**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, 2008

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

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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 companyx

 

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 ofFebruary 28, 2009:  $10,248,000.

 

The numberof shares of the registrant’s common stock outstanding as of February 28, 2009: 22,680,000.

 

 

 

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INDEX TO FORM 10-K ANNUAL REPORT

 

 

                    

|         |                                                                       |   | Page   |
|--------------|----------------------------------------------------------------------------|--------|--------|
| **PART I**   |                                                                       |   |   |
| Item 1.      | Business                                                                   |   | 3      |
| Item 1A.     | Risk Factors                                                               |   | 8      |
| Item 1B.     | Unresolved Staff  Comments                                                 |   | 14     |
| Item 2.      | Properties                                                                 |   | 14     |
| Item 3.      | Legal Proceedings                                                          |   | 15     |
| Item 4.      | Submission of Matters  to a Vote of Security Holders                       |   | 15     |
| **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                                                   |   | 17     |
| Item 7.      | Management’s  Discussion and Analysis of Financial Condition and      |   |   |
|         | Results of Operations                                                      |   | 17     |
| Item 7A.     | Quantitative and  Qualitative Disclosures about Market Risk                |   | 19     |
| 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                                                          |   | 20     |
| **PART III** |                                                                       |   |   |
| Item 10.     | Directors, Executive  Officers and Corporate Governance                    |   | 20     |
| Item 11.     | Executive Compensation                                                     |   | 22     |
| Item 12.     | Security Ownership of  Certain Beneficial Owners and Management            |   |   |
|         | and Related  Stockholder Matters                                           |   | 23     |
| Item 13.     | Certain Relationships  and Related Transactions, and Director Independence |   | 25     |
| Item 14.     | Principal Accountant  Fees and Services                                    |   | 26     |
| **PART IV**  |                                                                       |   |   |
| Item 15.     | Exhibits and Financial  Statement Schedules                                |   | 27     |
|         | Signatures                                                                 |   | 28     |
|         | Financial Statements                                                       |   | F-1    |

 

 

 

2

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**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 oursubsidiaries.

 

**ITEM1.  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

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On October 19, 2007, the Companyamended its certificate of incorporation changing its name to “Petrocorp Inc.”and effected 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.

 

***Our Current Business***

 

We are an exploration stage Companyengaged 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 has significant lease holdings on the NorthSlope of Alaska, the Canadian Provinces of Alberta and Quebec, permitapplications pending in Italy and Netherlands, and oil and gas production inOklahoma.

 

**            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 fromthe public domain, to contain the East Kurupa gas field, discovered by Texacoin 1976.  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.

 

The Alaska leases are in areas whichthe Company believes are promising for gas production although the Company doesnot make any representations as to their future production, if any. Furthermore, any gas recovered from our Alaska leases will not be salableunless or until a proposed North Slope gas pipeline is completed.  We haveretained Frontier Land Inc. (an established land firm and a member of theAmerican Association of Professional Landmen) to conduct negotiations withother leaseholders regarding their acreage and to acquire other land interestswithin the vicinity of our tracts.

 

4

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

 

The Company’s Okfuskee and OkmulgeeCounty oil and gas leases are near oil and gas fields with proved developedproduction and within the general area of the “Woodford shale play”.  We haveretained Keith Summar (a member of the American Association of PetroleumGeologists) as a consultant to assist us in our Oklahoma operations.

* *

**            Alberta, Canada**

 

On May 14, 2008, the Company was thewinning bidder in a Crown Land sale for eight contiguous sections (totaling5,120 acres) of oil sands leases in the Peace River Oil Sands Area of northernAlberta, Canada.  The bids totaled $250,000 and the leases were issued byAlberta Energy on May 15, 2008, with a term of 15 years.

 

**            Quebec, Canada**

 

On June 23, 2008, the Companyreceived notification from the Province of Quebec that it was the successfulapplicant for seven oil and gas exploration permits (totaling 121,297 hectares;299,728 acres) in the Montreal area of the St. Lawrence Lowlands.  The Companypaid advance rentals totaling $12,000 to the Province of Quebec and expectsthat the permits will be formally issued in the spring of 2009 with an initialterm of five years.  The Company has committed to a five-year work programfollowing the formal issue of the permits with minimum expenditures of(expressed in Canadian dollars): $0.50 per hectare in the first year; $1.00 perhectare in the second year; $1.50 per hectare in the third year; $2.00 perhectare in the fourth year; and $2.50 per hectare in the fifth year.

 

**            Italy**

 

On January 20, 2009, the Government of Italymade the preliminary awards of the competitive oil and gas explorationlicenses, “Fiorenzuola D'Arda” located in the Po Valley and “Montottone”located in the Marche region, in favor of Mac Oil SpA, our subsidiary.  OnMarch 24, 2009, the Government of Italy made the preliminary award of thecompetitive oil and gas exploration license, “Melzo” located in the Po Valley,again in favor of Mac Oil SpA. The three Italy licenses cover a net surfacearea of 115,760 hectares (285,827 acres).

 

5

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The Company also has twocompetitive oil and gas exploration license applications pending awaitingadjudication by the Ministry of Economic Development in Italy covering a netsurface area of 27,240 hectares (67,259 acres).

 

            **Netherlands**

 

The Company has one license application pendingcovering a net surface area of 68,284 hectares (168,602 acres).

 

Internationally, we have retained DanieleAlbisetti and Christian Ceppi (members of the Swiss Geological Society, theSocietà Geologica Italiana (Italian Geological Society) and the GeologicalAssociation of Canada) as consultants to assist us in our 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 inthe face of this competition. No assurance can be given that sufficient oil andgas acreage will be available for acquisition and development.

 

***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 environmental protection.These laws and regulations are under constant review for amendment orexpansion. Changes in these regulations could require us to expend significantresources to comply with new laws or regulations or changes to currentrequirements 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.

 

6

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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.

* *

*           ***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 UnitedStates, a term broadly defined. Permits must be obtained to dischargepollutants into federal waters. The CWA provides for civil, criminal andadministrative penalties for unauthorized discharges of oil, hazardoussubstances and other pollutants. It imposes substantial potential liability forthe costs of removal or remediation associated with discharges of oil orhazardous substances. State laws governing discharges to water also providevarying civil, criminal and administrative penalties and impose liabilities inthe case of a discharge of petroleum or it derivatives, or other hazardoussubstances, into state waters. In addition, the EPA has promulgated regulationsthat may require us to obtain permits to discharge storm water runoff. In theevent of an unauthorized discharge of wastes, we may be liable for penaltiesand costs.

*** ***

7

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***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.

*** ***

***Internet Website***

*** ***

Ourwebsite address is http://www.petrocorp.us.

 

**Item 1A.  Risk Factors.**

 

You should carefullyconsider the risks described below, which constitute the material risks facingus.  If any of the following risks actually occur, our business could beharmed. You should also refer to the other information about us contained inthis Form 10-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.

 

**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 to manyrisks, 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.

 

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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 depends 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, worldprices 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.

 

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 ourCompany.

 

**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 ourCompany will 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.

 

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**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 toliability for pollution or other environmental damages which we may elect notto insure against due to prohibitive premium costs and other reasons. To datewe have not been required to spend material amounts on compliance withenvironmental regulations.  However, we may be required to do so in future andthis may affect our ability to expand or maintain our operations.

 

**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 and dispositionof hazardous wastes. In addition, legislation has been enacted which requireswell and facility sites to be abandoned and reclaimed to the satisfaction ofstate authorities. However, such laws and regulations are frequently changedand we are unable to predict the ultimate cost of compliance.

*** ***

***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 andAlaska properties covered by our oil and gas leases. Therefore, we will need toobtain additional financing in order to complete our business plan.  Wecurrently have limited operations and we have minimal oil and gas sales.

