.  EXHIBITS and FINANCIAL STATEMENT SCHEDULES

 

The following exhibits are filed with this report, exceptthose indicated as having previously been filed with the Securities andExchange Commission and are incorporated by reference to another report,registration statement or form.  As to any shareholder of record requesting acopy of this report, we will furnish any exhibit indicated in the list below asfiled with this report upon payment to us of our expenses in furnishing theinformation.

 
| **Exhibit Number** | **Exhibit Description**                                                                                                                                                                                                                |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 3.1                | Certificate of Incorporation (Incorporated  by reference to like numbered exhibit to the Company’s Registration Statement  on Form SB-2 File Number 333-141993).                                                                  |
| 3.2                | Bylaws (Incorporated by reference to  like numbered exhibit to the Company’s Registration Statement on Form SB-2  File Number 333-141993).                                                                                        |
| 3.3                | Certificate of Amendment to Certificate  of Incorporation (Incorporated by reference to Exhibit 3.1 to the Company’s Current  Report on Form 8-K filed November 5, 2007).                                                         |
| 4.1                | Specimen  Stock Certificate (Incorporated by reference to like numbered exhibit to the  Company’s Annual Report on Form 10-KSB for the year ended December 31, 2007  filed on April 11, 2008).                                    |
| 10.1               | Consulting  Agreement, dated March 12, 2008, between the Company and Keith G. Summar  (Incorporated  by reference to the Company’s Annual Report on Form 10-KSB for the year ended  December 31, 2007 filed April 11, 2008). |
| 21                 | Description of Subsidiaries.  **                                                                                                                                                                                                  |
| 31.1               | Certification  of Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of  the Securities Exchange Act, as amended.  **                                                                                          |
| 31.2               | Certification  of Principal Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a)  of the Securities Exchange Act, as amended.  **                                                                                      |
| 32.1               | Certificate (Pursuant to 18 U.S.C.  Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of  2002) of Chief Executive Officer.  **                                                                           |
| 32.2               | Certificate (Pursuant to 18 U.S.C.  Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of  2002) of Principal Financial Officer.  **                                                                       |

 

•        ** Filed herewith.

 

28

----

 

**SIGNATURES**

** **

Pursuantto the requirements of Section 13 or 15(d) of the Securities Exchange Act of1934, the registrant has duly caused this report to be signed on its behalf bythe undersigned, thereunto duly authorized.

Date: April21, 2010

 

**PETROCORPINC.**

** **

                                                                                                        By/s/ James Fitzsimons   **    **

                                                                                                                   James Fitzsimons

                                                                                                                   CEO and President

 

 

Pursuant to the requirements of the Securities Exchange Actof 1934, this report has been signed below by the following persons on behalfof the registrant and in the capacities and on the dates indicated.
| Signature                                                                                                    | Title                                                        | Date            |
|--------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------|-----------------|
|                                                                                                         |                                                         |            |
|     /s/ James Fitzsimons

         James Fitzsimons   |      Director, CEO and President

  | April	21,  2010 |
|                                                                                                         |                                                         |            |
|     /s/ Stephen M. Siedow

         Stephen M. Siedow |      Director and CFO                    | April	21,  2010 |
|                                                                                                         |                                                         |            |
|                                                                                                              |                                                              |                 |  |

 

 

29

----

 

 

**PETROCORP INC.**

**(An Exploration StageCompany)**

** December31, 2009 and 2008**

 

**Index to Consolidated FinancialStatements**

 

 

 

                                                                                                                                                

|                                                                                      |   |   Page |
|-------------------------------------------------------------------------------------------|--------|-------------|
|                                                                                      |   |        |
| Report of Independent  Registered Public Accounting Firm                                  |   |  F-1   |
|                                                                                      |   |        |
| Consolidated Balance  Sheets at December 31, 2009 and 2008                                |   | F-2         |
|                                                                                      |   |        |
| Consolidated  Statements of Operations for the years ended December 31, 2009 and          |   |        |
|    2008 and for the  period June 19, 2006 (inception) through December 31, 2009 |   | F-3         |
|                                                                                      |   |        |
| Consolidated Statement of Stockholders' Equity for the period June 19, 2006               |   |        |
|    (inception) through  December 31, 2009                                       |   | F-4         |
|                                                                                      |   |        |
| Consolidated  Statements of Cash Flows for the years ended December 31, 2009 and          |   |        |
|    2008 and for the  period June 19, 2006 (inception) through December 31, 2009 |   | F-5         |
|                                                                                      |   |        |
| Notes to the  Consolidated Financial Statements                                           |   | F-7-F-17    |

 

 

 

----

 

 

**Report of Independent RegisteredPublic Accounting Firm**

 

 

To the Board of Directors and Stockholdersof

Petrocorp Inc.

White Plains, New York

 

We have audited the accompanying consolidated balancesheets of Petrocorp Inc. and subsidiaries (an exploration stage company)(collectively, "Petrocorp' or the "Company") as of December 31, 2009 and 2008and the related statements of operations, stockholders' equity and cash flowsfor the years then ended,and for theperiod June 19, 2006 (inception) through December 31, 2009.  These consolidatedfinancial statements are the responsibility of the Company’s management.  Ourresponsibility is to express an opinion on these financial statements based on ouraudits.

 

We conducted our audits in accordance with thestandards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audits to obtain reasonableassurance about whether the financial statements are free of materialmisstatement.  The Company is not required to have, nor were we engaged toperform, an audit of its internal control over financial reporting. Our auditincluded consideration of internal control over financial reporting as a basisfor designing audit procedures that are appropriate in the circumstances, butnot for the purpose of expressing an opinion on the effectiveness of theCompany's internal control over financial reporting.  Accordingly, we expressno such opinion.  An audit includes examining, on a test basis, evidencesupporting the amounts and disclosures in the financial statements.  An auditalso includes assessing the accounting principles used and significantestimates made by management, as well as evaluating the overall financialstatement presentation.  We believe that our audits provide a reasonable basisfor our opinion.

 

In our opinion, the consolidated financialstatements referred to above present fairly, in all material respects, thefinancial position of theCompany at December 31, 2009 and2008 andthe results of its operations and its cash flows for the years then ended, and for the period June 19, 2006(inception) through December 31, 2009, in conformity with accounting principlesgenerally accepted in the United States of America.

 

The accompanying consolidated financialstatements have been prepared assuming that the Company will continue as a going concern.  As discussedin Note 3 to the consolidated financial statements, the Company had a deficit accumulatedduring the exploration stage at December 31, 2009, a net loss from operationsand net cash used in operations for the year then ended.  These factors raise substantial doubtabout the Company’s ability to continue as a going concern.  Management’s plansin regards to these matters are also described in Note 3.  The financial statementsdo not include any adjustments that might result from the outcome of thisuncertainty.

 

 

* /s/Li& Company, PC*

Li& Company, PC

 

 

Skillman, New Jersey

April21, 2010

 

 

