FORWARD-LOOKING STATEMENTS
This
report contains forward-looking statements within the meaning of Section 27A of
the Securities Act of 1933, as amended (the Securities Act), and Section 21E
of the Securities Exchange Act of 1934, as amended (the Exchange Act). All
statements other than statements of historical facts are forward-looking
statements. You can find many of these statements by looking for words such as
believes, expects, anticipates, estimates, intends, or similar
expressions used in this report.
These forward-looking
statements are subject to numerous assumptions, risks and uncertainties.
Factors which may cause our actual results, performance or achievements to be
materially different from any future results, performance or achievements
expressed or implied by us in those statements include, among others, the
following:
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the quality of our
properties with regard to, among other things, the existence of reserves in
economic quantities;
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uncertainties about
the estimates of reserves;
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our ability to
increase our production and oil and natural gas income through exploration
and development;
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the number of well
locations to be drilled and the time frame within which they will be drilled;
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the timing and extent
of changes in commodity prices for natural gas and crude oil;
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domestic demand for
oil and natural gas;
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drilling and operating
risks;
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the availability of
equipment, such as drilling rigs and transportation pipelines;
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changes in our
drilling plans and related budgets;
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the adequacy of our
capital resources and liquidity including, but not limited to, access to
additional borrowing capacity; and
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other factors discussed
under Item 1A Risk Factors with the heading Risks Related To Our Business.
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Because such statements
are subject to risks and uncertainties, actual results may differ materially
from those expressed or implied by the forward-looking statements. You are
cautioned not to place undue reliance on such statements, which speak only as
of the date of this report.
PART I
References to us, we
and our in this report refer to Petrocorp Inc. together with our
subsidiaries.
ITEM
1. BUSINESS.
Background
We were incorporated as GD Conference Center,
Inc. under the laws of Delaware on June 16, 2006. Prior to September 2007, the
Companys business model provided telephonic conferencing services to
businesses, organizations and individuals in North America. Due to capital constraints and because its executives could
no longer serve the Company without compensation, the Company decided to change
directions.
On September 20, 2007, the Company
entered the oil and gas exploration and production business with the
acquisition of three separate farm-out agreements from James Fitzsimons. Mr.
Fitzsimons also purchased 17,800,000 shares of the Companys common stock from
certain shareholders, resulting in him owning 84.5% of the Companys then
outstanding shares for $454,000. Mr. Fitzsimons was elected a director of the
Company.
3
On October 19, 2007, the Company
amended its certificate of incorporation changing its name to Petrocorp Inc.
and effected a five for one forward stock split which increased the
authorized common stock to 100,000,000 shares at $.0001 par value. On
August 13, 2008, the Companys board of directors approved a stock dividend on
its outstanding common stock. The ratio for the stock dividend was four shares
to each share owned (4:1). All share and per share amounts have been restated
to reflect these common stock transactions.
Our Current Business
We are an exploration stage Company
engaged in the acquisition, exploration and production, if warranted,
development of prospective oil and gas properties. We plan to conduct
exploration work on each of our current and future properties in order to
ascertain whether any of them possess commercially exploitable quantities of
oil and gas reserves. The Company has significant lease holdings on the North
Slope of Alaska, the Canadian Provinces of Alberta and Quebec, permit
applications pending in Italy and Netherlands, and oil and gas production in
Oklahoma.
Alaska
On October 25, 2007, Union Energy
(Alaska) LLC (UEA), our subsidiary, was the winning bidder for tracts 254,
258 and 259 in the North Slope Areawide 2007 Competitive Oil and Gas Lease
Sale. 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 State
of Alaska. UEA paid a total of $380,021 to the State
of Alaska in respect of the leases. These tracts are contiguous and the
Company believes, based upon current available geological data and maps from
the public domain, to contain the Kavik gas field, discovered in 1969, which
has been evaluated in detail by the U.S. Department of the Interior, U.S
Geological Survey ("USGS").
On February 27, 2008, UEA was the
winning bidder for tracts 922, 923, 927, 988, 989, 990, 991, 992 and 925 in the
State of Alaska North Slope Foothills Areawide 2008 Competitive Oil and Gas
Lease 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 the
State of Alaska. UEA paid a total of $59,565 to the
State of Alaska in respect of the leases. These tracts are contiguous and the
Company believes, based upon current available geological data and maps from
the public domain, to contain the East Kurupa gas field, discovered by Texaco
in 1976. The USGS has been studying the potential for unconventional
over-pressured, continuous gas deposits in the Colville basin that contains the
Kurupa anticline and is now interpreting the East Kurupa well to have
encountered a thick section of over-pressured gas in Brookian strata.
The Alaska leases are in areas which
the Company believes are promising for gas production although the Company does
not make any representations as to their future production, if any.
Furthermore, any gas recovered from our Alaska leases will not be salable
unless or until a proposed North Slope gas pipeline is completed. We have
retained Frontier Land Inc. (an established land firm and a member of the
American Association of Professional Landmen) to conduct negotiations with
other leaseholders regarding their acreage and to acquire other land interests
within the vicinity of our tracts.
4
Oklahoma
On August 12, 2008, the Company acquired from
its President, James Fitzsimons, a 50% working interest (41.25% net revenue
interest) in the Snake Creek prospect, a 3,200 gross (3,022 net) acre gas
development project located in northern Okmulgee County. The Company
reimbursed Mr. Fitzsimons for his historic costs (acreage and drilling) by
issuing a secured, non-interest bearing note, payable on demand for $210,917
and assumed responsibility for all further costs.
On November 30, 2008, the Company acquired from
Mr. Fitzsimons, a 100% working interest (81.25% net revenue interest) in the
Spanish Peak prospect, a 2,041 gross (900 net) acre gas development project
located in Okmulgee County, Oklahoma. The Company reimbursed Mr. Fitzsimons
for his historic costs (acreage) by issuing a secured, non-interest bearing
note, payable on demand for $173,141 and assumed responsibility for all further
costs.
On March 31, 2009, the Company purchased 171 oil
and 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
Soladino Investments SA at a cost of $583,823. The Company reimbursed Soladino
for its historic costs (acreage) by issuing a secured, non-interest bearing
note, payable on demand for $583,823 and assumed responsibility for all further
costs.
The Companys Okfuskee and Okmulgee
County oil and gas leases are near oil and gas fields with proved developed
production and within the general area of the Woodford shale play. We have
retained Keith Summar (a member of the American Association of Petroleum
Geologists) as a consultant to assist us in our Oklahoma operations.
Alberta, Canada
On May 14, 2008, the Company was the
winning bidder in a Crown Land sale for eight contiguous sections (totaling
5,120 acres) of oil sands leases in the Peace River Oil Sands Area of northern
Alberta, Canada. The bids totaled $250,000 and the leases were issued by
Alberta Energy on May 15, 2008, with a term of 15 years.