 

As of February 28, 2009, we have cash on hand ofapproximately $523,000 representing the remaining proceeds of our two 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 $600,000. Exploration (and if successful, development) of the Alaska prospects isunlikely to commerce until the next decade and it is impossible to forecastthese costs at this time.  Nevertheless, we will require substantial additionalfinancing to cover such costs.  Furthermore, we will require additionalfinancing to sustain our business operations if we are not successful inearning revenues once drilling is complete.

 

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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 anysignificant income producing oil and gas properties and we have limitedfinancial resources. We have not yet commenced our exploration activities norhave we generated any significant revenue since our incorporation. There is nomeans by which investors can evaluate our potential for success and there is noassurance that 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 begiven that we will ever operate on a profitable basis.

 

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 yieldnatural gas or oil in commercially viable quantities. If this happens, ourbusiness will likely fail and investors would likely lose their entireinvestment in our Company.**

 

11

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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 and operatingany well is uncertain and any wells we drill may not be productive. If we neverfind commercially viable resources of oil and gas, our business will fail andinvestors 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 ourcontrol which could have significant impacts on our future results.

 

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

 

James Fitzsimons, our president and a director,owns Soladino Investments SA, a Swiss corporation, that owns 17,800,000 sharesof our common stock, or 78.5% of the Company’s issued and outstanding shares.Due to this stock ownership, James Fitzsimons is able to substantiallyinfluence all matters requiring shareholder approval, including the election ofdirectors and approval of significant corporate transactions.  Suchconcentration of ownership may also have the effect of delaying or preventing achange in control, which may be to the benefit of our management but not in theinterest of the shareholders.  This stock ownership and potential effectivecontrol on all matters relating to the business and operations of our Companycould eliminate the possibility of shareholders changing the management in theevent that 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.

 

***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.**

 

12

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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 penny stockssuch 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 adividend.

 

**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 the holdersof 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.**

 

Our Articles of Incorporation and applicableDelaware law provide for the indemnification of our directors, officers,employees, and agents, under certain circumstances, against attorney's fees andother expenses incurred by them in any litigation to which they become a partyarising from their association with or activities on our behalf.  We will alsobear the expenses of such litigation or any of our directors, officers,employees, or agents, upon such person's promise to repay us, therefore, if itis ultimately determined 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.

 

13

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

** **

None

 

**ITEM2.  PROPERTIES.**

*** ***

***Leasehold Acreage***

 

We own interests indeveloped and undeveloped oil and natural gas acreage in the locations setforth below as of December 31, 2008.  These ownership interests generally takethe form of working interests in oil and natural gas leases or licenses thathave varying terms.

 

                                                                     Developed Acreage              Undeveloped Acreage      
|      State or Country                      | Gross  | Net    | Gross              | Net                |
|----------------------------------------------------------------|--------|--------|--------------------|--------------------|
|         Alaska              |   |   |   24,280      |   24,280      |
|         Oklahoma            | 1,504  | 752    |    4,875 |    2,057 |
|         Canada              |   |   | 286,713            | 286,713            |
|         Italy **(1)**       |   |   |               |               |
|         Netherlands **(2)** |   |   |               |               |
| Total                                                          | 1,504  | 752    | 315,868            | 313,050            |

 

**(1) **On January 20, 2009, theGovernment of Italy made the preliminary awards of the competitive oil and gasexploration licenses, “Fiorenzuola D'Arda” located in the Po Valley and“Montottone” located in the Marche region, in favor of Mac Oil SpA, oursubsidiary.  On March 24, 2009, the Government of Italy made the preliminaryaward of the competitive oil and gas exploration license, “Melzo” located inthe Po Valley, again in favor of Mac Oil SpA. The three Italy licenses cover anet surface area of 115,760 hectares (285,827 acres).

 

The Company also has two competitive oil and gas explorationlicense applications pending awaiting adjudication by the Ministry of EconomicDevelopment in Italy covering a net surface area of 27,240 hectares (67,259acres).

 

**(2)  **One license applicationpending covering a net surface area of 68,284 hectares (168,602 acres).

** **

***Leasehold Acreage Costs***

 

We have capitalizedleasehold acreage costs in developed and undeveloped oil and natural gasacreage in the locations set forth below as of December 31, 2008.

                                                                                                                  Capitalized Acreage Costs
|      State or Country                   | Developed                         | Undeveloped                           |
|-------------------------------------------------------------|-----------------------------------|---------------------------------------|
|         Alaska           |                              | $    442,086           |
|         Oklahoma **(1)** | $     304,053 |     215,997            |
|         Canada           |                              |     277,129            |
|         Italy            |                              |     228,868            |
|         Netherlands      |                              |       25,760 |
| Total                                                       | $    304,053       | $ 1,189,840                           |

 

**(1) **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.

*** ***

14

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***Oil and Gas DrillingActivity***

 

We own working interestsin one gross (.5 net) producing oil well and two gross (1.0 net) producing gaswells at December 31, 2008.  Of the three gross productive wells one had dualcompletions.  At December 31, 2008, we had six gross wells in progress.  TheCompany currently does not yet have sufficient production records to computethe quantities of proved oil and gas reserves as required by SEC RegulationS-X, Rule 4-10(a).

*** ***

***Corporate Offices***

 

Our office is located at 1065 Dobbs Ferry Road, White Plains, NY10607 and our telephone number is (914) 674-4373.  Should we require aregular permanent office we will attempt to locate one in the vicinity of ourleases and we believe that suitable properties are available at reasonablecosts.

 

**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.

 

**ITEM 4.  SUBMISSION of MATTERS to a VOTE ofSECURITY HOLDERS.**

 

No matters were submitted to a vote of securityholders, through the solicitation of proxies or otherwise during the Company’sfourth quarter.

 

# PART II

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

*** ***

***Stock Split/Dividends***

 

On October 19, 2007, the Company effected 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).

 

***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)** |   |
| Fiscal Year                        |   | High                 |   |   | Low |   |
| **YeYear Ended December31, 2008**  |   |                 |   |   |   |   |   |   |
| FirFourth Quarter **  ** |   | $                    | 2.10   |   |   | $ | 2.10 |   |
| SSThird Quarter               |   | $                    | 2.20   |   |   | $ | 2.10 |   |
| ThSecond Quarter              |   | $                    | 1.80   |   |   | $ | 1.80 |   |
| FoFirst Quarter               |   | $                    | -      |   |   | $ | - |   |

 

15

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(1)  Therewere no trades in our common stock until May 2008.

 

***Reports toShareholders***

 

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 February 28, 2009, we had five shareholders of record and22,680,000 common shares issued and outstanding.  The number of holdersdoes not include the shareholders 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.

*** ***

***Securities Authorized for Issuance underEquity Compensation Plans***

 

None

 

***Recent Salesof Unregistered Securities***

 

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).  Theshares were sold in transactions exempt from registration under Regulation S ofthe Securities Act of 1933, as amended.  The shares are not registered underthe Securities Act or any state securities laws and, unless so registered, maynot be offered or sold except pursuant to an applicable exemption from theregistration requirements of the Securities Act and applicable state securitieslaws.  The purchasers of the shares represented that they were acquiring theshares for their own account, for investment, and that the purchasers were notUS Persons within the meaning of Regulation S.  The Company has no obligationto register the resale of the shares under the Securities Act.  The proceedsfrom the sale of the shares will be used for working capital purposes.

 

 

 

## ITEM 6.  SELECTED FINANCIAL DATA.

 

Not applicable

16

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## 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 necessarily achieveany plans and objectives or projected financial results referred to in any ofthe forward-looking statements.  We do not undertake to release the results ofany revisions of these forward-looking statements to reflect future events orcircumstances.  Some of the factors that may cause actual results, developmentsand business decisions to differ materially from those contemplated by suchforward-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.