                                           F-1

----

 
| **PETROCORP INC.**                                                             |
|--------------------------------------------------------------------------------|
| **(An Exploration Stage Company)**                                             |
| **Consolidated Balance Sheets**                                                |
|                                                                           |   |   |   |   |   |   |   |
| **ASSETS**                                                                     |
|                                                                           |   |   |   |   |   |   |   |
|                                                                           |   |   |   December 31, |
|                                                                           |   |   | 2009 |   | 2008 |
|                                                                           |   |   |   |   |   |
| Current assets:                                                                |   |   |   |   |   |   |   |
|    Cash                                                              |   |   | $ |        38,510 |   | $ |      556,035 |
|    Revenue receivables                                               |   |   |   |        24,474 |   |   |        33,962 |
|    Marketable securities                                             |   |   |   |      250,000 |   |   |                 - |
|         Total current assets                |   |   |   |      312,984 |   |   |      589,997 |
|                                                                           |   |   |   |   |   |   |   |
| Oil and gas properties  (successful efforts method):                           |   |   |   |   |   |   |   |
|     Unproven acreage                                            |   |   |   |      1,228,365 |   |   |   1,497,643 |
|     Less depletion,  depreciation and amortization              |   |   |   |      (26,250) |   |   |        (3,750) |
|                                                                           |   |   |   |      1,202,115 |   |   |   1,493,893 |
|                                                                           |   |   |   |   |   |   |   |
| Total assets                                                                   |   |   | $ |      1,515,099 |   | $ |   2,083,890 |
| ** **                                                                     |   |   |   |   |   |   |   |
| ** **                                                                     |   |   |   |   |   |   |   |
| **LIABILITIES AND STOCKHOLDERS’ EQUITY**                                  |
| ** **                                                                     |   |   |   |   |   |   |   |
| ** **                                                                     |   |   |   |   |   |   |   |
| Current liabilities:                                                           |   |   |   |   |   |   |   |
|    Accrued expenses                                                  |   |   | $ |        33,298 |   | $ |        71,317 |
|    Notes payable to majority  stockholder                            |   |   |   |   1,099,975 |   |   |      734,058 |
|         Total current liabilities           |   |   |   |   1,133,273 |   |   |      805,375 |
|                                                                           |   |   |   |   |   |   |   |
| Stockholders' equity:                                                          |   |   |   |   |   |   |   |
|     Preferred stock; $.0001 par  value; 1,000,000 shares        |   |   |   |   |   |   |   |
|      authorized; none issued or  outstanding               |   |   |   |                 - |   |   |                 - |
|    Common stock; $.0001 par  value; 100,000,000 shares               |   |   |   |   |   |   |   |
|      authorized; 22,680,000  shares issued and outstanding |   |   |   |         2,268 |   |   |         2,268 |
|    Additional paid-in capital                                        |   |   |   |   2,051,752 |   |   |   1,711,182 |
|    Deficit accumulated during  the exploration stage                 |   |   |   |  (1,672,194) |   |   |    (434,935) |
|                                                                           |   |   |   |    381,826 |   |   |   1,278,515 |
| ** **                                                                     |   |   |   |   |   |   |   |
| Total liabilities and  stockholders’ equity                               |   |   | $ |      1,515,099 |   | $ |   2,083,890 |
|                                                                           |   |   |   |   |   |   |   |
|                                                                           |   |   |   |   |   |   |   |
|                                                                           |   |   |   |   |   |   |   |
| * See accompanying notes to the consolidated  financial statements.*      |
|  F-2                                                                      |

 

----

 
| **PETROCORP INC.**                                                                               |
|--------------------------------------------------------------------------------------------------|
| **(An Exploration Stage Company)**                                                               |
| **Consolidated Statements of Operations**                                                        |
|                                                                                             |   |   |   |   |   |   |   |   |   |
|                                                                                             |   |   |   |   |   |   |   | June 19, 2006 |
|                                                                                             |   |   |   |  (inception) to |
|                                                                                             |   |        Year Ended  December 31, |   |   December 31, |
|                                                                                             |   | 2009 |   | 2008 |   | 2009 |
|                                                                                             |   |   |   |   |   |   |   |   |   |
| Revenues  earned during the exploration stage                                                    |   |  $ |             70,961 |   |  $ |             24,151 |   |  $ |             95,112 |
|                                                                                             |   |   |   |   |   |   |   |   |   |
| Cost  of revenues during the exploration stage:                                                  |   |   |   |   |   |   |   |   |   |
|    Oil and gas operating costs                                                         |   |   |       86,398 |   |   |             17,099 |   |   |           103,497 |
|    Exploration costs                                                                   |   |   |         96,634 |   |   |               5,709 |   |   |             102,343 |
|    Depletion, depreciation and  amortization                                           |   |   |             22,500 |   |   |               3,750 |   |   |             26,250 |
|    Production taxes                                                                    |   |   |               5,109 |   |   |               1,739 |   |   |               6,848 |
|           Total cost of revenues during the exploration stage |   |   |           210,640 |   |   |             28,297 |   |   |           238,938 |
|                                                                                             |   |   |   |   |   |   |   |   |   |
| Gross profit (loss)                                                                              |   |   |        (139,679) |   |   |             (4,146) |   |   |        (143,826) |
|                                                                                             |   |   |   |   |   |   |   |   |   |
| Operating expenses:                                                                              |   |   |   |   |   |   |   |   |   |
|    Salary - president and  majority stockholder                                        |   |   |           120,000 |   |   |           120,000 |   |   |           240,000 |
|    Professional fees - CFO and  secretary                                              |   |   |             98,506 |   |   |           104,200 |   |   |           202,706 |
|    Professional fees                                                                   |   |   |           140,174 |   |   |             52,168 |   |   |           192,342 |
|    General and administrative  expenses                                                |   |   |             26,918 |   |   |             36,985 |   |   |           127,819 |
|    Impairment charges                                                                  |   |   |    639,813 |   |     |                     -  |   |     |      656,742 |
|           Total operating expenses                            |   |     |       1,025,411 |   |     |           313,353 |   |     |       1,419,609 |
|                                                                                             |   |   |   |   |   |   |   |   |   |
| Loss  from operations                                                                            |   |   |     (1,165,411) |   |   |        (317,499) |   |   |     (1,563,435) |
|                                                                                             |   |   |   |   |   |   |   |   |   |
| Other  (income) expenses:                                                                        |   |   |   |   |   |   |   |   |   |
|    Interest income                                                                     |   |   |                (727) |   |   |             (1,718) |   |   |             (2,445) |
|    Interest expense                                                                    |   |   |                     -  |   |   |                  359 |   |   |                  359 |
|    Interest expense - related  parties                                                 |   |    |             72,895 |   |     |             30,274 |   |     |           109,245 |
|           Total other (income) expense                        |   |     |             72,168 |   |     |             28,915 |   |     |           107,159 |
|                                                                                             |   |   |   |   |   |   |   |   |   |
| Loss  before income taxes                                                                        |   |   |   (1,237,259) |   |   |        (346,414) |   |   |     (1,670,594) |
|                                                                                             |   |   |   |   |   |   |   |   |   |
| Provision  for income taxes                                                                      |   |   |                       - |   |   |                       - |   |   |               1,600 |
|                                                                                             |   |   |   |   |   |   |   |   |   |
| Net  loss                                                                                        |   |  $ |     (1,237,259) |   |  $ |        (346,414) |   |  $ |     (1,672,194) |
|                                                                                             |   |   |   |   |   |   |   |   |   |
| Net  loss per common share -                                                                     |   |   |   |   |   |   |   |   |   |
|    basic and diluted                                                                   |   | $ | (0.08) |   | $ | (0.02) |   |   |   |
|                                                                                             |   |   |   |   |   |   |   |   |   |
| Weighted common shares  outstanding -                                                            |   |   |   |   |   |   |   |   |   |
|    basic and diluted                                                                   |   |   | 22,680,000 |   |   | 22,680,000 |   |   |   |
|                                                                                             |   |   |   |   |   |   |   |   |   |
| * *                                                                                         |
|  

*See accompanying notes to the consolidated financial	statements.*

F-3                  |

** **

----

 