Quebec, Canada
On June 23, 2008, the Company
received notification from the Province of Quebec that it was the successful
applicant for seven oil and gas exploration permits (totaling 121,297 hectares;
299,728 acres) in the Montreal area of the St. Lawrence Lowlands. The Company
paid advance rentals totaling $12,000 to the Province of Quebec and expects
that the permits will be formally issued in the spring of 2009 with an initial
term of five years. The Company has committed to a five-year work program
following the formal issue of the permits with minimum expenditures of
(expressed in Canadian dollars): $0.50 per hectare in the first year; $1.00 per
hectare in the second year; $1.50 per hectare in the third year; $2.00 per
hectare in the fourth year; and $2.50 per hectare in the fifth year.
Italy
On January 20, 2009, the Government of Italy
made the preliminary awards of the competitive oil and gas exploration
licenses, Fiorenzuola D'Arda located in the Po Valley and Montottone
located in the Marche region, in favor of Mac Oil SpA, our subsidiary. On
March 24, 2009, the Government of Italy made the preliminary award of the
competitive oil and gas exploration license, Melzo located in the Po Valley,
again in favor of Mac Oil SpA. The three Italy licenses cover a net surface
area of 115,760 hectares (285,827 acres).
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The Company also has two
competitive oil and gas exploration license applications pending awaiting
adjudication by the Ministry of Economic Development in Italy covering a net
surface area of 27,240 hectares (67,259 acres).
Netherlands
The Company has one license application pending
covering a net surface area of 68,284 hectares (168,602 acres).
Internationally, we have retained Daniele
Albisetti and Christian Ceppi (members of the Swiss Geological Society, the
Società Geologica Italiana (Italian Geological Society) and the Geological
Association 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 and
institutional and individual investors, which are actively seeking oil and gas
properties throughout the world together with the equipment, labor and
materials required to operate properties. Most of our competitors have
financial resources, staffs and facilities substantially greater than ours. The
principal area of competition is encountered in the financial ability to
acquire good acreage positions and drill wells to explore for oil and gas,
then, if warranted, drill production wells and install production equipment.
Competition for the acquisition of oil and gas acreage is intense. Therefore,
we may not be successful in acquiring and developing profitable properties in
the face of this competition. No assurance can be given that sufficient oil and
gas acreage will be available for acquisition and development.
Government Regulation
Oil and gas exploration and development
companies are subject to various federal, state and local governmental
regulations, which may be changed from time to time in response to economic or
political conditions and can have a significant impact upon overall operations.
Matters subject to regulation include permits for drilling operations, drilling
bonds, reports concerning operations, the spacing of wells, unitization and
pooling of properties, taxation, abandonment and restoration and environmental protection.
These laws and regulations are under constant review for amendment or
expansion. Changes in these regulations could require us to expend significant
resources to comply with new laws or regulations or changes to current
requirements and could have a material adverse effect on us.
Oil and Gas Regulation
The governmental laws and regulations which
could have a material impact on our Company are as follows:
Drilling and Production
These types of regulation include permit
requirements for the drilling of wells, drilling bonds and reports concerning
operations. Most states regulate one or more of the following: (i) the location
of wells; (ii) the method of drilling and casing wells; (iii) the rates of
production or "allowables"; (iv) the surface use and restoration of
properties upon which wells are drilled; (v) the plugging and abandoning of
wells; and (vi) notice to surface owners and other third parties.
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State laws may regulate the size and shape of
drilling and spacing units or proration units governing the pooling of oil and
natural gas properties. Some states, including Oklahoma, allow forced pooling
or integration of tracts to facilitate exploration while other states rely on
voluntary pooling of lands and leases. In some instances, forced pooling or
unitization may be implemented by third parties and may reduce our interest in
the unitized properties. In addition, state conservation laws establish maximum
rates of production from oil and natural gas wells, generally prohibit the
venting or flaring of natural gas and impose requirements regarding the
ratability of production. These laws and regulations may limit the amount of
natural gas and oil we can produce from our wells or limit the number of wells
or the locations at which we can drill. Moreover, each state generally imposes
a 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 existing
federal, state and local laws and regulations governing environmental quality
and pollution control. Our operations will be subject to stringent
environmental regulation by state and federal authorities including the
Environmental Protection Agency ("EPA"). Such regulation can increase
the cost of such activities. In most instances, the regulatory requirements
relate to water and air pollution control measures.
Waste Disposal
The Resource Conservation and Recovery Act
("RCRA"), and comparable state statutes, affect oil and gas
exploration and production activities by imposing regulations on the
generation, transportation, treatment, storage, disposal and cleanup of
"hazardous wastes" and on the disposal of non-hazardous wastes. Under
the auspices of the EPA, the individual states administer some or all of the
provisions of RCRA, sometimes in conjunction with their own, more stringent
requirements. Drilling fluids, produced waters, and most of the other wastes
associated with the exploration, development, and production of crude oil,
natural gas, or geothermal energy constitute "solid wastes", which
are regulated under the less stringent non-hazardous waste provisions, but
there is no guarantee that the EPA or the individual states will not adopt more
stringent requirements for the handling of non-hazardous wastes or categorize
some non-hazardous wastes as hazardous for future regulation.
Air Emissions
Our operations are subject to local, state and
federal regulations for the control of emissions of air pollution. Major
sources of air pollutants are subject to more stringent, federally imposed
permitting requirements. Administrative enforcement actions for failure to
comply strictly with air pollution regulations or permits are generally
resolved by payment of monetary fines and correction of any identified
deficiencies. Alternatively, regulatory agencies could require us to forego
construction, modification or operation of certain air emission sources.
Clean Water Act
The Clean Water Act ("CWA") imposes
restrictions and strict controls regarding the discharge of wastes, including
produced waters and other oil and natural gas wastes, into waters of the United
States, a term broadly defined. Permits must be obtained to discharge
pollutants into federal waters. The CWA provides for civil, criminal and
administrative penalties for unauthorized discharges of oil, hazardous
substances and other pollutants. It imposes substantial potential liability for
the costs of removal or remediation associated with discharges of oil or
hazardous substances. State laws governing discharges to water also provide
varying civil, criminal and administrative penalties and impose liabilities in
the case of a discharge of petroleum or it derivatives, or other hazardous
substances, into state waters. In addition, the EPA has promulgated regulations
that may require us to obtain permits to discharge storm water runoff. In the
event of an unauthorized discharge of wastes, we may be liable for penalties
and costs.
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Employees
We have no employees as of the date of this
report and anticipate that our operations will be conducted primarily through
third party consultants and contractors rather than by employees. We do not
anticipate hiring a large number of employees.
Internet Website
Our
website address is http://www.petrocorp.us.
Item 1A. Risk Factors.