 

***Plan of Operation***

 

Our plan of operation for 2009 is to continuedrilling test wells on our Oklahoma oil and gas leases.  We anticipate the costof these programs will be approximately $600,000, however, this figure could bereduced, possibly substantially, by third-party working interest participation,arising particularly as a result of spacing and pooling applications andhearings.

 

We anticipate spending approximately $50,000 in2009 geologically evaluating our oil and gas exploration permits in theProvince of Quebec.

 

During 2009 we also anticipate spending $100,000on administrative expenses, including fees payable in connection with our compliancereporting obligations as a public company, such as legal, accounting and auditfees.

 

Total expenditures in 2009 therefore could be atleast $750,000.  While we have cash on hand to cover most of these expenses, wecould require additional funding.  We anticipate that additional funding willbe provided in the form of equity financing from the sale of our common stockor loans from directors. 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.

 

17

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***Results of Operations***

 

For the year ended December31, 2008, we had revenues of $24,151, oil and gas exploration costs of $28,297and incurred a loss of $346,414, as compared to no revenues and a loss of$61,124 in 2007. Salaries in 2008 were $120,000 as compared to $10,000 in2007.  Professional fees in 2008 were $156,368 as compared to $20,600 in 2007. General and administrative expenses for 2008 were $29,599 as compared to $5,648in 2007.  In addition, we incurred interest expense of $30,633 in 2008 ascompared to $6,076 in 2007.  The increase in our 2008 expenses is the result ofthe Company changing its business plan from telephonic conferencing services to the oil andgas sector.  TheCompany recorded a $16,929 impairment charge in 2007 related to its telephonicequipment.

*** ***

***Liquidity and Capital Resources***

 

Our Company's principal cash requirements arefor exploration expenses which we anticipate will rise as we proceed todetermine the feasibility of developing our current or future propertyinterests.  As of December 31, 2008, we had cash of $556,035 and negativeworking capital of $215,378.  Our net cash provided by financing activitiesfrom June 19, 2006 (inception) to December 31, 2008 was $2,288,158

 

In March 2008 we raised $1,000,000 from the saleof 800,000 shares of our common stock at $.625 per share.  This sale was to anunaffiliated party, completed pursuant to an exemption from registration underthe Securities Act of 1933, as amended, by Regulation S issued thereunder.

 

At December 31, 2008, the Company has a $734,058note payable to Soladino Investments SA , a Swiss corporation owned by ourpresident, Mr. Fitzsimons.  The note is secured by the Company’s oil and gas leases,is non interest bearing and payable upon demand.

 

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.

*** ***

We anticipate that additional funding will beprovided in the form of equity financing from the sale of our common stock orloans from directors. We cannot provide investors with any assurance thatadditional funds will be raised.  Currently, we do not have any arrangements inplace for future 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 nomaterial revenue generating activities that give rise to significantassumptions or estimates. Our most critical accounting policies relate to theaccounting and disclosure of related party transactions. Our financialstatements filed as part of this annual report include a summary of thesignificant accounting policies and methods used in the preparation of our financialstatements.

 

18

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***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.  QUANTITATIVEand QUALITATIVE DISCLOSURES about MARKET RISK.**

 

Not applicable.

** **

## ITEM 8.  FINANCIAL STATEMENTS and SUPPLEMENTARY DATA.

 

Our financial statements for the years ended December 31,2008 and 2007, 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.**

*** ***

***DisclosureControls and Procedures***

 

We maintaindisclosure controls and procedures (as defined in Rule 13a-15(e) under theExchange Act) that are designed to ensure that information that would berequired to be disclosed in Exchange Act reports is recorded, processed,summarized and reported within the time period specified in the SEC’s rules andforms, and that such information is accumulated and communicated to ourmanagement, including to our chief executive officer and chief financialofficer, as appropriate, to allow timely decisions regarding requireddisclosure.

 

As requiredby Rule 13a-15 under the Exchange Act, our management, including JamesFitzsimons, our chief executive officer and chief financial officer, evaluatedthe effectiveness of the design and operation of our disclosure controls andprocedures as of December 31, 2008.  Based on that evaluation, Mr. Fitzsimonsconcluded that as of December 31, 2008, and as of the date that the evaluationof the effectiveness of our disclosure controls and procedures was completed,our disclosure controls and procedures were effective to satisfy the objectivesfor which they are intended.

 

***Management’sAnnual Report on Internal Control over Financial Reporting***

 

Section 404of the Sarbanes-Oxley Act of 2002 requires that management document and testthe Company’s internal control over financial reporting and include in thisAnnual Report on Form 10-K a report on management’s assessment of theeffectiveness of our internal control over financial reporting.

 

Ourmanagement is responsible for establishing and maintaining adequate internalcontrol over financial reporting, as such term is defined in Rule 13a-15(f) ofthe Exchange Act.  Under the supervision and with the participation of ourmanagement, including James Fitzsimons, our chief executive officer and chieffinancial officer, we conducted an evaluation of the effectiveness of ourinternal control over financial reporting based upon the framework in InternalControl - Integrated Framework issued by the Committee of SponsoringOrganizations of the Treadway Commission (COSO).  Based on that evaluation, ourmanagement concluded that our internal control over financial reporting iseffective, as of December 31, 2008.

 

19

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This annualreport does not include an attestation report of our registered publicaccounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered publicaccounting firm pursuant to temporary rules of the Securities and ExchangeCommission that permit us to provide only management’s report in this annualreport.

*** ***

***Changes inInternal Controls over Financial Reporting.***

 

During thefiscal year ended December 31, 2008, there were no changes in our internalcontrol over financial reporting identified in connection with the evaluationperformed during the fiscal year covered by this report that has materiallyaffected, or is reasonably likely to materially affect, our internal controlover financial reporting.

 

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

 

We do nothave any information that was required to be reported on Form 8-K during thefourth quarter.

 

**PART 1II**

##  

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

 

Our directors and officers as of February 28, 2009 are:

 

 

| **Name**          | **  Age**                                | **Position(s) with the   Company**       |
|-------------------|-----------------------------------------------|------------------------------------------|
| James Fitzsimons  |         48 | Director, CEO, President and CFO **(1)** |
| Stephen M. Siedow |         59 | Director and CFO **(1)**                 |
| Frank J. Hariton  |         60 | 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 Oklahomaoil and gas industry for over five years.  Mr. Fitzsimons received a Bachelorof Laws degree from University College London.  His industry knowledge comesfrom direct experience of the oil and gas business both in Europe and theUnited 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, partnershipsand individuals.  Mr. Siedow specializes in public and SEC accounting and hasexperience in industries including construction, mining, oil and gas, andmergers/acquisitions.

 

20

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

 

***Family Relationships***

 

There are no family relationshipsamong our officers or directors.

 

***Involvement in Certain LegalProceedings***

 

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 criminalproceeding, excluding traffic violations or similar misdemeanors, or has been aparty to any judicial or administrative proceeding during the past five yearsthat resulted in a judgment, decree or final order enjoining the person fromfuture violations 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, principalaccounting officer or controller and any person who may perform similarfunctions.  As required by SEC rules, we will report the nature of any changeor waiver of our code of ethics.

 

 

21

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## ITEM11.  EXECUTIVE COMPENSATION.