| **PETROCORP INC.**                                                           | ** ** |
|------------------------------------------------------------------------------|------------|
| **(An Exploration Stage Company)**                                           |       |
| ** **                                                                   | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |   |
| **Consolidated Statement of Stockholder's Equity**                           |       |
| **For the Period from June 19, 2006 (inception)  through December 31, 2009** |       |
|                                                                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                         |       |   |   |   |   |   |   |   |   |  Deficit |   |   |   |
|                                                                         |       |   |   |   |   |   |  Additional |   |  Accumulated |   | Total |   |
|                                                                         |       | Common Stock |   |  Paid-in |   |  during the |   |  Stockholders' |   |
|                                                                         |       |  Shares |   |  Amount |   |  Capital |   |  Exploration Stage |   | Equity |   |
|                                                                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  Balance, June 19, 2006  (inception)                                    |       |                  - |   |  $ |                - |   |  $ |                - |   |  $ |                   - |   |  $ |                - |   |
|                                                                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  Common  stock issued for cash                                          |       |   20,000,000 |   |   |         2,000 |   |   |        (1,900) |   |   |   |   |   |            100 |   |
|  Common  stock issued for cash                                          |       |        600,000 |   |   |              60 |   |   |        29,940 |   |   |   |   |   |        30,000 |   |
|  Net  loss                                                              |       |   |   |   |   |   |   |   |   |   | (27,397) |   |   |      (27,397) |   |
|                                                                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  Balance, December 31, 2006                                             |       |   20,600,000 |   |   |         2,060 |   |   |        28,040 |   |   |          (27,397) |   |   |         2,703 |   |
|                                                                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  Common  stock issued for cash                                          |       |        480,000 |   |   |              48 |   |   |        23,952 |   |   |   |   |   |        24,000 |   |
|  Capital  contribution                                             |       |   |   |   |   |   |   |         3,000 |   |   |   |   |   |         3,000 |   |
|  Common  stock issued for cash                                     |       |        800,000 |   |   |              80 |   |   |      499,920 |   |   |   |   |   |      500,000 |   |
|  Interest  contribution                                            |       |   |   |   |   |   |   |         6,076 |   |   |   |   |   |         6,076 |   |
|  Net  loss                                                              |       |   |   |   |   |   |   |   |   |   |          (61,124) |   |   |      (61,124) |   |
|                                                                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  Balance, December 31, 2007                                             |       |   21,880,000 |   |   |         2,188 |   |   |      560,988 |   |   |          (88,521) |   |   |      474,655 |   |
|                                                                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  Common  stock issued for cash                                     |       |        800,000 |   |   |              80 |   |   |      999,920 |   |   |   |   |   |   1,000,000 |   |
|  Salary  contribution                                              |       |   |   |   |   |   |   |      120,000 |   |   |   |   |   |      120,000 |   |
|  Interest  contribution                                            |       |   |   |   |   |   |   |        30,274 |   |   |   |   |   |        30,274 |   |
|  Net  loss                                                              |       |   |   |   |   |   |   |   |   |   |        (346,414) |   |   |    (346,414) |   |
|                                                                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  Balance, December 31, 2008                                             |       |   22,680,000 |   |   |         2,268 |   |   |   1,711,182 |   |   |        (434,935) |   |   |   1,278,515 |   |
|                                                                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  Sales price over cost of oil and gas                                   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  properties sold to majority stockholder                                |       |   |   |   |   |   |      147,675 |   |   |   |   |   |      147,675 |   |
|  Salary  contribution                                              |       |   |   |   |   |   |   |      120,000 |   |   |   |   |   |      120,000 |   |
|  Interest  contribution                                            |       |   |   |   |   |   |   |        72,895 |   |   |   |   |   |        72,895 |   |
|  Net  loss                                                              |       |   |   |   |   |   |   |   |   |   |   (1,237,259) |   |   |  (1,237,259) |   |
|                                                                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  Balance, December 31, 2009                                             |       |   22,680,000 |   |  $ |         2,268 |   |  $ |   2,051,752 |   |  $ |     (1,672,194) |   |  $ |      381,826 |   |
|                                                                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| * See accompanying notes to the consolidated financial	statements.*     |
|  F-4                                                                    |

 

** **

----

 

 

| **PETROCORP INC.**                                                        |
|---------------------------------------------------------------------------|
| **(An Exploration Stage  Company)**                                       |
| ** **                                                                |
| **Consolidated  Statements of Cash Flows**                                |
|                                                                      |   |   |   |   |   |   |   |   |   |
|                                                                      |   |   |   |   |   |   |   |  June 19, 2006 |
|                                                                      |   |   |   | (inception) to |
|                                                                      |   |               Year Ended December  31, |   | December 31, |
|                                                                      |   | 2009 |   | 2008 |   | 2009 |
|                                                                      |   |   |   |   |   |   |   |   |   |
| Cash flows from  operating activities:                                    |   |   |   |   |   |   |   |   |   |
| Net loss                                                                  |   |  $ |  (1,237,259) |   |  $ |    (346,414) |   |  $ |  (1,672,194) |
| Adjustments to  reconcile net loss to net cash                            |   |   |   |   |   |   |   |   |   |
| used in operating  activities:                                            |   |   |   |   |   |   |   |   |   |
| Depletion,  depreciation and amortization                                 |   |   |        22,500 |   |   |         3,750 |   |   |        27,321 |
| Impairment charges                                                        |   |   |       	639,813 |   |   |   |   |   |       	656,742 |
| Salary contribution                                                       |   |   |      120,000 |   |   |      120,000 |   |   |      240,000 |
| Interest contribution                                                     |   |   |        72,895 |   |   |        30,274 |   |   |      109,245 |
| Changes in operating  assets and liabilities:                             |   |   |   |   |   |   |   |   |   |
| Revenue receivables                                                       |   |   |         9,488 |   |   |      (33,962) |   |   |      (24,474) |
| Accrued expenses                                                          |   |   |      (38,019) |   |   |        52,431 |   |      |        33,298 |
| State of Alaska  payable                                                  |   |   |   |   |     |    (279,500) |   |   |  - |
| Net cash used in  operating activities                                    |   |    |    (410,582) |   |     |    (453,421) |   |   |   	(630,062) |
|                                                                      |   |   |   |   |   |   |   |   |   |
| Cash flows from  investing activities:                                    |   |   |   |   |   |   |   |   |   |
| Acquisition of oil and  gas properties                                    |   |          |   	(569,411) |   |   |   	(728,299) |   |   |  (1,682,996) |
| Proceeds from sale of  oil and gas properties                             |   |   |        96,551 |   |   |   |   |   |        96,551 |
| Purchase of equipment                                                     |   |    |   |   |   |   |   |      |      (18,000) |
| Net cash used in  investing activities                                    |   |   |    (472,860) |    |   |    (728,299) |   |   |  (1,604,445) |
|                                                                      |   |   |   |   |   |   |   |   |   |
| Cash flows from  financing activities:                                    |   |   |   |   |   |   |   |   |   |
| Proceeds from notes	payable to  majority stockholder                      |   |     |     	365,917 |   |     |   |   |     |     	805,917 |
| Repayment of notes	payable to  majority stockholder                       |   |     |  	   |   |     |      (90,000) |   |     |   	(90,000) |
| Proceeds from sale of  common stock                                       |   |     |   |   |      |   1,000,000 |   |     |   1,557,100 |
| Net cash provided by  financing activities                                |   |   |     	365,917 |   |   |      910,000 |   |     |  	2,273,017 |
|                                                                      |   |   |   |   |   |   |   |   |   |
| Net (decrease) increase  in cash                                          |   |   |    (517,525) |   |   |    (271,720) |   |   |       	38,510 |
| Cash at beginning of  year                                                |   |     |      556,035 |   |     |      827,755 |   |      |  - |
| Cash at end of year                                                       |   |  $ |       	38,510 |   |  $ |      556,035 |   |  $ |       	38,510 |
|                                                                      |   |   |   |   |   |   |   |   |   |
| Supplemental  disclosure of cash flow information:                        |   |   |   |   |   |   |   |   |   |
| Cash paid for interest                                                    |   |  $ |  - |   |  $ |            359 |   |  $ |            359 |
| Cash paid for taxes                                                       |   |  $ |  - |   |  $ |  - |   |  $ |  - |
|                                                                      |   |   |   |   |   |   |   |   |   |
| Supplemental  disclosure of noncash investing and                         |   |   |   |   |   |   |   |   |   |
| financing activities:                                                     |   |   |   |   |   |   |   |   |   |
|  Forgiveness of debt  by a stockholder                               |   |  $ |                - |   |  $ |                - |   |  $ |         3,000 |
|  Salary contribution                                                 |   |  $ |      120,000 |   |  $ |      120,000 |   |  $ |      240,000 |
|  Interest contribution                                               |   |  $ |        72,895 |   |  $ |        30,274 |   |  $ |      109,245 |
| Acquisition of  undeveloped oil and gas properties                        |   |   |   |   |   |   |   |   |   |
| from majority  stockholder for notes                                      |   |  $ |      583,823 |   |  $ |      384,058 |   |  $ |      967,881 |
| Sale of	$448,876 of oil and gas properties to Soladino                    |   |   |   |   |   |   |   |   |   |
| Investments SA, an entity owned by our president for                      |   |   |   |   |   |   |   |   |   |
| cancellation of $500,000 of notes  and cash payment of $96,551            |   |  $ |    (500,000) |   |  $ |                - |   |  $ |    (500,000) |
|                                                                      |   |   |   |   |   |   |   |   |   |
| * See accompanying  notes to the consolidated financial statements.* |
|  F-5                                                                 |

 

 

----

**PETROCORP INC.(An Exploration Stage Company)**

**December 31, 2009 and2008****Notes to the Consolidated Financial Statements**

 

**Note 1 - Organization and Operations**

 

Petrocorp Inc., an exploration stage company, was incorporated on June 19, 2006 under the laws of theState of Delaware.  Prior to September 2007,the Company’s business model provided telephonic conferencing services tobusinesses, organizations and individuals in North America.  Due to capital constraints and because its executives couldno longer serve the Company without compensation, the Company decided to changeits business directions.