You should carefully
consider the risks described below, which constitute the material risks facing
us. If any of the following risks actually occur, our business could be
harmed. You should also refer to the other information about us contained in
this Form 10-K, including our financial statements and related notes.
Risks Related to Our Business
Our exploratory drilling operations may not be
successful, our business may fail and investors may lose their entire
investment in our Company.
There can be no assurance that our future
drilling activities will be successful. We may not recover all or any portion
of our capital investment in the wells. Unsuccessful drilling activities would
have a material adverse effect upon our results of operations and financial
condition and would likely result in the ultimate failure of our business
operations. The cost of drilling, completing, and operating wells is often
uncertain, and a number of factors can delay or prevent drilling operations
including: (i) unexpected drilling conditions; (ii) pressure or irregularities
in formation; (iii) equipment failures or accidents; (iv) adverse weather
conditions; and (iv) shortages or delays in availability of drilling rigs and
delivery of equipment. If our exploratory drilling operations are not
successful, our business may fail and investors may lose their entire
investment in our Company.
Oil and gas exploration and development involves
many operating risks. If we were to experience any of these problems, it could
have a material, adverse effect on our operations and possibly cause us to go
out of business and investors to lose their entire investment in our Company.
Our exploration activities will be subject to many
risks, including the risk that we may not discover commercially productive
reservoirs. Exploration for oil and natural gas can be unprofitable, not only
from failing to discover reserves, but from productive wells that do not
produce sufficient revenues to return a profit. In addition, our exploration
activities may be curtailed, delayed or cancelled as a result of other factors,
including:
fires;
explosions;
blow-outs and surface
cratering;
uncontrollable flows of
underground natural gas, oil, or formation water;
natural disasters;
facility and equipment
failures;
title problems;
shortages or delays in
the delivery of equipment and services;
abnormal pressure
formations; and,
environmental hazards
such as natural gas leaks, oil spills, pipeline ruptures and discharges of
toxic gases.
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If any of these events occur, we could incur
substantial losses as a result of:
injury or loss of life;
severe damage to and
destruction of property, natural resources or equipment;
pollution and other
environmental damage;
clean-up
responsibilities;
regulatory
investigation and penalties;
suspension of our
operations; or,
repairs necessary to
resume operations.
We may be affected by any of these events more
than larger companies, since we have limited working capital. We have not
obtained any liability insurance for our operations at this time. If we were to
experience any of these problems, it could have a material, adverse effect on
our operations and could cause us to go out of business and investors to lose
their entire investment in our Company.
The operations and the potential profitability
of oil and gas exploration and development companies often depends upon factors
beyond our control. If our operations and potential profitability are
negatively impacted because of these factors, our business could suffer and
investors could lose all or part of their investment in our Company.
The potential profitability of oil and gas
properties is dependent upon many factors beyond our control. For instance, world
prices and markets for oil and gas are unpredictable, highly volatile and
potentially subject to governmental price fixing, pegging and controls, or any
combination of these and other factors, responding to changes in domestic,
international, political, social, and economic environments. Additionally, due
to worldwide economic uncertainty, the availability and cost of funds and other
expenses have become increasingly difficult, if not impossible, to project.
These and other changes and events may materially affect our financial
performance.
Adverse weather conditions can also hinder
drilling operations. A productive well may become uneconomic in the event water
or other deleterious substances are encountered which impair or prevent the
production of oil and/or gas from the well. In addition, production from any
well may be unmarketable if it is impregnated with water or other deleterious
substances. The marketability of oil and gas, which may be acquired or
discovered will be affected by numerous factors beyond our control. These
factors include, but are not limited to, the proximity and capacity of oil and
gas 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 potential
profitability are negatively impacted because of these factors, our business
could suffer and investors could lose all or part of their investment in our
Company.
The oil and gas industry is highly competitive
and there is no assurance that we will be successful in acquiring further oil
and gas exploration prospects and hiring qualified personnel. If we do not
compete successfully in these areas, our operations will likely suffer and our
Company will likely be unsuccessful.
The oil and gas industry is intensely
competitive, 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 products
on a regional, national or worldwide basis. These companies may be able to pay
more for productive oil and natural gas properties and exploratory prospects or
define, evaluate, bid for and purchase a greater number of properties and
prospects than our financial or human resources permit. In addition, these
companies may have a greater ability to continue exploration activities during
periods of low oil and natural gas market prices. Our larger competitors may be
able to absorb the burden of present and future laws and regulations more
easily than we can, which would adversely affect our competitive position. Our
ability to acquire additional properties and to discover reserves in the future
will be dependent upon our ability to evaluate and select suitable properties
and to consummate transactions in a highly competitive environment. These
companies also may be better able to attract the qualified personnel required
to run a successful oil and gas exploration company.
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Oil and gas operations are subject to
comprehensive regulation which may cause substantial delays or require capital
outlays 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, including
laws regulating removal of natural resources from the ground and the discharge
of materials into the environment. Oil and gas operations are also subject to
federal, state, and local laws and regulations which seek to maintain health
and safety standards by regulating the design and use of drilling methods and
equipment. Various permits from government bodies are required for drilling
operations to be conducted; no assurance can be given that such permits will be
received. Environmental standards imposed by federal, state, or local
authorities may be changed and any such changes may have material adverse
effects on our activities. Moreover, compliance with such laws may cause
substantial delays or require capital outlays in excess of those anticipated,
thus causing an adverse effect on us. Additionally, we may be subject to
liability for pollution or other environmental damages which we may elect not
to insure against due to prohibitive premium costs and other reasons. To date
we have not been required to spend material amounts on compliance with
environmental regulations. However, we may be required to do so in future and
this may affect our ability to expand or maintain our operations.
Oil and gas exploration and development
activities are subject to certain environmental regulations which may prevent
or delay the commencement or continuance of our operations.
Our oil and gas exploration and development
activities will be subject to certain federal, state and local laws and
regulations relating to environmental quality and pollution control. Such laws
and regulations increase the costs of these activities and may prevent or delay
the commencement or continuance of a given operation. Compliance with these
laws and regulations has not had a material effect on our operations or
financial condition to date. Specifically, we are subject to legislation
regarding emissions into the environment, water discharges and storage and disposition
of hazardous wastes. In addition, legislation has been enacted which requires
well and facility sites to be abandoned and reclaimed to the satisfaction of
state authorities. However, such laws and regulations are frequently changed
and we are unable to predict the ultimate cost of compliance.
Risks Related to Our Company
If we do not continue to obtain additional
financing, our business will fail.
Our current operating funds are less than
necessary to commence and complete all intended test wells on the Oklahoma and
Alaska properties covered by our oil and gas leases. Therefore, we will need to
obtain additional financing in order to complete our business plan. We
currently have limited operations and we have minimal oil and gas sales.