*** ***

***Compensationof Executive Officers***

 

Thefollowing table sets forth information concerning the compensation of our namedexecutive officers for the fiscal years ended December 31, 2008 and 2007;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.

 
| **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)**  |   | 2008             | $120,000                                                                            |                                                             |                                  |                                 |                                                                  |                                                                                                                       |                                             | $120,000                   |
|                                                         | 2007   | $-0-             |                                                                                |                                                             |                                  |                                 |                                                                  |                                                                                                                       | $-0-                                             |
|                                                         |   |             |                                                                                |                                                             |                                  |                                 |                                                                  |                                                                                                                       |                                             |                       |
| Stephen M. Siedow,

Director **(2)**                         |   | 2008

2007       | $-0-

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

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

Secretary **(3)**                         |   | 2008             | $-0-                                                                                |                                                             |                                  |                                 |                                                                  |                                                                                                                       |                                             | $-0-                       |
|                                                         | 2007   | $-0-             |                                                                                |                                                             |                                  |                                 |                                                                  |                                                                                                                       | $-0-                                             |
|                                                         |   |             |                                                                                |                                                             |                                  |                                 |                                                                  |                                                                                                                       |                                             |                       |
| Peter Destler, former

CEO, President, and

Director **(4**) |   |  

2007     |  

$-0-                                                                        |                                                             |                                  |                                 |                                                                  |                                                                                                                       |                                             |  

$-0-               |
|                                                         |   |             |                                                                                |                                                             |                                  |                                 |                                                                  |                                                                                                                       |                                             |                       |
| Deborah Destler, former VP, Secretary and

Director **(4)**  |   |  

2007     |  

$-0-                                                                        |                                                             |                                  |                                 |                                                                  |                                                                                                                       |                                             |  

$-0-               |

 

 
| **(1**)    |   | James Fitzsimons has  been******the Company’s CEO, President and CFO since December 17,  2007 when Mssrs. Peter Destler and Deborah Destler resigned.  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 $77,700 for  accounting/consulting fees in 2008 and $2,300 in 2007.                                   |
|       |   |                                                                                                                                                                                                                                                                               |
| **(3**)    |   | Frank J. Hariton has  been the Company’s secretary since September 2007.  Mr. Hariton was paid  $26,500 for legal services in 2008 and $16,000 in 2007.                                                                                                                  |
| ** ** |   |                                                                                                                                                                                                                                                                               |
| **(4)**    |   | On  December 17, 2007 Mssrs. Peter Destler and Deborah Destler resigned as  officers and directors of our Company.  Fees paid to Peter Destler and  Deborah Destler in 2007 were as consultants to the Company.  Deborah Destler is  the sister-in-law of Peter Destler. |

 

***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.

*** ***

22

----

 

 

***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 nocompensatory plans or arrangements, including payments to be received from theCompany, with respect to any person named in the Summary Compensation Table setforth above that would in any way result in payments to any such person becauseof his or her resignation, retirement or other termination of such person’semployment with us.

 

***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 February 28, 2009, 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.

 

 

23

----

 
| *Name and Address*                    |   | *Amount & Nature*                                                |   |                                     |
|---------------------------------------|--------|----------------------------------------------------------------------|--------|------------------------------------------|
| *of Beneficial*                       |   | *of Beneficial*                                                      |   | *Percent*                                |
| *Owner **(1)***                       |   | *Ownership **(2)***                                                  |   | *of Class*                               |
|                                  |   |                                                                 |   |                                     |
| **James Fitzsimons  (3)**        |   | **17,800,000**                                                       |   | **78.50%**                               |
| 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**                                                       |   | **78.50%**                               |
| Via Quadrellas 4                      |   |                                                                 |   |                                     |
| CH-7500 St.                           |   |                                                                 |   |                                     |
| Moritz, Switzerland                   |   |                                                                 |   |                                     |
|                                  |   |                                                                 |   |                                     |
| **All officers and directors**        |   |                                                                 |   |                                     |
| as a  group (3 persons)               |   | **17,800,000**                                                       |   | **78.50%**                               |
|                                  |   |                                                                 |   |                                     |

 
| **(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 February  28, 2009, 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 Fittzsimons**.**                                                                                                                                                                                                                                                                                                                                                                                                    |

 

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 2008, 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 2008.

*** ***

***Changes in Control***

 

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

 

24

----

 

 

## 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 first wellon this acreage, the Snake Creek #1, spaced on 160 acres, has been successfullydrilled and completed.  The Middle Dutcher zone was fracture stimulated and isin production.  The Company reimbursed Mr. Fitzsimons for his historic costs(acreage and drilling) by issuing a secured, non-interest bearing note, payableon demand for $210,917 and assumed responsibility for all further costs.

** **

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 andOkmulgee Counties, Oklahoma from CH4 Energy, Inc., a company controlled bySoladino Investments SA at a cost of $583,823.  The Company reimbursed Soladinofor its historic costs (acreage) by issuing a secured, non-interest bearingnote, payable on demand for $583,823 and assumed responsibility for all furthercosts.

 

During the year ended December 31, 2008, theCompany imputed interest expense related to these notes of $30,274.  Interestwas imputed at an implied rate of 6% and the amounts were recorded as capitalcontributions by the Company.

** **

The Company was provided management services byits president, Mr. Fitzsimons during 2008 at no cost.  The Company recorded the$120,000 estimated value of these services as compensation expense and as acapital contribution.

** **

***Director Independence***

 

Our current directorsare James Fitzsimons and Stephen M. 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 2008 and 2007 were $14,000 and $7,500, respectively.

 

***Audit Related Fees***

 

None

 

25

----

 

***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.

 

26

----

**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: April 7, 2009

 

**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 7,  2009 |
|                                                                                                         |                                                          |           |
|     /s/ Stephen M. Siedow

         Stephen M. Siedow |      Director and CFO                     | April 7,  2009 |
|                                                                                                         |                                                          |           |
|                                                                                                              |                                                               |                |  |

 

 

 

 

----

** **

** **

** **

** **

**PETROCORP INC.**

**(An Exploration StageCompany)**

** **

**Index to Financial Statements**

 

 

 

                                                                                                                                    

|                                                                                      |   |   Page                                                           |
|-------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------|
|                                                                                      |   |                                                                  |
| Report of Independent  Registered Public Accounting Firm                                  |   |     F-1                                      |
|                                                                                      |   |                                                                  |
| Consolidated Balance  Sheets at December 31, 2008 and 2007                                |   |     F-2                                      |
|                                                                                      |   |                                                                  |
| Consolidated  Statements of Operations for the years ended December 31, 2008 and          |   |                                                                  |
|    2007 and for the  period June 19, 2006 (inception) through December 31, 2008 |   |    F-3                                            |
|                                                                                      |   |                                                                  |
| Consolidated Statement  of Stockholders’ Equity for the period June 19, 2006         |   |                                                                  |
|    (inception) through  December 31, 2008                                       |   |    F-4                                            |
|                                                                                      |   |                                                                  |
| Consolidated  Statements of Cash Flows for the years ended December 31, 2008 and          |   |                                                                  |
|    2007 and for the  period June 19, 2006 (inception) through December 31, 2008 |   |    F-5                                            |
|                                                                                      |   |                                                                  |
| Notes to the Consolidated  Financial Statements                                           |   |            F-6-F-14 |

 

 

 

----

 

 

**Report of Independent RegisteredPublic Accounting Firm**

 

 

To the Board of Directors and Stockholders

Petrocorp Inc.

White Plains, New York

 

We have audited the accompanying consolidatedbalance sheets of PetrocorpInc. and subsidiaries (an exploration stage company) (collectively,“Petrocorp” or the “Company”) as of December31, 2008 and 2007and the related statements of operations, stockholders’ equity and cash flowsfor the years then ended,and for theperiod June 19, 2006 (inception) through December 31, 2008.  These consolidatedfinancial statements are the responsibility of the Company’s management.  Ourresponsibility is to express an opinion on these financial statements based onour audits.