 

On September 20, 2007, the Companyentered the oil and gas exploration and production business with theacquisition of three separate farm-out agreements from James Fitzsimons.  Mr.Fitzsimons also purchased 17,800,000 shares of the Company’s common stock fromcertain shareholders, resulting in him owning 84.5% of the Company’s thenoutstanding shares for $454,000.  Mr. Fitzsimons was elected a director of theCompany.

 

On October 19, 2007, the Companyamended its certificate of incorporation changing its name to “Petrocorp Inc.”and effectuated a five for one forward stock split which increased theauthorized common stock to 100,000,000 shares at $.0001 par value.

 

On August 13, 2008, the Company’s board of directorsapproved a stock dividend on its outstanding common stock.  The ratio for thestock dividend was four shares to each share owned (4:1).

 

All share and per share amounts have beenrestated to reflect these common stock transactions.

 

**Note 2 - Summary of Significant Accounting Policies**

 

*Basis of presentation*

 

The Company’s consolidated financial statementshave been prepared in accordance with accounting principles generally acceptedin the United States of America (“US GAAP”).

* *

The consolidated financial statements includethe accounts of Petrocorp Inc. and its wholly-owned subsidiaries: Petrocorp (Oklahoma) Inc., Union Energy (Alaska) LLC and Mac Oil SpA through November 30, 2009(collectively, “Petrocorp” or the “Company”).  All intercompany accounts andtransactions have been eliminated.

 

*Exploration stage company*

 

The Company is an exploration stage company as definedby section915-10-20 of the FASB Accounting Standards Codification. Although the Company has recognized some nominal amount of revenue sinceinception, the Company is devoting substantially all of its efforts onestablishing the business and its planned principal operations have not yetcommenced.  All losses since inception have been considered part of theCompany’s exploration stage activities.

* *

* *F-6

----

**PETROCORP INC.(An Exploration Stage Company)**

**December 31, 2009 and2008****Notes to the Consolidated Financial Statements**

* *

*Use of estimates*

 

The preparation of financial statements inconformity with generally accepted accounting principles requires management tomake estimates and assumptions that affect the reported amounts of assets andliabilities and disclosure of contingent assets and liabilities at the date ofthe financial statements and the reported amounts of revenues and expensesduring the reporting period.  Actual results could differ from those estimates.

 

*Reclassifications*

 

Certain amounts in the prior periodconsolidated financial statements have been reclassified to conform with thecurrent period presentation.   These reclassifications had no effecton reported losses.

 

*Cash equivalents*

 

The Company considers all highly liquidinvestments with a maturity of three months or less when purchased to be cashequivalents.

 

*Marketable securities*

 

Marketable securities available-for-sale, consisted of 1,000,000 common shares of Tamm Oil and Gas Corp. ("TAMO"), a publicly traded company listed on the Over the Counter Bulletin Board ("OTCBB"), and are stated at market value based on the most recently traded price of these marketable securities at December 31, 2009 taking into consideration their lack of liquidity.  On June 12, 2009, the Company exchanged its membership interest in Union Energy (Alberta) LLC, a Colorado limited liability company, that owned eight contiguous sections (5,120 acres) of oil sands leases in the Peace River Oil Sands Area of northern Alberta, Canada for the 1,000,000 common shares, restricted for six (6) months from the date of signing, pursuant to the Agreement and Plan of Reorganization executed by and between Tamm Oil and Gas Corp  and the Company.  The Company acquired these oil sands leases in May 2008 for $250,000.  Pursuant to Section 320-10-25 of the FASBAccounting Standards Codification unrealized gains and losses, if any,determined by the difference between the historical cost of $250,000 and themarket value at each balance sheet date, are recorded as a component ofaccumulated other comprehensive income in stockholders' equity and realized gains and losses are determined by the difference between the historical cost of $250,000 and the gross proceeds received when these marketable securities are sold. TAMO's shares traded between $0.56 per share and $1.05 per share with an average daily volume of 274,000 shares for the period June 12, 2009 through December 31, 2009, with the closing price at $0.645 per share and a volume of 86,000 shares on December 31, 2009.  The market value of the Company's 1,000,000 TAMO's shares at December 31, 2009 would have been $645,000 based on TAMO's December 31, 2009 closing price.  The Management determined that the fair value of these marketable securities was $250,000, its historical cost when taking into consideration of the lack of average trading volume.  At December 31, 2009, the Company did not record any unrealized gains or (losses), nor sold any of these marketable securities.     

 

*Oil and gas properties*

* *

The Company’s oil and gas exploration andproduction activities are accounted for using the successful efforts method.Under this method, all property acquisition costs and costs of exploratory anddevelopment wells are capitalized when incurred, pending determination ofwhether the well has found proved reserves.  If an exploratory well does notfind proved reserves, the costs of drilling the well are charged to expense andincluded within cash flows from investing activities in the Consolidated Statementsof Cash Flows pursuant to Topic 932 “*FinancialAccounting and Reporting by Oil and Gas Producing Companies”* of the FASB Accounting Standards Codification (“Topic932”).  The costs of development wells are capitalized whether productive ornonproductive.  Oil and gas lease acquisition costs are also capitalized. Interest cost is capitalized as a component of property cost for significantexploration and development projects that require greater than six months to bereadied for their intended use.

 

Other exploration costs, including certaingeological and geophysical expenses and delay rentals for oil and gas leases,are charged to expense as incurred.  The sale of a partial interest in a provedproperty is accounted for as a cost recovery and no gain or loss is recognizedas long as this treatment does not significantly affect the unit-of-productionamortization rate.  A gain or loss is recognized for all other sales of provedproperties and is classified in other operating revenues.  Maintenance andrepairs are charged to expense, and renewals and betterments are capitalized tothe appropriate property and equipment accounts.

 

Unevaluated properties are assessed periodicallyon a property-by-property basis and any impairment in value is charged toexpense.  If the unevaluated properties are subsequently determined to beproductive, the related costs are transferred to proved oil and gasproperties.  Proceeds from sales of partial interests in unproved leases areaccounted for as a recovery of cost without recognizing any gain until allcosts are recovered.

 

The provision fordepreciation, depletion and amortization (“DD&A”) of oil and gas propertiesis calculated on a field-by-field basis using the unit-of-production method. Oil is converted to natural gas equivalents, Mcfe, at the rate of one barrel tosix Mcf.  Taken into consideration in the calculation of DD&A are estimatedfuture dismantlement, restoration and abandonment costs, which are net ofestimated salvage values.

 

F-7

----

**PETROCORP INC.(An Exploration Stage Company)**

**December 31, 2009 and2008****Notes to the Consolidated Financial Statements**

 

*Fairvalue of financial instruments*

* *

TheCompany follows paragraph 825-10-50-10 of the FASB Accounting StandardsCodification for disclosures about fair value of its financial instruments andhas adopted paragraph 820-10-35-37 of the FASB Accounting StandardsCodification (“Paragraph 820-10-35-37”) to measure the fair value of itsfinancial instruments. Paragraph 820-10-35-37 establishes a framework formeasuring fair value in accounting principles generally accepted in the UnitedStates of America (U.S. GAAP), and expands disclosures about fair valuemeasurements. To increase consistency and comparability in fair valuemeasurements and related disclosures, Paragraph 820-10-35-37 establishes a fairvalue hierarchy which prioritizes the inputs to valuation techniques used tomeasure fair value into three (3) broad levels.  The fair value hierarchy givesthe highest priority to quoted prices (unadjusted) in active markets foridentical assets or liabilities and the lowest priority to unobservableinputs.  The three (3) levels of fair value hierarchy defined by Paragraph820-10-35-37 are described below:

 
|      Level 1 |   | Quoted market prices available in  active markets for identical assets or liabilities as  |
|----------------------------------|--------|-------------------------------------------------------------------------------------------|
|                             |   | of the reporting date.                                                                    |
|                             |   |                                                                                      |
|      Level 2 |   | Pricing inputs other than quoted prices  in active markets included in Level 1, which     |
|                             |   | are either directly or indirectly  observable as of the reporting date.                   |
|                             |   |                                                                                      |
|     Level 3       |   | Pricing inputs that are generally  observable inputs and not corroborated by market data. |

 

The carrying amounts of the Company’s financial assets andliabilities, such as cash, revenue receivable, and accrued expenses approximate their fairvalues because of the short maturity of these instruments.  The Company’s marketable securities –restricted and notes payable to majority stockholder approximatethe fair value of such instruments based upon management’s best estimate ofinterest rates that would be available to the Company for similar financialarrangement at December 31,2009 and 2008.