As of February 28, 2009, we have cash on hand of
approximately $523,000 representing the remaining proceeds of our two financing
transactions and loans from our president. In order to commence and complete
all intended test wells on the Oklahoma properties covered by the oil and gas
leases, we anticipate that we will need to spend a minimum of $600,000.
Exploration (and if successful, development) of the Alaska prospects is
unlikely to commerce until the next decade and it is impossible to forecast
these costs at this time. Nevertheless, we will require substantial additional
financing to cover such costs. Furthermore, we will require additional
financing to sustain our business operations if we are not successful in
earning revenues once drilling is complete.
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We do not currently have any arrangements for
financing and may not be able to find such financing. Our ability to obtain
additional financing will be subject to a number of factors, including the
market price for oil and gas, the success of our initial test wells and general
market conditions. These factors will make the timing, amount, terms or
conditions of financing uncertain and additional financing may be unavailable
to us. If we do not obtain additional financing, our business will fail.
We are a new entrant into the oil and gas
industry without a profitable or long operating history. We do not have any
significant income producing oil and gas properties and we have limited
financial resources. We have not yet commenced our exploration activities nor
have we generated any significant revenue since our incorporation. There is no
means by which investors can evaluate our potential for success and there is no
assurance that we will ever operate profitably.
We have a limited operating history and must be
considered in the exploration stage. Our Company's operations will be subject
to all the risks inherent in the establishment of an exploration stage
enterprise and the uncertainties arising from the absence of a significant
operating history. Potential investors should be aware of the difficulties
normally encountered by oil and gas exploration and development companies and
the high rate of failure of such enterprises, especially those with a limited
operating history such as ours. The likelihood of success must be considered in
light of the problems, expenses, difficulties, complications and delays
encountered in connection with the oil and gas exploration that we plan to
undertake. These potential problems include, but are not limited to,
unanticipated problems relating to exploration, and additional costs and
expenses that may exceed current estimates. The expenditures to be made by us
in our oil and gas exploration may not result in the discovery of oil and gas
reserves. If the results of our exploration do not reveal commercially viable
oil or gas reserves, we may decide to abandon our leasehold interests and
acquire new oil and gas interests for exploration or cease operations. The
acquisition of additional oil and gas interests will be dependent upon us
possessing capital resources in order to purchase such interests. If no funding
is available, we may be forced to abandon our operations. No assurance can be
given that we will ever operate on a profitable basis.
Potential investors should be aware of the
difficulties normally encountered by new resource companies and the high rate
of failure of such enterprises. There is a high risk that our business will
fail.
Because our directors have other business
interests, they may not be able or willing to devote a sufficient amount of
time to our business operations, causing our business to suffer and possibly
fail
.
Our directors intend to spend a minority of
their business time providing their services to us. While they presently
possess adequate time to attend to our interests, it is possible that the
demands on our directors from their other obligations could increase, or the
demands of our business operations could increase, with the result that they
would no longer be able to devote sufficient time to the management of our
business. If this happens, our Company will not likely perform to its potential
and may fail.
Prospects that we decide to drill may not yield
natural gas or oil in commercially viable quantities. If this happens, our
business will likely fail and investors would likely lose their entire
investment in our Company.
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None of our properties covered by the oil and
gas leases/permits have yet been fully evaluated by the Company. We will not
know for certain, prior to drilling and testing, whether natural gas or oil
will be present in those properties or, if present, whether natural gas or oil
will be present in sufficient quantities to recover drilling or completion
costs or to be economically viable. The cost of drilling, completing and operating
any well is uncertain and any wells we drill may not be productive. If we never
find commercially viable resources of oil and gas, our business will fail and
investors will likely lose their entire investment in our Company.
Our Alaska prospects are in areas believed to
contain gas, but presently lacking gas transportation facilities
.
While our Alaska prospects are in areas that are
promising for gas discovery, there are no existing pipeline facilities
available to transport any gas they may produce to market. Unless such
facilities are built and available to us, our gas would be stranded gas with
little or no market value. The Company believes that a pipeline facility will
be 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 terms
the pipeline is made available to transport our gas are all matters beyond our
control which could have significant impacts on our future results.
James Fitzsimons, our president, owns Soladino
Investments SA, a Swiss corporation, that owns approximately 78.5% of our
common stock and this interest could conflict with other investors, which could
cause 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 shares
of our common stock, or 78.5% of the Companys issued and outstanding shares.
Due to this stock ownership, James Fitzsimons is able to substantially
influence all matters requiring shareholder approval, including the election of
directors and approval of significant corporate transactions. Such
concentration of ownership may also have the effect of delaying or preventing a
change in control, which may be to the benefit of our management but not in the
interest of the shareholders. This stock ownership and potential effective
control on all matters relating to the business and operations of our Company
could eliminate the possibility of shareholders changing the management in the
event that the shareholders did not agree with the conduct of the officers and
directors. Additionally, the shareholders would potentially not be able to
obtain the necessary shareholder vote to effect any change in the course of
business of our Company. This lack of shareholder control could prevent the
shareholders from removing from the board of directors any directors who are
not managing the Company with sufficient skill to make it profitable, which
could prevent us from becoming profitable and cause investors to lose all or
part of their investment in our Company.
Risks Related to Our Securities
If a liquid market for our common stock does not
develop, shareholders may be unable to sell their shares.
There is currently no liquid market for our
common stock and no certainty that a liquid market will develop. While our
common stock is quoted for trading on the OTC Bulletin Board, there has only
been sporadic trading of our common stock. If a liquid market is not developed
for our shares, it will be difficult for shareholders to sell their stock.
A purchaser of our stock is purchasing penny
stock which limits his or her ability to sell the stock.
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Our shares of common stock are considered penny
stock under the Exchange Act. The shares will remain penny stock for the
foreseeable future. The classification of penny stock makes it more difficult
for a broker-dealer to sell the stock into a secondary market, thus limiting
investment liquidity. Any broker-dealer engaged by the purchaser for the
purpose of selling his or her shares in our Company will be subject to rules
15g-1 through 15g-10 of the Exchange Act. Rather than creating a need to comply
with those rules, some broker-dealers will refuse to attempt to sell penny stocks
such as ours.
We do not intend to pay dividends and there will
be less ways in which you can make a gain on any investment in our Company.
We have never paid any cash dividends and
currently do not intend to pay any dividends for the foreseeable future. To the
extent that we require additional funding currently not provided for in our
financing plan, our funding sources may likely prohibit the payment of a
dividend.
Our board of directors
is authorized to issue shares of preferred stock, which may have rights and
preferences detrimental to the rights of the holders of our common shares
.
We are authorized to issue up to 1,000,000
shares of preferred stock, $.0001 par value. To date we have not issued any
shares of preferred stock and have no plans to do so. Our preferred stock may
bear such rights and preferences, including dividend and liquidation
preferences, as the board of directors may fix and determine from time to
time. Any such preferences may operate to the detriment of the rights of the holders
of our common shares.