 

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, 2008 and2007 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, 2008, 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 deficitaccumulated during the exploration stage, a net loss from operations and netcash used in operations for the year ended December 31, 2008.  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

April 3, 2009

 

 

F-1

----

 

 

**PETROCORP INC.**

**(An Exploration StageCompany)**

** **

**Consolidated BalanceSheets**

| **ASSETS**                                                  |
|-------------------------------------------------------------|
|                                                        |   |   |   |   |   |   |
|                                                   |   | December 31, |
|                                                   |   | 2008 |   | 2007 |
|                                                        |   |   |   |   |   |   |
| Current assets:                                             |   |   |   |   |   |   |
|  Cash                                                  |   |     $ | 556,035 |   |     $ | 827,755 |
|  Revenue receivables                                   |   |   | 33,962 |   |   |            - |
|   Total current assets                                 |   |   | 589,997 |   |   | 827,755 |
|                                                        |   |   |   |   |   |   |
| Oil and gas properties  (successful efforts method):        |   |   |   |   |   |   |
|  Developed                                             |   |     | 304,053 |   |      | - |
|  Undeveloped                                           |   |     | 1,189,840 |   |      | 385,286 |
|    Total oil and gas  properties                  |   |     | 1,493,893 |   |       | 385,286 |
|                                                        |   |   |   |   |   |   |
| Total assets                                                |   | $ | 2,083,890 |   | $ | 1,213,041 |
| ** **                                                  | ** ** |   |   |   |   |   |
| ** **                                                  | ** ** |   |   |   |   |   |
| **LIABILITIES AND STOCKHOLDERS’ EQUITY**               |
| ** **                                                  | ** ** |   |   |   |   |   |
| Current  liabilities:                                       |   |   |   |   |   |   |
|  Accrued expenses                                      |   | $ | 71,317 |   | $ | 18,886 |
|  State of Alaska payable                               |   |   | -  |   |   | 279,500 |
|  Notes payable to majority  stockholder                |   |   | 734,058 |   |   | 440,000 |
|    Total current  liabilities                     |   |   | 805,375 |   |   | 738,386 |
|                                                        |   |   |   |   |   |   |
| 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  and 21,880,000 shares issued |   |   |   |   |   |   |
|   and outstanding,  respectively                       |   |   | 2,268 |   |   | 2,188 |
|  Additional paid-in capital                            |   |   | 1,711,182 |   |   | 560,988 |
|  Deficit accumulated during  the exploration stage     |   |   | (434,935) |   |   | (88,521) |
|    Total stockholders’  equity               |   |   | 1,278,515 |   |   | 474,655 |
| ** **                                                  | ** ** |   |   |   |   |   |
| Total liabilities and  stockholders’ equity            |   | $ | 2,083,890 |   | $ | 1,213,041 |

 
|  |  |  |  |  |  |  |  |  |  |
|--|--|--|--|--|--|--|--|--|--|

 

See accompanying notes tothe consolidated financial statements.

F-2

----

**PETROCORP INC.**

**(An Exploration StageCompany)**

##  

## Consolidated Statements of Operations

 

   

|                                             |         |                                              |       |               |                                                                            |       |   |  June 19, 2006  |
|--------------------------------------------------|--------------|---------------------------------------------------|------------|--------------------|---------------------------------------------------------------------------------|------------|--------|----------------------|
|                                             |         |                                              |       |               |                                                                            |       |   |  (inception) to |
|                                             |         |      Year Ended  December 31, |       |  December 31, |
|                                             |         | 2008                                              |       | 2007               |                                                                            | 2008       |
|                                             |         |                                              |       |               |                                                                            |       |   |                 |   |
| Revenues:                                        |         |                                              |       |               |                                                                            |       |   |                 |   |
|   Oil and gas                               |         | $                                                 | 24,151     |               |  $                                                                         | -     |   |  $              | 24,151 |
|                                             |         |                                              |       |               |                                                                            |       |   |                 |   |
| Costs and expenses:                              |         |                                              |       |               |                                                                            |       |   |                 |   |
|   Oil and gas                               |         |                                              | 18,838     |               |                                                                       |       |   |            | 18,838 |
|   Depletion,  depreciation and amortization |         |                                              | 3,750      |               |                                                                       | 1,071      |   |            | 4,821 |
|   Exploration                               |         |                                              | 5,709      |               |                                                                       |       |   |            | 5,709 |
|   Impairment of  equipment                  |         |                                         |       |               |                                                                       | 16,929     |   |            | 16,929 |
|   Salaries                             |         |                                              | 120,000    |               |                                                                            | 10,000     |   |                 | 130,000 |
|   Professional fees                         |         |                                              | 156,368    |               |                                                                            | 20,600     |   |                 | 176,968 |
|   General and  administrative               |         |                                              | 29,599     |               |                                                                       | 5,648      |   |            | 61,444 |
|   Franchise taxes                           |         |                                         | 7,386      |               |                                                                       | 800        |   |            | 8,986 |
|                                             |         |                                              | 341,650    |               |                                                                            | 55,048     |   |                 | 424,095 |
| Loss from operations                             |         |                                              | (317,499)  |               |                                                                            | (55,048)   |   |                 | (399,944) |
|                                             |         |                                              |       |               |                                                                            |       |   |                 |   |
| Other income  (expense):                         |         |                                              |       |               |                                                                            |       |   |                 |   |
|   Interest income                           |         |                                         | 1,718      |               |                                                                       |       |   |            | 1,718 |
|   Interest expense                          |         |                                         | (30,633)   |               |                                                                       | (6,076)    |   |            | (36,709) |
|                                             |         |                                              | (28,915)   |               |                                                                            | (6,076)    |   |                 |          (6,076)             (34,991) |
| Loss before income  taxes                        |         |                                              | (346,414)  |               |                                                                       | (61,124)   |   |            | (434,935) |
|                                             |         |                                              |       |               |                                                                            |       |   |                 |   |
| Provision for income  taxes                      |         |                                              | -     |               |                                                                       | -     |   |            | - |
| Net loss                                         |         | $                                                 | (346,414)  |               | $                                                                               | (61,124)   |   | $                    | (434,935) |
|                                             |         |                                              |       |               |                                                                            |       |   |                 |   |
| Net loss per common  share -                     |         |                                              |       |               |                                                                            |       |   |                 |   |
|   basic and diluted                         |         | $                                                 | (0.02)     |               |  $             | (0.01)     |   |                 |   |
|                                             |         |                                              |       |               |                                                                            |       |   |                 |   |
| Weighted average  number of                      |         |                                              |       |               |                                                                            |       |   |                 |   |
|   common shares  outstanding                |    |                                              | 22,680,000 |               |                                                                            | 20,342,500 |   |                 |   |

 

** **

See accompanying notes tothe consolidated financial statements.