 

TheCompany does not have any assets or liabilities measured at fair value on arecurring or a non-recurring basis, consequently, the Company did not have anyfair value adjustments for assets and liabilities measured at fair value atDecember 31, 2009 or 2008, nor gains or losses are reported in the statement ofoperations that are attributable to the change in unrealized gains or lossesrelating to those assets and liabilities still held at the reporting date forthe interim period ended December 31, 2009 and 2008. 

 

*Revenue recognition*

 

The Company applies paragraph 605-10-S99-1 of the FASBAccounting Standards Codification for revenue recognition.  The Companyrecognizes revenue when it is realized or realizable and earned less estimated future doubtful accounts.  The Company considers revenue realized orrealizable and earned when all of the following criteria are met: (i)persuasive evidence of an arrangement exists, (ii) the product has been shippedor the services have been rendered to the customer, (iii) the sales price is fixed ordeterminable, and (iv) collectability is reasonably assured.  TheCompany derives revenue primarily from the sale of produced natural gas andcrude oil.  The Company reports revenue as the gross amount received beforetaking into account production taxes and transportation costs, which arereported as separate expenses.  Revenue is recorded in the month the Company’sproduction is delivered to the purchaser, but payment is generally receivedbetween thirty (30) and ninety (90) days after the date of production.  Norevenue is recognized unless it is determined that title to the product hastransferred to the purchaser.  At the end of each month, the Company estimatesthe amount of production delivered to the purchaser and the price the Companywill receive.

 

*Income taxes*

 

The Company accounts for income taxes under Section 740-10-30 of the FASB Accounting Standards Codification, which requires recognition of deferred taxassets and liabilities for the expected future tax consequences of events thathave been included in the financial statements or tax returns.  Under this method,deferred tax assets and liabilities are based on the differences between thefinancial statement and tax bases of assets and liabilities using enacted taxrates in effect for the year in which the differences are expected to reverse.  Deferred taxassets are reduced by a valuation allowance to the extent management concludesit is morelikely than not that the assets will not be realized.  Deferred tax assets andliabilities are measured using enacted tax rates expected to apply to taxableincome in the years in which those temporary differences are expected to berecovered or settled.  The effect on deferred tax assets and liabilities of achange in tax rates is recognized in the Consolidated Statements of Income andComprehensive Income in the period that includes the enactment date.

 

The Company adopted section 740-10-25 of the FASB Accounting Standards Codification (“Section 740-10-25”). Section 740-10-25 addresses thedetermination of whether tax benefits claimed or expected to be claimed on atax return should be recorded in the financial statements.  Under Section740-10-25, the Company may recognize the tax benefitfrom an uncertain tax position only if it is more likely than not that the taxposition will be sustained on examination by the taxing authorities, based onthe technical merits of the position.  The tax benefits recognized in thefinancial statements from such a position should be measured based on thelargest benefit that has a greater than fifty (50) percent likelihood of beingrealized upon ultimate settlement.  Section 740-10-25 also provides guidance on de-recognition, classification,interest and penalties on income taxes, accounting in interim periods andrequires increased disclosures.  The Company had no material adjustments to itsliabilities for unrecognized income tax benefits according to the provisions ofSection 740-10-25.

 

F-8

----

**PETROCORP INC.(An Exploration Stage Company)**

**December 31, 2009 and2008****Notes to the Consolidated Financial Statements**

 

*Net loss per common share*

 

Section 260-10-45 of the FASB AccountingStandards Codification requires dual presentation of basic and diluted earningsor loss per share (“EPS”) for all entities with complex capital structures andrequires a reconciliation of the numerator and denominator of the basic EPScomputation to the numerator and denominator of the diluted EPS computation. Basic EPS excludes dilution; diluted EPS reflects the potential dilution thatcould occur if securities or other contracts to issue common stock wereexercised or converted into common stock or resulted in the issuance of commonstock that then shared in the earnings of the entity.

 

Basic loss per share is computed by dividing netloss applicable to common shareholders by the weighted average number of commonshares outstanding during the period.  Diluted loss per share reflects thepotential dilution that could occur if dilutive securities and other contractsto issue common stock were exercised or converted into common stock or resultedin the issuance of common stock that then shared in the earnings of theCompany, unless the effect is anti-dilutive.  The Company had no potentially dilutivesecurities for the years ended December 31, 2009 or 2008.

 

*Recently issued accounting pronouncements*

* *

On June 5, 2003, the United StatesSecurities and Exchange Commission (“SEC”) adopted final rules under Section404 of the Sarbanes-Oxley Act of 2002 (“Section 404”), as amended by SECRelease No. 33-9072 on October 13, 2009.  Under the provisions of Section 404 of theSarbanes-Oxley Act, public companies and their independent auditors are eachrequired to report to the public on the effectiveness of a company’s internalcontrols.  The smallest public companies with a public float below $75 millionhave been given extra time to design, implement and document these internalcontrols before their auditors are required to attest to the effectiveness ofthese controls.  This extension of time will expire beginning with the annualreports of companies with fiscal years ending on or after June 15, 2010.  Commencing with its annual report for the fiscal yearending December 31, 2010, the Company will be required to include a report ofmanagement on its internal control over financial reporting.  The internalcontrol report must include a statement

 
|      •      | of management’s responsibility for  establishing and maintaining adequate internal control over its financial reporting; |
|----------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------|

 
|      •      | of management’s assessment of the  effectiveness of its internal control over financial reporting as of year  end; and |
|----------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------|

 
|      •      | of the framework used by  management to evaluate the effectiveness of the Company’s internal control  over financial reporting. |
|----------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------|

 

F-9

----

**PETROCORP INC.(An Exploration Stage Company)**

**December 31, 2009 and2008****Notes to the Consolidated Financial Statements**

 

Furthermore, it is required to file theauditor’s attestation report separately on the Company’s internal control overfinancial reporting on whether it believes that the Company has maintained, inall material respects, effective internal control over financial reporting.

 

In June 2009, the FASB approved the “FASBAccounting Standards Codification” (the “Codification”) as the single source ofauthoritative nongovernmental US GAAP to be launched on July 1, 2009.  The Codification does not change current US GAAP, but is intended to simplify useraccess to all authoritative US GAAP by providing all the authoritativeliterature related to a particular topic in one place.  All existing accountingstandard documents will be superseded and all other accounting literature notincluded in the Codification will be considered non-authoritative.  TheCodification is effective for interim and annual periods ending afterSeptember 15, 2009.

 

In August 2009, the FASB issued the FASBAccounting Standards Update No. 2009-04 *“Accounting for Redeemable EquityInstruments - Amendment to Section 480-10-S99”* which represents an updateto section 480-10-S99, distinguishing liabilities from equity, per EITF TopicD-98, *Classification and Measurement of Redeemable Securities*.  TheCompany does not expect the adoption of this update to have a material impacton its consolidated financial position, results of operations or cash flows.

 

In August 2009, the FASB issued the FASBAccounting Standards Update No. 2009-05 *“Fair Value Measurement andDisclosures Topic 820 – Measuring Liabilities at Fair Value”*, whichprovides amendments to subtopic 820-10, Fair Value Measurements and Disclosures– Overall, for the fair value measurement of liabilities.  This update providesclarification that in circumstances in which a quoted price in an active marketfor the identical liability is not available, a reporting entity is required tomeasure fair value using one or more of the following techniques:  1. Avaluation technique that uses: a. The quoted price of the identical liabilitywhen traded as an asset b. Quoted prices for similar liabilities or similarliabilities when traded as assets.  2. Another valuation technique that isconsistent with the principles of topic 820; two examples would be an incomeapproach, such as a present value technique, or a market approach, such as atechnique that is based on the amount at the measurement date that thereporting entity would pay to transfer the identical liability or would receiveto enter into the identical liability.  The amendments in this update alsoclarify that when estimating the fair value of a liability, a reporting entityis not required to include a separate input or adjustment to other inputsrelating to the existence of a restriction that prevents the transfer of theliability.  The amendments in this update also clarify that both a quoted pricein an active market for the identical liability when traded as an asset in anactive market when no adjustments to the quoted price of the asset are requiredare Level 1 fair value measurements.  The Company does not expect the adoptionof this update to have a material impact on its consolidated financialposition, results of operations or cash flows.