Our Articles of Incorporation provide for
indemnification of officers and directors at our expense and limit their
liability which may result in a major cost to us and hurt the interests of our
shareholders because corporate resources may be expended for the benefit of
officers and/or directors.
Our Articles of Incorporation and applicable
Delaware law provide for the indemnification of our directors, officers,
employees, and agents, under certain circumstances, against attorney's fees and
other expenses incurred by them in any litigation to which they become a party
arising from their association with or activities on our behalf. We will also
bear the expenses of such litigation or any of our directors, officers,
employees, or agents, upon such person's promise to repay us, therefore, if it
is ultimately determined that any such person should not have been entitled to
indemnification this indemnification policy could result in substantial
expenditures by us, which we will be unable to recoup.
We have been advised that, in the opinion of the
SEC, indemnification for liabilities arising under federal securities laws is
against public policy as expressed in the Securities Act of 1933 and is,
therefore, unenforceable. In the event that a claim for indemnification
against these types of liabilities, other than the payment by us of expenses
incurred or paid by a director, officer or controlling person in the successful
defense of any action, suit or proceeding, is asserted by a director, officer
or 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 by
controlling precedent) submit to a court of appropriate jurisdiction, the
question whether indemnification by us is against public policy as expressed in
the Securities Act and will be governed by the final adjudication of such
issue. The legal process relating to this matter if it were to occur is likely
to be very costly and may result in us receiving negative publicity, either of
which factors is are likely to materially reduce the market and price for our
shares, if such a market ever develops.
13
ITEM 1B. UNRESOLVED STAFF COMMENTS.
None
ITEM
2. PROPERTIES.
Leasehold Acreage
We own interests in
developed and undeveloped oil and natural gas acreage in the locations set
forth below as of December 31, 2008. These ownership interests generally take
the form of working interests in oil and natural gas leases or licenses that
have 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, the
Government of Italy made the preliminary awards of the competitive oil and gas
exploration licenses, Fiorenzuola D'Arda located in the Po Valley and
Montottone located in the Marche region, in favor of Mac Oil SpA, our
subsidiary. On March 24, 2009, the Government of Italy made the preliminary
award of the competitive oil and gas exploration license, Melzo located in
the Po Valley, 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 exploration
license applications pending awaiting adjudication by the Ministry of Economic
Development in Italy covering a net surface area of 27,240 hectares (67,259
acres).
(2)
One license application
pending covering a net surface area of 68,284 hectares (168,602 acres).
Leasehold Acreage Costs
We have capitalized
leasehold acreage costs in developed and undeveloped oil and natural gas
acreage 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, the
Company purchased 171 oil and 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 Soladino Investments SA at a cost of $583,823. The
Company reimbursed Soladino for its historic costs (acreage) by issuing a
secured, non-interest bearing note, payable on demand for $583,823 and assumed
responsibility for all further costs.
14
Oil and Gas Drilling
Activity
We own working interests
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 one had dual
completions. At December 31, 2008, we had six gross wells in progress. The
Company currently does not yet have sufficient production records to compute
the quantities of proved oil and gas reserves as required by SEC Regulation
S-X, Rule 4-10(a).
Corporate Offices
Our office is located at 1065 Dobbs Ferry Road, White Plains, NY
10607 and our telephone number is (914) 674-4373. Should we require a
regular permanent office we will attempt to locate one in the vicinity of our
leases and we believe that suitable properties are available at reasonable
costs.
ITEM 3. LEGAL
PROCEEDINGS.
We currently have no legal proceedings pending nor have any
legal proceeding been threatened against us or any of our officers, directors
or control persons of which we are aware.
ITEM 4. SUBMISSION of MATTERS to a VOTE of
SECURITY HOLDERS.
No matters were submitted to a vote of security
holders, through the solicitation of proxies or otherwise during the Companys
fourth quarter.
PART II
ITEM 5. MARKET for REGISTRANTS COMMON EQUITY and ISSURER
PURCHASES of EQUITY SECURITIES.
Stock Split/
Dividends
On October 19, 2007, the Company effected a five for one forward stock split which increased the
authorized common stock to 100,000,000 shares at $.0001 par value. On
August 13, 2008, the Companys board of directors approved a stock dividend on
its outstanding common stock. The ratio for the stock dividend was four shares
to each share owned (4:1).
Market Information
Our common stock trades on the Over the Counter
Bulletin Board under the symbol PTCP. The following table sets forth for the
periods indicated the high and low prices per share of our common stock as
quoted 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
(1) There
were no trades in our common stock until May 2008.
Reports to
Shareholders
We plan to
furnish our shareholders with an annual report for each fiscal year ending
December 31 containing financial statements audited by our independent
certified public accountants. Additionally, we may, in our sole discretion,
issue unaudited quarterly or other interim reports to our shareholders when we
deem appropriate. We intend to maintain compliance with the periodic reporting
requirements of the Securities Exchange Act of 1934.
Holders
As of February 28, 2009, we had five shareholders of record and
22,680,000 common shares issued and outstanding. The number of holders
does 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 common
stock to date. We anticipate that any future earnings will be retained as
working capital and used for business purposes. Accordingly, it is unlikely
that we will declare or pay any such dividends in the foreseeable future.
Securities Authorized for Issuance under
Equity Compensation Plans
None
Recent Sales
of Unregistered Securities
On December 27, 2007, the Company sold 800,000
shares 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 common
stock to one investor at $1.25 per share (an aggregate of $1,000,000). The
shares were sold in transactions exempt from registration under Regulation S of
the Securities Act of 1933, as amended. The shares are not registered under
the Securities Act or any state securities laws and, unless so registered, may
not be offered or sold except pursuant to an applicable exemption from the
registration requirements of the Securities Act and applicable state securities
laws. The purchasers of the shares represented that they were acquiring the
shares for their own account, for investment, and that the purchasers were not
US Persons within the meaning of Regulation S. The Company has no obligation
to register the resale of the shares under the Securities Act. The proceeds
from the sale of the shares will be used for working capital purposes.
ITEM 6. SELECTED FINANCIAL DATA.
Not applicable
16
ITEM 7.
MANAGEMENTS DISCUSSION and ANALYSIS of FINANCIAL CONDITIONS and REULTS OF
OPERATION.