F-3

----

****

**PETROCORP INC.**

**(An Exploration StageCompany)**

** **

**Consolidated Statementof Stockholders’ Equity**

**For the PeriodJune 19, 2006 (Inception) through December 31, 2008**

** **

 

|                                 |   |                                        |   |                       |          |       |       |      |              | Deficit   |
|--------------------------------------|--------|---------------------------------------------|--------|----------------------------|---------------|------------|------------|-----------|-------------------|---------------------|
|                                 |   |                                        |   |                       |          |       | Additional |      |  Accumulated |
|                                 |   |     Common Stock   |   |     Paid-in |          |  from |
|                                 |   |   Shares                               |   |                       |   Amount |       | Capital    |      |  Inception   |
|                                 |   |                                        |   |                       |          |       |       |      |              |                |   |
| Balances, June 19,  2006 (inception) |   | -                                           |   | $                          | -        |       |  $    | -    |              |  $             | - |
|   Common stock issued  for cash |   | 20,000,000                                  |   |                       | 2,000         |       |       | (1,900)   |              |                |   |
|   Common stock issued  for cash |   | 600,000                                     |   |                       | 60            |       |       | 29,940    |              |                |   |
|   Net loss for the  period      |   |                                        |   |                       |          |       |       |      |              |                | (27,397) |
| Balances, December 31,  2006         |   | 20,600,000                                  |   |                       | 2,060         |       |       | 28,040    |              |                | (27,397) |
|   Common stock issued  for cash |   | 480,000                                     |   |                       | 48            |       |       | 23,952    |              |                |   |
|   Capital contribution          |   |                                        |   |                       |          |       |       | 3,000     |              |                |   |
|   Common stock issued  for cash |   | 800,000                                     |   |                       | 80            |       |       | 499,920   |              |                |   |
|   Interest  contribution        |   |                                        |   |                       |          |       |       | 6,076     |              |                |   |
|   Net loss for the  year        |   |                                        |   |                       |          |       |       |      |              |                | (61,124) |
| Balances, December 31,  2007         |   | 21,880,000                                  |   |                       | 2,188         |       |       | 560,988   |              |                | (88,521) |
|   Common stock issued  for cash |   | 800,000                                     |   |                       | 80            |       |       | 999,920   |              |                |   |
|   Salary contribution           |   |                                        |   |                       |          |       |       | 120,000   |              |                |   |
|   Interest  contribution        |   |                                        |   |                       |          |       |       | 30,274    |              |                |   |
|   Net loss for the  year        |   |                                        |   |                       |          |       |       |      |              |                | (346,414) |
| Balances, December 31,  2008         |   | 22,680,000                                  |   |  $                    | 2,268         |       |  $    | 1,711,182 |              |  $             | (434,935) |

** **

** **

 

See accompanying notes tothe consolidated financial statements.

F-4

----

**PETROCORP INC.**

**(An Exploration StageCompany)**

** **

## Consolidated Statements of Cash Flows

   

|                                                                                            |   |                     |          |                |         |         |   |  June19, 2006 |
|-------------------------------------------------------------------------------------------------|--------|--------------------------|---------------|---------------------|--------------|--------------|--------|--------------------|
|                                                                                            |   |                     |          |                |         |         |   | (inception) to     |
|                                                                                            |   | Year Ended December 31,  |          |   December 31, |
|                                                                                            |   | 2008                     |          | 2007                |         | 2008         |
|                                                                                            |   |                     |          |                |         |         |   |               |   |
| Cash flows from  operating activities:                                                          |   |                     |          |                |         |         |   |               |   |
|   Net loss                                                                                 |   | $                        | (346,414)     |                | $            | (61,124)     |   | $                  | (434,935) |
|   Adjustments to  reconcile net loss to net cash                                           |   |                     |          |                |         |         |   |               |   |
|     (used in) provided  by operating activities:                                 |   |                     |          |                |         |         |   |               |   |
|     Capital  contribution                                                        |   |                     |          |                |         | 3,000        |   |               | 3,000 |
|     Depletion,  depreciation and amortization                                    |   |                     | 3,750         |                |         | 1,071        |   |               | 4,821 |
|     Impairment of  equipment                                                     |   |                     |          |                |         | 16,929       |   |               | 16,929 |
|     Salary contribution                                                          |   |                     | 120,000       |                |         |         |   |               | 120,000 |
|     Interest  contribution                                                       |   |                     | 30,274        |                |         | 6,076        |   |               | 36,350 |
|     Changes in operating  assets and liabilities:                                |   |                     |          |                |         |         |   |               |   |
|         Accounts  receivable                                 |   |                | (33,962)      |                |         |    |   |               | (33,962) |
|         Accrued  expenses                                    |   |                     | 52,431        |                |         | (943)        |   |               | 71,317 |
|         State of Alaska  payable                             |   |                     | (279,500)     |                |    | 279,500      |   |          | - |
|         Net cash (used  in) provided by operating activities |   |                     | (453,421)     |                |         | 244,509      |   |          | (216,480) |
|                                                                                            |   |                     |          |                |         |         |   |               |   |
| Cash flows from  investing activities:                                                          |   |                     |          |                |         |         |   |               |   |
|     Acquisition of oil  and gas properties                                       |   |      | (1,112,357)   |                |         | (385,286)    |   |               | (1,497,643) |
|     Purchase of  equipment                                                       |   |                     | -   |                |    | (18,000)     |   |          | (18,000) |
|                                                              |   |                     | (1,112,357)   |                |         | (403,286)    |   |               | (1,515,643) |
|                                                                                            |   |                     |          |                |         |         |   |               |   |
| Cash flows from  financing activities:                                                          |   |                     |          |                |         |         |   |               |   |
|     Notes payable to  majority stockholder                                       |   |                     | 384,058       |                |         | 440,000      |   |               | 824,058 |
|     Repayment of notes  to majority stockholder                                  |   |                     | (90,000)      |                |         | -       |   |               | (90,000) |
|     Proceeds from sale  of common stock                                          |   |                     | 1,000,000     |                |    | 524,000      |   |          | 1,554,100 |
|       Net cash provided  by financing activities                       |   |                     | 1,294,058     |                |    | 964,000      |   |          | 2,288,158 |
|                                                                                            |   |                     |          |                |         |         |   |               |   |
| Net (decrease) increase  in cash                                                                |   |                     | (271,720)     |                |         | 805,223      |   |               | 556,035 |
| Cash at beginning of  year                                                                      |   |                     | 827,755       |                |    | 22,532       |   |          | - |
| Cash at end of year                                                                             |   | $                        | 556,035       |                |  $      | 827,755      |   |  $            | 556,035 |
|                                                                                            |   |                     |          |                |         |         |   |               |   |
| Supplemental disclosure  of cash flow information:                                              |   |                     |          |                |         |         |   |               |   |
|     Cash paid for  interest                                                      |   | $                        | 359           |                |         |         |   | $                  | 359 |
|     Cash paid for taxes                                                          |   | $                        | -             |                |         |         |   | $                  | - |
| Supplemental disclosure  of noncash investing and                                               |   |                     |          |                |         |         |   |               |   |
|    financing  activities:                                                             |   |                     |          |                |         |         |   |               |   |
|     Capital  contribution                                                        |   | $                        | -             |                |  $      | 3,000        |   |  $            | 3,000 |
|     Salary contribution                                                          |   | $                        | 120,000       |                |         |         |   |  $            | 120,000 |
|     Interest  contribution                                                       |   | $                        | 30,274        |                |  $      | 6,076        |   |  $            | 36,350 |

See accompanying notes tothe consolidated financial statements.

F-5

----

 

**PETROCORP INC.**

**(An Exploration Stage Company)**

 

**Notes to the Consolidated Financial Statements**

**December 31, 2008 and 2007**

 

**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 (“U.S. GAAP”).

* *

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

 

*Exploration stage company*

 

The Company is an exploration stage company as definedby Statement of Financial Accounting Standards No. 7*“Accounting andReporting by Development Stage Enterprises”*(“SFAS No. 7”).  Although theCompany has recognized some nominal amount of revenue, the Company is stilldevoting substantially all of its efforts on establishing the business and,therefore, still qualifies as a development stage company.  All losses sinceinception have been considered part of the Company’s exploration stageactivities.

* *

F-6

----

 

* *

**PETROCORP INC.**

**(An Exploration Stage Company)**

 

**Notes to the Consolidated Financial Statements**

**December 31, 2008 and 2007**

*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.