 

In September 2009, the FASB issued the FASBAccounting Standards Update No. 2009-08 *“Earnings Per Share – Amendments toSection 260-10-S99”,*which represents technical corrections to topic260-10-S99, Earnings per share, based on EITF Topic D-53, *Computation ofEarnings Per Share for a Period that includes a Redemption or an InducedConversion of a Portion of a Class of Preferred Stock* and EITF Topic D-42, *TheEffect of the Calculation of Earnings per Share for the Redemption or InducedConversion of Preferred Stock*.  The Company does not expect the adoption ofthis update to have a material impact on its consolidated financial position,results of operations or cash flows.

 

F-10

----

**PETROCORP INC.(An Exploration Stage Company)**

**December 31, 2009 and2008****Notes to the Consolidated Financial Statements**

 

In September 2009, the FASB issued the FASBAccounting Standards Update No. 2009-09 *“Accounting for Investments - EquityMethod and Joint Ventures and Accounting for Equity-Based Payments toNon-Employees”*.  This update represents a correction to Section323-10-S99-4, *Accounting by an Investor for Stock-Based Compensation Grantedto Employees of an Equity Method Investee*.  Additionally, it adds observercomment*Accounting Recognition for Certain Transactions Involving EquityInstruments Granted to Other Than Employees* to the Codification.  TheCompany does not expect the adoption to have a material impact on itsconsolidated financial position, results of operations or cash flows.

 

In September 2009, the FASB issued the FASBAccounting Standards Update No. 2009-12 *“Fair Value Measurements andDisclosures Topic 820 – Investment in Certain Entities That Calculate NetAssets Value Per Share (or Its Equivalent)”*, which provides amendments toSubtopic 820-10, Fair Value Measurements and Disclosures-Overall, for the fairvalue measurement of investments in certain entities that calculate net assetvalue per share (or its equivalent).  The amendments in this update permit, asa practical expedient, a reporting entity to measure the fair value of aninvestment that is within the scope of the amendments in this update on thebasis of the net asset value per share of the investment (or its equivalent) ifthe net asset value of the investment (or its equivalent) is calculated in amanner consistent with the measurement principles of Topic 946 as of thereporting entity’s measurement date, including measurement of all orsubstantially all of the underlying investments of the investee in accordancewith Topic 820.  The amendments in this update also require disclosures bymajor category of investment about the attributes of investments within thescope of the amendments in this update, such as the nature of any restrictionson the investor’s ability to redeem its investments a the measurement date, anyunfunded commitments (for example, a contractual commitment by the investor toinvest a specified amount of additional capital at a future date to fund investmentsthat will be make by the investee), and the investment strategies of theinvestees.  The major category of investment is required to be determined onthe basis of the nature and risks of the investment in a manner consistent withthe guidance for major security types in US GAAP on investments in debt andequity securities in paragraph 320-10-50-1B. The disclosures are required forall investments within the scope of the amendments in this update regardless ofwhether the fair value of the investment is measured using the practicalexpedient.  The Company does not expect the adoption to have a material impacton its consolidated financial position, results of operations or cash flows.

 

In January 2010, the FASB issued the FASBAccounting Standards Update No. 2010-01 *“Equity Topic 505 – Accounting forDistributions to Shareholders with Components of Stock and Cash”*, whichclarify that the stock portion of a distribution to shareholders that allowsthem to elect to receive cash or stock with a potential limitation on the totalamount of cash that all shareholders can elect to receive in the aggregate isconsidered a share issuance that is reflected in EPS prospectively and is not astock dividend for purposes of applying Topics 505 and 260 (Equity and EarningsPer Share (“EPS”)).  Those distributions should be accounted for and includedin EPS calculations in accordance with paragraphs 480-10-25-14 and 260-10-45-45through 45-47 of the FASB Accounting Standards codification.  The amendments inthis Update also provide a technical correction to the Accounting StandardsCodification.  The correction moves guidance that was previously included inthe Overview and Background Section to the definition of a stock dividend inthe Master Glossary.  That guidance indicates that a stock dividend takesnothing from the property of the corporation and adds nothing to the interestsof the stockholders.  It also indicates that the proportional interest of eachshareholder remains the same, and is a key factor to consider in determiningwhether a distribution is a stock dividend.

 

F-11

----

**PETROCORP INC.(An Exploration Stage Company)**

**December 31, 2009 and2008****Notes to the Consolidated Financial Statements**

 

In January 2010, the FASB issued the FASBAccounting Standards Update No. 2010-02 *“Consolidation Topic 810 –Accounting and Reporting for Decreases in Ownership of a Subsidiary – a ScopeClarification”*, which provides amendments to Subtopic 810-10 and relatedguidance within U.S. GAAP to clarify that the scope of the decrease inownership provisions of the Subtopic and related guidance applies to thefollowing:

 
|   |  1. | A subsidiary or group of  assets that is a business or nonprofit activity                                |
|--------|----------|----------------------------------------------------------------------------------------------------------|
|   |     |                                                                                                     |
|   |  2. | A subsidiary that is a  business or nonprofit activity that is transferred to an equity method  investee |
|   |     | or joint venture                                                                                         |
|   |     |                                                                                                     |
|   |  3. | An exchange of a group of  assets that constitutes a business or nonprofit activity for a                |
|   |     | noncontrolling interest in  an entity (including an equity method investee or joint venture).            |

 

The amendments in this Update also clarify thatthe decrease in ownership guidance in Subtopic 810-10 does not apply to thefollowing transactions even if they involve businesses:

 
|   |  1. | Sales  of in substance real estate.  Entities should apply the sale of real  estate guidance in Subtopics |
|--------|----------|----------------------------------------------------------------------------------------------------------------|
|   |     | 360-20  (Property, Plant, and Equipment) and 976-605 (Retail/Land) to such  transactions.                      |
|   |     |                                                                                                           |
|   |  2. | Conveyances  of oil and gas mineral rights.  Entities should apply the mineral  property conveyance       |
|   |     | and related transactions  guidance in Subtopic 932-360 (Oil and Gas-Property, Plant, and Equipment)            |
|   |     |  to such transactions.                                                                                    |

 

If a decrease in ownership occurs in asubsidiary that is not a business or nonprofit activity, an entity first needsto consider whether the substance of the transaction causing the decrease inownership is addressed in other US GAAP, such as transfers of financial assets,revenue recognition, exchanges of nonmonetary assets, sales of in substancereal estate, or conveyances of oil and gas mineral rights, and apply thatguidance as applicable.  If no other guidance exists, an entity should applythe guidance in Subtopic 810-10.

 

Management does not believe that any other recentlyissued, but not yet effective accounting pronouncements, if adopted, would havea material effect on the accompanying financial statements.

 

**Note 3 – Going Concern**

 

The consolidated financial statements have been prepared on a going concernbasis, which assumes the Company will be able to realize its assets anddischarge its liabilities in the normal course of business.  At December31, 2009, the Company had a deficit accumulated during the exploration stage of$1,672,194, a net loss of $1,237,259 with revenues of $70,961 and cash used inoperations of $410,582for the year then ended.  These conditions raise substantial doubt about theCompany’s ability to continue as a going concern.

 

While the Company is attempting to generatemeasurable revenues, the Company’s cash position may not be sufficient tosupport its daily operations.  Management intends to raise additional capitalthrough sales of its securities, sale of its Tamm Oil and Gas Corp (“TAMO”)stock or loans from its majority stockholder.  The ability of the Company tocontinue as a going concern is dependent upon its ability to further implement its businessplan, generate sufficient revenues and raise additional capital.

 

F-12

----

**PETROCORP INC.(An Exploration Stage Company)**

**December 31, 2009 and2008****Notes to the Consolidated Financial Statements**

 

The financial statements do not include anyadjustments that might be necessary if the Company is unable to continue as agoing concern.