Overview
We caution you that reliance on any forward-looking statement
involves risks and uncertainties, and that although we believe the assumptions
on which our forward-looking statements are based are reasonable, any of those
assumptions could prove to be inaccurate, and as a result, the forward-looking
statements based on those assumptions could be incorrect. In light of these
and other uncertainties, you should not conclude that we will necessarily achieve
any plans and objectives or projected financial results referred to in any of
the forward-looking statements. We do not undertake to release the results of
any revisions of these forward-looking statements to reflect future events or
circumstances. Some of the factors that may cause actual results, developments
and business decisions to differ materially from those contemplated by such
forward-looking statements include the following:
|
our ability to raise additional
capital and secure additional financing;
|
|
anticipated trends in our
financial condition and results of operations;
|
|
our ability to hire and retain key
employees;
|
|
Risks related to diverting
managements attention from ongoing business operations.
|
Background
Prior to September 2007, the Companys business
model provided telephonic conferencing services to businesses, organizations
and individuals in North America. Due to capital
constraints and because its executives could no longer serve the Company
without compensation, the Company decided to change directions.
Plan of Operation
Our plan of operation for 2009 is to continue
drilling test wells on our Oklahoma oil and gas leases. We anticipate the cost
of these programs will be approximately $600,000, however, this figure could be
reduced, possibly substantially, by third-party working interest participation,
arising particularly as a result of spacing and pooling applications and
hearings.
We anticipate spending approximately $50,000 in
2009 geologically evaluating our oil and gas exploration permits in the
Province of Quebec.
During 2009 we also anticipate spending $100,000
on administrative expenses, including fees payable in connection with our compliance
reporting obligations as a public company, such as legal, accounting and audit
fees.
Total expenditures in 2009 therefore could be at
least $750,000. While we have cash on hand to cover most of these expenses, we
could require additional funding. We anticipate that additional funding will
be provided in the form of equity financing from the sale of our common stock
or loans from directors. We cannot provide investors with any assurance that
additional funds will be raised. Currently, we do not have any arrangements in
place for future equity financings.
We are in the process of determining our
personnel needs. We intend to hire consultants over the course of the next
twelve months. To attract qualified personnel, we intend to offer percentages
of the Companys working interest in its oil and gas properties.
17
Results of Operations
For the year ended December
31, 2008, we had revenues of $24,151, oil and gas exploration costs of $28,297
and 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 in
2007. 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 $5,648
in 2007. In addition, we incurred interest expense of $30,633 in 2008 as
compared to $6,076 in 2007. The increase in our 2008 expenses is the result of
the Company changing its business plan from telephonic conferencing services to the oil and
gas sector. The
Company recorded a $16,929 impairment charge in 2007 related to its telephonic
equipment.
Liquidity and Capital Resources
Our Company's principal cash requirements are
for exploration expenses which we anticipate will rise as we proceed to
determine the feasibility of developing our current or future property
interests. As of December 31, 2008, we had cash of $556,035 and negative
working capital of $215,378. Our net cash provided by financing activities
from June 19, 2006 (inception) to December 31, 2008 was $2,288,158
In March 2008 we raised $1,000,000 from the sale
of 800,000 shares of our common stock at $.625 per share. This sale was to an
unaffiliated party, completed pursuant to an exemption from registration under
the Securities Act of 1933, as amended, by Regulation S issued thereunder.
At December 31, 2008, the Company has a $734,058
note payable to Soladino Investments SA , a Swiss corporation owned by our
president, Mr. Fitzsimons. The note is secured by the Companys oil and gas leases,
is non interest bearing and payable upon demand.
On March 31, 2009, the
Company purchased 171 oil and 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 Soladino Investments SA at a cost of $583,823. The
Company reimbursed Soladino for its historic costs (acreage) by issuing a
secured, non-interest bearing note, payable on demand for $583,823 and assumed
responsibility for all further costs.
We anticipate that additional funding will be
provided in the form of equity financing from the sale of our common stock or
loans from directors. We cannot provide investors with any assurance that
additional funds will be raised. Currently, we do not have any arrangements in
place for future equity financings.
Seasonality and Inflation
We do not believe that our business will be
seasonal 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 our
results will be materially impacted by inflation in the current fiscal year.
Critical Accounting Policies
Financial Reporting Release No. 60 of the SEC encourages
all companies to include a discussion of critical accounting policies or
methods used in the preparation of the financial statements. There are no
material revenue generating activities that give rise to significant
assumptions or estimates. Our most critical accounting policies relate to the
accounting and disclosure of related party transactions. Our financial
statements filed as part of this annual report include a summary of the
significant accounting policies and methods used in the preparation of our financial
statements.
18
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that have
or are reasonably likely to have a current or future effect on our financial
condition, changes in financial condition, revenues or expenses, results of
operations, liquidity, capital expenditures or capital resources that is
material to investors.
ITEM 7A. QUANTITATIVE
and 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 are
included in this annual report.
ITEM 9. CHANGES in and DISAGREEMENTS with ACCOUNTANTS on
ACCOUNTING and FINANCIAL DISCLOSURE.
None.
ITEM 9A(T). CONTROLS and PROCEDURES.
Disclosure
Controls and Procedures
We maintain
disclosure controls and procedures (as defined in Rule 13a-15(e) under the
Exchange Act) that are designed to ensure that information that would be
required to be disclosed in Exchange Act reports is recorded, processed,
summarized and reported within the time period specified in the SECs rules and
forms, and that such information is accumulated and communicated to our
management, including to our chief executive officer and chief financial
officer, as appropriate, to allow timely decisions regarding required
disclosure.
As required
by Rule 13a-15 under the Exchange Act, our management, including James
Fitzsimons, our chief executive officer and chief financial officer, evaluated
the effectiveness of the design and operation of our disclosure controls and
procedures as of December 31, 2008. Based on that evaluation, Mr. Fitzsimons
concluded that as of December 31, 2008, and as of the date that the evaluation
of the effectiveness of our disclosure controls and procedures was completed,
our disclosure controls and procedures were effective to satisfy the objectives
for which they are intended.
Managements
Annual Report on Internal Control over Financial Reporting
Section 404
of the Sarbanes-Oxley Act of 2002 requires that management document and test
the Companys internal control over financial reporting and include in this
Annual Report on Form 10-K a report on managements assessment of the
effectiveness of our internal control over financial reporting.
Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting, as such term is defined in Rule 13a-15(f) of
the Exchange Act. Under the supervision and with the participation of our
management, including James Fitzsimons, our chief executive officer and chief
financial officer, we conducted an evaluation of the effectiveness of our
internal control over financial reporting based upon the framework in Internal
Control - Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). Based on that evaluation, our
management concluded that our internal control over financial reporting is
effective, as of December 31, 2008.
19
This annual
report does not include an attestation report of our registered public
accounting firm regarding internal control over financial reporting.
Managements report was not subject to attestation by our registered public
accounting firm pursuant to temporary rules of the Securities and Exchange
Commission that permit us to provide only managements report in this annual
report.
Changes in
Internal Controls over Financial Reporting.
During the
fiscal year ended December 31, 2008, there were no changes in our internal
control over financial reporting identified in connection with the evaluation
performed during the fiscal year covered by this report that has materially
affected, or is reasonably likely to materially affect, our internal control
over financial reporting.