 

*Cash equivalents*

 

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

 

*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 Statement of FinancialAccounting Standards No. 19 “*Financial Accounting and Reporting byOil and Gas Producing Companies”* (“SFAS No. 19”).  The costs of developmentwells are capitalized whether productive or nonproductive.  Oil and gas leaseacquisition costs are also capitalized.  Interest cost is capitalized as acomponent of property cost for significant exploration and development projectsthat require greater than six months to be readied 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 to expense. If the unevaluated properties are subsequently determined to be productive,the related costs are transferred to proved oil and gas properties.  Proceedsfrom sales of partial interests in unproved leases are accounted for as arecovery of cost without recognizing any gain until all costs are recovered.

 

The Company reviews itsproved oil and gas properties for impairment whenever events and circumstancesindicate a decline in the recoverability of their carrying value may haveoccurred. The Company estimates the expected undiscounted future cash flows ofits oil and gas properties and compares such undiscounted future cash flows tothe carrying amount of the oil and gas properties to determine if the carryingamount is recoverable. If the carrying amount exceeds the estimatedundiscounted future cash flows, the Company will adjust the carrying amount ofthe oil and gas properties to fair value.  The factors used to determine fairvalue include, but are not limited to, recent sales prices of comparableproperties, estimates of proved reserves, future commodity pricing, futureproduction estimates, anticipated capital expenditures, and a discount ratecommensurate with the risk associated with realizing the expected cash flowsprojected.

 

F-7

----

**PETROCORP INC.**

**(An Exploration Stage Company)**

 

**Notes to the Consolidated Financial Statements**

**December 31, 2008 and 2007**

 

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.

*** ***

*Furniture, equipment andother*

 

Furniture and other office and field equipmentare recorded at cost.  Costs of renewals and improvements that substantiallyextend the useful lives of the assets are capitalized.  Leasehold improvementsare amortized over the lesser of five years or the life of the lease. Maintenance and repairs are expensed when incurred. Depreciation of otherproperty and equipment is computed using the straight-line method over theirestimated useful lives of three to ten years.  Upon retirement or dispositionof assets, the costs and related accumulated depreciation are removed from theaccounts with the resulting gains or losses, if any, reflected in results ofoperations.

 

In September 2007, the Company recorded animpairment charge of $16,929 related to its telephonic equipment when theCompany changed the direction of its efforts from telephonic conferencingservices to the oil and gas sector.

 

*Fair value of financial instruments*

 

The fair value of a financialinstrument is the amount at which the instrument could be exchanged in acurrent transaction between willing parties.  The carrying amounts of financialassets and liabilities, such as cash, revenue receivables, accounts payable,accrued expenses, and the State of Alaska payable approximate their fair valuesbecause of the short maturity of these instruments.  The 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 financialarrangements at December31, 2008and 2007.

 

*Revenue recognition*

 

The Company follows the guidance of the United StatesSecurities and Exchange Commission’s Staff Accounting Bulletin (“SAB”) No. 101 *“Revenue Recognition”* (“SAB No. 101”), as amended by SAB No. 104 (“SAB No. 104”) for revenue recognition.  The Company recognizes revenue when it is realized or realizableand earned less estimated future doubtfulaccounts.  The Company considers revenuerealized or realizable and earned when all of the following criteria are met:(i) persuasive evidence of an arrangement exists, (ii) the product has beenshipped or 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.

F-8

----

**PETROCORP INC.**

**(An Exploration Stage Company)**

 

**Notes to the Consolidated Financial Statements**

**December 31, 2008 and 2007**

 

*Income taxes*

 

The Company recognizes deferred income taxliabilities and assets for the expected future tax consequences of events thathave been recognized in the financial statements or tax returns.  Under thismethod, deferred tax liabilities and assets are determined based on thedifferences between the financial statement carrying amounts and the tax basisof assets and liabilities using enacted tax rates in effect in the years inwhich the differences are expected to reverse.

 

*Net loss per common share*

 

Statement of Financial Accounting Standards No.128 “*Earnings per Share”* (“SFAS No. 128”), requires dual presentation ofbasic and diluted earnings or loss per share (“EPS”) for all entities withcomplex capital structures and requires a reconciliation of the numerator anddenominator of the basic EPS computation to the numerator and denominator ofthe diluted EPS computation.  Basic EPS excludes dilution; diluted EPS reflectsthe potential dilution that could occur if securities or other contracts toissue common stock were exercised or converted into common stock or resulted inthe issuance of common stock 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, 2008 or 2007.

 

*Recently issued accounting pronouncements*

 

In June 2003, the Securities andExchange Commission (“SEC”) adopted final rules under Section 404 of theSarbanes-Oxley Act of 2002 (“Section 404”), as amended by SEC Release No. 33-8934on June 26, 2008.  Commencing with its annual report for the year endingDecember 31, 2009, 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 if its internal control over financial     reporting as of year end; and

F-9

----

**PETROCORP INC.**

**(An Exploration Stage Company)**

 

**Notes to the Consolidated Financial Statements**

**December 31, 2008 and 2007**

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

 

Furthermore, in the following fiscal year, it isrequired to file the auditor’s attestation report separately on the Company’sinternal control over financial reporting on whether it believes that theCompany has maintained, in all material respects, effective internal controlover financial reporting.

 

In December 2007, the FASB issued FASB Statement No. 141 (Revised 2007)*“Business Combinations”*(“SFAS No. 141(R)”), which requires the Company to record fair value estimatesof contingent consideration and certain other potential liabilities during theoriginal purchase price allocation, expense acquisition costs as incurred anddoes not permit certain restructuring activities previously allowed underEmerging Issues Task Force Issue No. 95-3 to be recorded as a component ofpurchase accounting.  SFAS No. 141(R) applies prospectively to businesscombinations for which the acquisition date is on or after the beginning of thefirst annual reporting period beginning on or after December 15, 2008, except for the presentation and disclosure requirements,which shall be applied retrospectively for all periods presented.  The Companyhas not determined the effect that the adoption of SFAS No. 141(R) will have onits financial statements.

 

In December 2007, the FASB issued FASB Statement No. 160*“Non-controlling Interests in Consolidated FinancialStatements - an amendment of ARB No. 51”* (“SFAS No. 160”), which causesnon-controlling interests in subsidiaries to be included in the equity sectionof the balance sheet.  SFAS No. 160 applies prospectively to businesscombinations for which the acquisition date is on or after the beginning of thefirst annual reporting period beginning on or after December 15, 2008, except for the presentation and disclosure requirements,which shall be applied retrospectively for all periods presented.  The Companyhas not determined the effect that the adoption of SFAS No. 160 will have onits financial statements.

 

In March 2008, the FASB issued FASB Statement No. 161,*Disclosures about Derivative Instruments andHedging Activities an amendment of FASB Statement No. 133* (“SFAS No. 161”). This statement changes the disclosure requirements for derivative instrumentsand hedging activities.  Pursuant to SFAS No. 161, Entities are required toprovide enhanced disclosures about (a) how and why an entity uses derivativeinstruments, (b) how derivative instruments and related hedged items areaccounted for under Statement 133 and its related interpretations, and (c) howderivative instruments and related hedged items affect an entity’s financialposition, financial performance, and cash flows.  SFAS No. 161 is effective forfinancial statements issued for fiscal years and interim periods beginningafter November 15, 2008 with early application encouraged.  SFAS No. 161encourages but does not require disclosures for earlier periods presented forcomparative purposes at initial adoption.  In years after initial adoption,this statement requires comparative disclosures only for periods subsequent toinitial adoption.  The Company does not expect the application of SFAS No. 161to have a material effect on its financial statements.

 

Management does not believe that any otherrecently issued, but not yet effective accounting pronouncements, when adopted,will have a material effect on its financial statements.