 

**Note 4 - Marketable Securities**

 

The available-for-sale marketable securities at December 31, 2009 and 2008 areset forth as follows:

 
|                                  |   | 2009   |    | 2008   |
|---------------------------------------|--------|--------|---------|--------|
|                                  |   |   |    |   |   |   |
| 1,000,000 shares of TAMO common stock |   | $      | 250,000 |   | $ | - |

 

**Note5 - Oil and Gas Properties**

* *

*Leasehold Acreage*

 

Petrocorp owns interestsin oil and gas acreage in the locations set forth below as of December 31, 2009and 2008.  These ownership interests generally take the form of workinginterests in oil and gas leases or licenses that have varying terms.

 
|                         | December 31, 2009 |   | December 31, 2008 |   |
|------------------------------|-------------------|--------|-------------------|--------|
|   State or Country      | Gross             |   | Net               |   | Gross |   | Net |   |
|   Alaska                |              | 24,280 |              |   | 24,280 |   |   | 24,280 |   |   | 24,280 |   |
|   Oklahoma              |              | 7,204  |              |   | 4,929 |   |   | 6,379 |   |   | 2,809 |   |
|   Canada  (1)      |              | -      |              |   | - |   |   | 286,713 |   |   | 286,713 |   |
|   Italy  (1)       |              | -      |              |   | - |   |   | - | (2) |   | - | (2) |
|   Netherlands  (1) |              | -      |              |   | - |   |   | - | (3) |   | - | (3) |
|   Total                 |              | 31,484 |              |   | 29,209 |   |   | 317,372 |   |   | 313,802 |   |

 

(1)** **On November 30, 2009, the Company sold $448,876 of its foreign oil and gas leases  to Soladino Investments SA, an entity owned and controlled by the president and the majority stockholder of the Company, for $596,551 by (i) the cancellation of $500,000 of notes and (ii) a cash payment of $96,551.  The sales price over the cost basis of $147,675 was booked as additional paid-in capital.

 

(2)**  **On January 20, 2009, the Government of Italy made the preliminary awards of the competitive oil and gas exploration licenses, "Fiorenzuola D'Arda" located in the Po Valley and "Montottone" located in the Marche region, in favor of Mac Oil SpA, our former subsidiary.On March 24, 2009, the Government of Italy made the preliminary award of the competitive oil and gas exploration license, "Melzo" located in the Po Valley, also in favor of Mac Oil SpA.  On September 17, 2009, the Government of Italy made the preliminary award of the competitive oil and gas exploration license, "San Grato" located in the Po Valley, again in favor of Mac Oil SpA. The four Italy licenses cover a net surface area of 132,900 hectares (328,181 acres).

 

        The Company also had two competitive oil and gas exploration license applications pending awaiting adjudication by the Ministry of Economic Development in Italy covering a net surface area of 98,332 hectares (242,982 acres).

 

(3)**  **The Company had one license application pending covering a net surface area of 45,037 hectares (111,288 acres).

 

*Leasehold Acreage Costs*

* *

Petrocorp hascapitalized leasehold acreage costs, net of accumulated depletion, depreciationand amortization, in undeveloped oil and natural gas acreagein the locations set forth below as of December 31, 2009 and 2008:

 
|                       |   |   |   |   |   |   | December 31, |
|----------------------------|--------|--------|--------|--------|--------|--------|--------------|
|                       |   |   |   |   |   |   | 2009         |   | 2008 |
| State or Country           |   |   |   |   |   |   |         |   |   |   |   |
| Alaska                     |   |   |   |   |   |   | $            | 442,086 |   | $ |     442,086 |
| Oklahoma  (1)         |   |   |   |   |   |   |         | 760,029 |   |   | 520,050 |
| Canada  (2), (3), (4) |   |   |   |   |   |   |         | - |   |   | 277,130 |
| Italy  (3), (4)       |   |   |   |   |   |   |         | - |   |   | 228,867 |
| Netherlands  (3)      |   |   |   |   |   |   |         | - |   |   | 25,760 |
| Total                      |   |   |   |   |   |   | $            | 1,202,115 |   | $ | 1,493,893 |

 

(1)  The Oklahoma oil and gas leasehold costs are net of acquisitions of$885,445, a 2009 impairment charge of $622,966 and accumulated depletion, depreciation and amortization of $26,200.   

                 

(2)   On June 12, 2009, the Company exchanged itsmembership interest in Union Energy (Alberta) LLC, a Colorado limited liabilitycompany, that owned eight contiguous sections (totaling 5,120 acres) of oilsands leases in the Peace River Oil Sands Area of northern Alberta, Canada for1,000,000 restricted shares of Tamm Oil and Gas Corp.  The Company acquiredthese oil sands leases in May 2008 for $250,000.

 

(3)  On November 30, 2009, the Company sold $448,876 of its foreign oil and gas leases to Soladino Investments SA, an entity owned and controlled by the president and majority stockholder of the Company, for $596,551 by (i) the cancellation of $500,000 of notes and (ii) a cash payment of $96,551.  The sales price over the cost basis of $147,675 was recorded as additional paid-in capital.

 

(4)  At December 31, 2009, the Company wrote off $7,978 and $8,669 of remaining Canadian and Italian oil and gas leasehold costs as an impairment charge, respectively.

 

F-13

----

**PETROCORP INC.(An Exploration Stage Company)**

**December 31, 2009 and2008****Notes to the Consolidated Financial Statements**

 

*2009 Detailed Leasehold Acreage Costs*

 
|                                                                        |       |           | ** ** | ** **    | **2009 Activities** | ** ** | ** ** | ** **    |
|-----------------------------------------------------------------------------|------------|----------------|------------|---------------|---------------------|------------|------------|---------------|
|                                                                        |       |           | ** ** | ** **    | ** **          | ** ** | ** ** | ** **    | ** ** | ** ** | **Properties** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
|                                                                        |       | **Balance at** | ** ** | **Leasehold** | ** **          | **Well**   | ** ** | **Exchanged** | ** ** | **Impairment** | ** ** | ** ** | ** ** | **Balance at** |
|                                                                        |       | **12/31/2008** | ** ** | **Costs**     | ** **          | **Costs**  | ** ** | **or Sold**   | ** ** | **Charge** | ** ** | **Depletion** | ** ** | **12/31/2009** |
|                                                                        |       |           |       |          |                |       |       |          |   |   |   |   |   |   |   |   |   |   |   |   |   |
| ** State or Country**                                                  | ** ** |           |       |          |                |       |       |          |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     Alaska                                                   |       | $              | 442,086    |          | $                   |       |       | $             |   |   | $ |   |   | $ |   |   | $ |   |   | $ | 442,086 |
|                                                                        |       |           |       |          |                |       |       |          |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     Oklahoma (by  prospect)                                  |       |           |       |          |                |       |       |          |   |   |   |   |   |   |   |   |   |   |   |   |   |
|        East Okemah                            |       |           | 41,998     |          |                |       |       |          |   |   |   |   |   |   | (41,998) |   |   |   |   |   | 0 |
|        Snake Creek                            |       |           | 307,803    |          |                |       |       |          | 29,106 |   |   |   |   |   | (218,977) |   |   |   |   |   | 117,932 |
|        Spanish Peak                           |       |           | 173,999    |          |                | 65,990     |       |          | 206,526 |   |   |   |   |   | (361,991) |   |   |   |   |   | 84,524 |
|        Coal Creek                             |       |           | -          |          |                | 583,823    |       |          |   |   |   |   |   |   |   |   |   |   |   |   | 583,823 |
|        Accumulated depletion                  |       |           | (3,750)    |          |                |       |       |          |   |   |   |   |   |   |   |   |   | (22,500) |   |   | (26,250) |
|             Oklahoma, net |       |           | 520,050    |          |                | 649,813    |       |          | 235,632 |   |   | 0 |   |   | (622,966) |   |   | (22,500) |   |   | 760,029 |
|                                                                        |       |           |       |          |                |       |       |          |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     Canada                                                   |       |           | 277,130    |          |                | 23,715     |       |          |   |   |   | (292,866) |   |   | (7,978) |   |   |   |   |   | 0 |
|                                                                        |       |           |       |          |                |       |       |          |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     Italy                                                    |       |           | 228,867    |          |                | 121,349    |       |          |   |   |   | (341,348) |   |   | (8,869) |   |   |   |   |   | 0 |
|                                                                        |       |           |       |          |                |       |       |          |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     Netherlands                                              |       |           | 25,760     |          |                | 38,902     |       |          |   |   |   | (64,662) |   |   |   |   |   |   |   |   | 0 |
|  Total oil and gas  properties                                         |       | $              | 1,493,893  |          | $                   | 833,779    |       | $             | 235,632 |   | $ | (698,876) |   | $ | (639,813) |   | $ | (22,500) |   | $ | 1,202,115 |

 

***Oil and Gas DrillingActivity***

 

The Company owns working interests in five (5) gross producing oil wells and seven (7) gross producing gas wells at December 31, 2009.  Of the five (5) gross producing oil wells two (2) were dual completions (oil and gas).  At December 31, 2009, the Company had no wells in progress.