ITEM 9B. OTHER INFORMATION.
We do not
have any information that was required to be reported on Form 8-K during the
fourth quarter.
PART 1II
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS and CORPORATE
GOVERNANCE.
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 of
our Company since September 20, 2007. Mr. Fitzsimons is an elected member of
the Schweizerische Vereinigung von Petroleum-Geologen und Ingeneuren (Swiss
Association of Petroleum Geologists and Engineers) and during the past five
years has been employed by Reta Holding SA of Paradiso, Switzerland, also
serving on the board of directors of Kapital Finanz und Treuhand Gesellshaft
(Capital Finance and Trust Company) a licensed and regulated asset and fund
management company and a full member of SECA (Swiss Private Equity &
Corporate Finance Association). Mr. Fitzsimons has been active in the mineral
extraction industry for over 15 years, and has been involved in the Oklahoma
oil and gas industry for over five years. Mr. Fitzsimons received a Bachelor
of Laws degree from University College London. His industry knowledge comes
from direct experience of the oil and gas business both in Europe and the
United States.
Stephen M. Siedow
has been a director of
our Company since December 2007. Mr. Siedow is a member of the American
Institute of Certified Public Accountants and the Colorado Society of Certified
Public Accountants. From 1974 to 1982 he was with the audit department of
Ernst & Young, Certified Public Accountants in Denver, Colorado and in
1982, he formed Stephen M. Siedow, PC a professional accounting firm providing
auditing, management consulting and tax services to corporations, partnerships
and individuals. Mr. Siedow specializes in public and SEC accounting and has
experience in industries including construction, mining, oil and gas, and
mergers/acquisitions.
20
Frank J. Hariton
has been secretary of
our Company since September 2007 and is an attorney in private practice in New
York State. Mr. Hariton received his BA (1971) and JD (1974 from Case Western
Reserve University.
Family Relationships
There are no family relationships
among our officers or directors.
Involvement in Certain Legal
Proceedings
None of our directors, director
nominees or executive officers has been involved in any transactions with us or
any of our directors, executive officers, affiliates or associates that are
required to be disclosed pursuant to the rules and regulations of the SEC other
than as set forth in Item 13. Certain Relationships and Related Transactions,
and Director Independence below. None of the directors, director designees or
executive officers to our knowledge has been convicted in a criminal
proceeding, excluding traffic violations or similar misdemeanors, or has been a
party to any judicial or administrative proceeding during the past five years
that resulted in a judgment, decree or final order enjoining the person from
future violations of, or prohibiting activities subject to, federal or state
securities laws, or a finding of any violation of federal or state securities
laws, except for matters that were dismissed without sanction or settlement.
Term
of Office
The term of office of
the current directors shall continue until new directors are elected or
appointed.
Committees of the Board
and Financial Expert
We do not have a
separately-designated audit or compensation committee of the Board or any other
Board-designated committee. Audit and compensation committee functions are
performed by our Board of Directors. We will form such committees in the future
as the need for such committees may arise. In addition, at this time we have
determined that we do not have an audit committee financial expert as defined
by the SEC on our Board.
Code
of Ethics
Due to its
small size, the Company has not adopted a code of ethics. The Company
will adopt a code of ethics for our senior officers,
including our principal executive officer, principal financial officer, principal
accounting officer or controller and any person who may perform similar
functions. As required by SEC rules, we will report the nature of any change
or waiver of our code of ethics.
21
ITEM
11. EXECUTIVE COMPENSATION.
Compensation
of Executive Officers
The
following table sets forth information concerning the compensation of our named
executive officers for the fiscal years ended December 31, 2008 and 2007;
provided, however, any payments to these officers were paid as consultants, not
employees, of the Company, as the Company has not yet hired full or part-time
employees. We may, once we are operational, implement employee benefits that
will be generally available to all employees and subsidiary employees,
including medical, dental and life insurance benefits and a 401(k) retirement
savings plan. Except as listed below, there were no bonuses, other annual
compensation, restricted stock awards or stock options/SARs or any other
compensation 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 Companys 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 Companys 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 or
currently contemplated to compensate the Companys directors for their service
as directors or as members of any committee of directors.
22
Employment Agreements
We do not have employment agreements
with any of our executive officers or directors. We have verbal understandings
with our executive officers regarding monthly retainers and reimbursement for
actual out-of-pocket expenses.
Termination of
Employment
There are no
compensatory plans or arrangements, including payments to be received from the
Company, with respect to any person named in the Summary Compensation Table set
forth above that would in any way result in payments to any such person because
of his or her resignation, retirement or other termination of such persons
employment with us.
Employee Benefit Plans
None
Indemnification of Directors and Executive Officers and Limitation
of Liability
Pursuant to
the General Corporation Law of Delaware our Certificate of Incorporation
provides that no director will have any personal liability to us or to any of
our shareholders for monetary damages for breach of fiduciary duty as a
director; provided, however, that this exclusion does not eliminate or limit
the liability of a director (i) for any breach of the director's duty of
loyalty to us or our shareholders, (ii) for acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of law, (iii)
under §174 of the General Corporation Law of Delaware, or (iv) for any
transaction from which the director derived an improper personal benefit.
ITEM 12. SECURITY OWNERSHIP of
CERTAIN BENEFICIAL OWNERS and MANAGEMENT and RELATED STOCKHOLDER MATTERS.
Security
Ownership of Certain Beneficial Owners
The following table sets
forth, as of February 28, 2009, the stock ownership of (i) each of our named
executive officers and directors, (ii)all executive officers and directors as a
group, and (iii) each person known by us to be a beneficial owner of 5% or more
of our common stock. No person listed below has any option, warrant or other
right to acquire additional securities from us, except as may be otherwise
noted. We believe that all persons named in the table have sole voting and
investment power with respect to all shares of common stock beneficially owned
by them except as stated therein.
23
(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 Companys common stock as of February
28, 2009, and each stockholders 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 named
executive officer refers to our principal executive officer, our two most
highly compensated executive officers other than the principal executive
officer who were serving as executive officers at the end of 2008, and two
additional individuals for whom disclosure would have been provided but for the
fact that the individuals were not serving as executive officers of the Company
at the end of 2008.
Changes in Control
We know of no
contractual arrangements which may at a subsequent date result in a change of
control in the Company.
24
ITEM 13. CERTAIN RELATIONSHIPS and RELATED TRANSACTIONS,
and DIRECTOR INDEPENDENCE.