 

F-10

----

**PETROCORP INC.**

**(An Exploration Stage Company)**

 

**Notes to the Consolidated Financial Statements**

**December 31, 2008 and 2007**

 

 

 

 

**Note 3 – Going Concern**

 

The consolidated financial statements have beenprepared on a going concern basis, which assumes the Company will be able torealize its assets and discharge its liabilities in the normal course ofbusiness.  At December 31, 2008, the Company had a deficit accumulated duringthe exploration stage of $434,935, a net loss of $346,414 with revenues of $24,151and cash used in operations of $453,421 for the year then ended.  Theseconditions raise substantial doubt about the Company’s ability to continue as agoing 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 or loans from its majority shareholder.  Theability of the Company to continue as a going concern is dependent upon its ability tofurther implement its business plan, generate sufficient revenues and raiseadditional capital.  The financial statements do not include any adjustmentsthat might be necessary if the Company is unable to continue as a goingconcern.

 

**Note4 - Oil and Gas Properties**

* *

*Leasehold Acreage*

 

Petrocorp owns interestsin developed and undeveloped oil and natural gas acreage in the locations setforth below as of December 31, 2008.  These ownership interests generally takethe form of working interests in oil and natural gas leases or licenses thathave varying terms.

 

                                                                     Developed Acreage              Undeveloped Acreage      
|      State or Country                        | Gross  | Net    | Gross              | Net                |
|------------------------------------------------------------------|--------|--------|--------------------|--------------------|
|         Alaska                |   |   |   24,280      |   24,280      |
|         Oklahoma              | 1,504  | 752    |    4,875 |    2,057 |
|         Canada                |   |   | 286,713            | 286,713            |
|         Italy **(1)**         |   |   |               |               |
|         Netherlands   **(2)** |   |   |               |               |
| Total                                                            | 1,504  | 752    | 315,868            | 313,050            |

 

**(1)**On January 20, 2009, theGovernment of Italy made the preliminary award of the competitive oil and gasexploration licenses, “Fiorenzuola D'Arda” located in the Po Valley and“Montottone” located in the Marche region, in favor of Mac Oil SpA, oursubsidiary.  On March 24, 2009, the Government of Italy made the preliminaryaward of the competitive oil and gas exploration license, “Melzo” located inthe Po Valley, again in favor of Mac Oil SpA. The three Italy licenses cover a net surface area of 115,760 hectares (285,827 acres).

 

The Company also has two competitive oil and gas explorationlicense applications pending awaiting adjudication by the Ministry of EconomicDevelopment in Italy covering a net surface area of 27,240 hectares (67,259acres).

 

**(2) **One license application pending covering a net surface areaof 68,284 hectares (168,602 acres).

 

F-11

----

 

** **

**PETROCORP INC.**

**(An Exploration Stage Company)**

 

**Notes to the Consolidated Financial Statements**

**December 31, 2008 and 2007**

*Leasehold Acreage Costs*

 

Petrocorp hascapitalized leasehold acreage costs in developed and undeveloped oil andnatural gas acreage in the locations set forth below as of December 31, 2008and 2007.

 

                                                                                                CapitalizedAcreage Costs
|                                                   | 2008                              | 2007                                  |
|--------------------------------------------------------|-----------------------------------|---------------------------------------|
|      State or Country              | Developed                         | Undeveloped                           | Undeveloped |
|         Alaska      |                              | $    442,086           | $  369,500 |
|         Oklahoma    | $     304,053 |     215,997            |       15,786 |
|         Canada      |                              |     277,129            |   |
|         Italy       |                              |     228,868            |   |
|         Netherlands |                              |       25,760 |   |
| Total                                                  | $    304,053       | $ 1,189,840                           | $  385,286 |

 

*Oil and Gas DrillingActivity*

 

The Company owns workinginterests in one gross (.5 net) producing oil well and two gross (1.0 net)producing gas wells at December 31, 2008.  Of the three gross productive wells onehad dual completions.  At December 31, 2008, Petrocorp had six gross wells inprogress.

 

**Note 5 - Notes Payable to Majority Stockholder**

** **

At December 31, 2007, the Company had $440,000 inunsecured, non-interest bearing notes (two), payable on demand with its presidentand majority stockholder James Fitzsimons.  In June 2008, the Company repaid a$90,000 unsecured, non-interest bearing note with Mr. Fitzsimons.

 

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.  At December 31, 2008, the Company has anote payable to Soladino for $734,058.  The note is secured by the Company’s oil and gasleases, is non interest bearing and payable upon demand.

 

During the years ended December 31, 2008 and2007, the Company imputed interest expense related to these notes of $30,274and $6,076, respectively.  Interest was imputed at an implied rate of 6% perannum and the amounts were recorded as capital contributions by the Company.

 

**Note 6 - 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 16 individuals. 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.

 

F-12

----

**PETROCORP INC.**

**(An Exploration Stage Company)**

 

**Notes to the Consolidated Financial Statements**

**December 31, 2008 and 2007**

 

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.

 

**Note 7 - Income Taxes**

 

*Deferred tax assets*

 

The Company incurred no income taxes for theyears ended December 31, 2008 and 2007.  The expected income tax benefit forthe years ended December 31, 2008 and 2007 was approximately $78,100 and $12,200,respectively.

 

The components of deferred taxassets at December 31, 2008 and 2007 are:

 

|                                                 |   | December 31, 2008 |    |   | December 31, 2007 |   |
|------------------------------------------------------|--------|-------------------|---------|--------|-------------------|--------|
|                                                 |   |              |    |   |              |   |   |   |
| Net deferred tax assets -  Non-current:              |   |              |    |   |              |   |   |   |
| Expected income tax benefit  from NOL carry-forwards |   | $                 | 95,800  |   |              |   | 17,700 |   |
| Less valuation allowance                             |   |              | (95,800 | )      |              |   | (17,700 | ) |
|                                                 |   |              |    |   |              |   |
| 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, 2008 |   |   | For the  Year Ended December 31, 2007 |   |
|---------------------------------------------------------------------|--------|-----------------------------------------|--------|--------|---------------------------------------|--------|
|                                                                |   |                                    |   |   |                                  |   |   |   |
| 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    | %      |                                  |   | 0.0 | % |

 

The Company’s net operating loss carry-forwardsof approximately $275,600 at December 31, 2008 are available to offset futuretaxable income, if any, and expire in 2028.

** **F-13

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**PETROCORP INC.**

**(An Exploration Stage Company)**

 

**Notes to the Consolidated Financial Statements**

**December 31, 2008 and 2007**

 

 

** **

**Note 8 - 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 firstwell on this acreage, the Snake Creek #1, spaced on 160 acres, has beensuccessfully drilled and completed.  The Middle Dutcher zone was fracturestimulated and is in production.  The Company reimbursed Mr. Fitzsimons for hishistoric costs (acreage and drilling) by issuing a secured, non-interestbearing note, payable on demand for $210,917 and assumed responsibility for allfurther 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 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.

** **

The Company was provided management services byits president, Mr. Fitzsimons during 2008 at no cost.  The Company recorded the$120,000 estimated value of these services as compensation expense and as acapital contribution.

** **

The Company was provided legal andadministrative services and office space by Mr. Hariton, our CorporateSecretary.  Mr. Hariton was paid $26,500 in 2008 and $16,000 in 2007 for theseservices.

* *

**Note 9 - Subsequent Event**

 

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 leases are held in the name of Frontier Land, Inc. as fiduciarytrustee for the benefit of the Company’s subsidiary Petrocorp (Oklahoma) Inc.

* *

* *

 F-14

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Exhibit 21

 

**SUBSDIARIES**

 

Union Energy (Alaska), LLC, an Alaska limitedliability company.

 

Mac Oil SpA, an Italian public limited liability company.

 

Petrocorp Italia SRL, an Italian limited liability company.

 

Union Energy (Alberta), LLC, a Colorado limited liability company.

 

Petrocorp (Oklahoma), Inc. an Oklahoma corporation