 

F-14

----

**PETROCORP INC.(An Exploration Stage Company)**

**December 31, 2009 and2008****Notes to the Consolidated Financial Statements**

 

**Note 6 - Notes Payable to Majority Stockholder**

 

On December 1, 2008, Mr. Fitzsimons transferredhis 78.5% stock ownership in Petrocorp Inc. and three outstanding promissorynotes (totaling $734,058) to Soladino Investments SA (“Soladino”), a Swisscorporation owned by Mr. Fitzsimons.  The Soladino note is secured, non-interestbearing and payable on demand.

 

On March 31, 2009, the Company purchased 171 oiland gas leases totaling 3,827 gross (2,666 net) acres in Okfuskee and Okmulgee Counties, Oklahoma from CH4 Energy, Inc., a company controlled by SoladinoInvestments SA at a cost of $583,823.  The Company reimbursed Soladino for itshistoric costs (acreage) by issuing a secured, non-interest bearing note,payable on demand for $583,823 and assumed responsibility for all further costs.

 

Soladino loaned the Company $182,094 on August19, 2009 and $100,000 on October 13, 2009.  The notes are secured, non-interestbearing and payable on demand.

 

On November 30, 2009, Soladino cancelled$500,000 of the Company’s notes in Soladino’s acquisition of Mac Oil SpA andits foreign oil and gas leases in Quebec, Canada.  At December 31, 2009, theCompany has $1,099,975 in secured, non-interest bearing notes (four), payableon demand with its majority stockholder Soladino.

 

During the years ended December 31, 2009 and 2008,the Company imputed interest expense related to these notes of $72,895 and $30,274,respectively.  Interest was imputed at an implied rate of 6% per annum and theamounts were recorded as capital contributions by the Company.

** **

**Note 7 - Stockholders’ Equity**

* *

*Common stock*

 

On September 30, 2006, the Company issued 20,000,000shares of common stock to its founders at par value ($.0001 per share).  Duringthe period July1 through December31, 2006,the Company sold 600,000 shares of its common stock in a private placementat $0.05 per share (an aggregate of $30,000) to 16individuals.  During the period from January 1 through September 30, 2007, theCompany sold 480,000 shares of its common stock at $0.05 per share (an aggregate of$24,000) to 24 individuals.

 

On December 27, 2007, the Company sold 800,000shares of its common stock to one investor at $.625 per share (an aggregate of$500,000).  On March 18, 2008, the Company sold 800,000 shares of its commonstock to one investor at $1.25 per share (an aggregate of $1,000,000).  These shareswere sold in transactions exempt from registration under Regulation S of theSecurities Act of 1933, as amended (the “Securities Act”).  These shares arenot registered under the Securities Act or any state securities laws and,unless so registered, may not be offered or sold except pursuant to anapplicable exemption from the registration requirements of the Securities Actand applicable state securities laws.  The purchasers of these sharesrepresented that they were acquiring the shares for their own account, forinvestment, and that the purchasers were not US Persons within the meaning ofRegulation S.  The Company has no obligation to register the resale of these sharesunder the Securities Act.  The proceeds from the sale of these shares will beused for working capital purposes.

** **

F-15

----

**PETROCORP INC.(An Exploration Stage Company)**

**December 31, 2009 and2008****Notes to the Consolidated Financial Statements**

 

**Note 8 - Income Taxes**

 

*Deferred tax assets*

 

At December 31, 2009, the Company had netoperating loss ("NOL") carry-forwards for Federal income tax purposes of$1,049,227 exclusive of $639,813 in impairment charges, that may be offset againstfuture taxable income through 2029.  No tax benefit has been reported withrespect to these net operating loss carry-forwards in the accompanying financialstatements because the Company believes that the realization of the Company'snet deferred tax assets of approximately $356,700 was not considered more likelythan not and accordingly, the potential tax benefits of the net losscarry-forwards are fully offset by a valuation allowance of $356,700.

 

Deferred tax assets consistprimarily of the tax effect of NOL carry-forwards.  The Company has provided afull valuation allowance on the deferred tax assets because of the uncertaintyregarding its realizability.  The valuation allowance increased approximately$260,900 and $78,100 for the year ended December 31, 2009 and 2008, respectively.

 

The components of deferred taxassets at December 31, 2009 and 2008 are:

 
|                                                 |   |   2009 |      |  2008 |
|------------------------------------------------------|--------|-------------|-----------|------------|
| Net  deferred tax assets - noncurrent:               |   |        |      |       |   |   |
| Expected  income tax benefit from NOL carry-forwards |   | $           | 356,700   |       | $ | 95,800 |
| Less  valuation allowance                            |   |        | (356,700) |       |   | (95,800) |
| Deferred  tax assets, net of valuation allowance     |   | $           | -         |       | $ | - |

* *

*Income taxes in the consolidated statementsof operations*

 

A reconciliation of the federal statutory incometax rate and the effective income tax rate as a percentage of income beforeincome taxes follows:
|                                                        |   |                            |
|-------------------------------------------------------------|--------|---------------------------------|
|                                                        |   | For the Year Ended December 31, |
|                                                        |   | 2009                            |   | 2008 |
| Federal statutory income  tax rate                          |   |                            | 34.0% |   |   | 34.0% |
| Change in valuation  allowance on net operating loss carry- |   |                            |   |   |   |   |
|     forwards                                 |   |                            | (34.0)% |   |   | (34.0)% |
| Effective income tax rate                                   |   |                            | -0-% |   |   | -0-% |

 

**Note 9 - Related Party Transactions**

** **

On August 12, 2008, the Company acquired fromits president, James Fitzsimons, a 50% working interest (41.25% net revenueinterest) in the Snake Creek prospect, a 3,200 gross (3,022 net) acre gasdevelopment project located in northern Okmulgee County, Oklahoma.  The Companyreimbursed Mr. Fitzsimons for his historic costs (acreage and drilling) byissuing a secured, non-interest bearing note, payable on demand for $210,917and assumed responsibility for all further costs.

** **

F-16

----

**PETROCORP INC.(An Exploration Stage Company)**

**December 31, 2009 and2008****Notes to the Consolidated Financial Statements**

 

On November 30, 2008, the Company acquired from Mr.Fitzsimons, a 100% working interest (81.25% net revenue interest) in theSpanish Peak prospect, a 2,041 gross (900 net) acre gas development projectlocated in Okmulgee County, Oklahoma.  The Company reimbursed Mr. Fitzsimonsfor his historic costs (acreage) by issuing a secured, non-interest bearing note,payable on demand for $173,141 and assumed responsibility for all furthercosts.

 

On December 1, 2008, James Fitzsimons transferredhis 78.5% stock ownership in Petrocorp Inc. and three outstanding promissorynotes (totaling $734,058) to Soladino Investments SA (“Soladino”), a Swisscorporation owned by Mr. Fitzsimons.  The Company issued Soladino a $734,058note, whichis secured by the Company’s oil and gas leases, is non interest bearing andpayable upon demand.

 

On March 31, 2009, the Company purchased 171 oiland gas lease leases totaling 3,827 gross (2,666 net) acres in Okfuskee and Okmulgee Counties, Oklahoma from CH4 Energy, Inc., a company controlled by SoladinoInvestments SA at a cost of $583,823.  The Company reimbursed Soladino for itshistoric costs (acreage) by issuing a secured, non-interest bearing note,payable on demand for $583,823 and assumed responsibility for all further costs.

** **

Soladino loaned the Company $182,094 on August19, 2009 and $100,000 on October 13, 2009.  The notes are secured, non-interestbearing and payable on demand.

** **

On November 30, 2009, the Company sold $448,876 of its oil and gas properties to Soladino Investments SA for $596,551.  The purchase price was paid by (i) cancellation of $500,000 of its notes to Soladino and (ii) a cash payment of $96,551.  The oil and gas properties were in Quebec, Canada and its wholly owned subsidiary Mac Oil SpA.  The Company recorded the $147,675 gain as a capital contribution.   

 

The Company was provided management services by its president, Mr. Fitzsimons during 2009 and 2008 at no cost.  The Companyrecorded the $120,000 estimated annual value of these services as compensation expenseand as a capital contribution.

** **

**Note 10 - Subsequent Events**

 

The Company has evaluated all events thatoccurred after the balance sheet date through December 31, 2009, through April21, 2010 the date when thefinancial statements were issued to determine if they must be reported.  Managementof the Company has determined that there are no reportable subsequent events tobe disclosed.

 

F-17