Certain
Relationships and Transactions with Related Persons
On August 12, 2008, the Company acquired from
its president, James Fitzsimons, a 50% working interest (41.25% net revenue
interest) in the Snake Creek prospect, a 3,200 gross (3,022 net) acre gas
development project located in northern Okmulgee County, Oklahoma. The first well
on this acreage, the Snake Creek #1, spaced on 160 acres, has been successfully
drilled and completed. The Middle Dutcher zone was fracture stimulated and is
in production. The Company reimbursed Mr. Fitzsimons for his historic costs
(acreage and drilling) by issuing a secured, non-interest bearing note, payable
on demand for $210,917 and assumed responsibility for all further costs.
On November 30, 2008, the Company acquired from
Mr. Fitzsimons, a 100% working interest (81.25% net revenue interest) in the
Spanish Peak prospect, a 2,041 gross (900 net) acre gas development project
located in Okmulgee County, Oklahoma. The Company reimbursed Mr. Fitzsimons
for his historic costs (acreage) by issuing a secured, non-interest bearing
note, payable on demand for $173,141 and assumed responsibility for all further
costs.
On December 1, 2008, James Fitzsimons
transferred his 78.5% stock ownership in Petrocorp Inc. and three outstanding
promissory notes (totaling $734,058) to Soladino Investments SA (Soladino), a
Swiss corporation owned by Mr. Fitzsimons. The Company issued Soladino a
$734,058 note, which
is secured by the Companys oil and gas leases, is non interest bearing and
payable upon demand.
On March 31, 2009, the Company purchased 171 oil
and 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
Soladino Investments SA at a cost of $583,823. The Company reimbursed Soladino
for its historic costs (acreage) by issuing a secured, non-interest bearing
note, payable on demand for $583,823 and assumed responsibility for all further
costs.
During the year ended December 31, 2008, the
Company imputed interest expense related to these notes of $30,274. Interest
was imputed at an implied rate of 6% and the amounts were recorded as capital
contributions by the Company.
The Company was provided management services by
its president, Mr. Fitzsimons during 2008 at no cost. The Company recorded the
$120,000 estimated value of these services as compensation expense and as a
capital contribution.
Director Independence
Our current directors
are James Fitzsimons and Stephen M. Siedow. We are not currently subject to
corporate governance standards defining the independence of our directors. We
have not yet adopted an independence standard or policy, although we intend to
do so in the near future. Accordingly, the Companys Board currently determines
the independence of each Director and nominee for election as a Director. The
Board has determined that none of the Companys directors currently qualifies
as an independent director. We do not list the independent definition we use
on our Internet website.
ITEM 14. PRINCIPAL ACCOUNTANT FEES and SERVICES.
Audit Fees
The aggregate fees billed by the Companys auditors for
professional services rendered in connection with the audit of the Companys
annual financial statements and reviews of the financial statements included in
the Companys Form 10-Q or services that are normally provided by the
accountant in connection with statutory and regulatory filings or engagements
for 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-Approval
Policies and Procedures
The board of
directors has not adopted any pre-approval policies and approves all
engagements with the Companys auditors prior to performance of services by
them.
PART 1V
ITEM 15. EXHIBITS and FINANCIAL STATEMENT SCHEDULES
The following exhibits are filed with this report, except
those indicated as having previously been filed with the Securities and
Exchange Commission and are incorporated by reference to another report,
registration statement or form. As to any shareholder of record requesting a
copy of this report, we will furnish any exhibit indicated in the list below as
filed with this report upon payment to us of our expenses in furnishing the
information.
Exhibit Number
|
Exhibit Description
|
3.1
|
Certificate of Incorporation
(Incorporated by reference to like numbered exhibit to the Companys
Registration Statement on Form SB-2 File Number 333-141993).
|
3.2
|
Bylaws (Incorporated by reference to
like numbered exhibit to the Companys 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 Companys
Current Report on Form 8-K filed November 5, 2007).
|
4.1
|
Specimen
Stock Certificate (Incorporated by reference to like numbered exhibit to the
Companys 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 Companys 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
Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
Date: April 7, 2009
PETROCORP
INC.
By
/s/ James Fitzsimons
James Fitzsimons
CEO and President
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following persons on behalf
of the registrant and in the capacities and on the dates indicated.
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 Stage
Company)
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 Registered
Public Accounting Firm
To the Board of Directors and Stockholders
Petrocorp Inc.
White Plains, New York
We have audited the accompanying consolidated
balance sheets of Petrocorp
Inc. and subsidiaries (an exploration stage company) (collectively,
Petrocorp or the Company) as of December
31, 2008 and 2007
and the related statements of operations, stockholders equity and cash flows
for the years then ended,
and for the
period June 19, 2006 (inception) through December 31, 2008. These consolidated
financial statements are the responsibility of the Companys management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with the
standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. The Company is not required to have, nor were we engaged to
perform, an audit of its internal control over financial reporting. Our audit
included consideration of internal control over financial reporting as a basis
for designing audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the
Company's internal control over financial reporting. Accordingly, we express
no such opinion. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial
statements referred to above present fairly, in all material respects, the
financial position of the
Company at December 31, 2008 and
2007 and
the 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 principles
generally accepted in the United States of America.
The accompanying consolidated financial
statements have been prepared assuming that the Company will continue as a going concern. As discussed
in Note 3 to the consolidated financial statements, the Company had a deficit
accumulated during the exploration stage, a net loss from operations and net
cash used in operations for the year ended December 31, 2008. These factors raise substantial doubt
about the Companys ability to continue as a going concern. Managements plans
in regards to these matters are also described in Note 3. The financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.
/s/Li
& Company, PC
Li
& Company, PC
Skillman, New Jersey
April 3, 2009
F-1
PETROCORP INC.
(An Exploration Stage
Company)
Consolidated Balance
Sheets
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 to
the consolidated financial statements.
F-2
PETROCORP INC.
(An Exploration Stage
Company)
Consolidated Statements of Operations
|
|
|
|
|
|
|
|
June 19, 2006
|
|
|
|
|
|
|
|
|
(inception) to
|
|
|
Year Ended
December 31,
|
|
December 31,
|
|
|
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 to
the consolidated financial statements.
F-3
PETROCORP INC.
(An Exploration Stage
Company)
Consolidated Statement
of Stockholders Equity
For the Period
June 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 to
the consolidated financial statements.
F-4
PETROCORP INC.
(An Exploration Stage
Company)
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 to
the 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 the
State of Delaware. Prior to September 2007,
the Companys business model provided telephonic conferencing services to
businesses, organizations and individuals in North America. Due to capital constraints and because its executives could
no longer serve the Company without compensation, the Company decided to change
its business directions.
On September 20, 2007, the Company
entered the oil and gas exploration and production business with the
acquisition of three separate farm-out agreements from James Fitzsimons. Mr.
Fitzsimons also purchased 17,800,000 shares of the Companys common stock from
certain shareholders, resulting in him owning 84.5% of the Companys then
outstanding shares for $454,000. Mr. Fitzsimons was elected a director of the
Company.
On October 19, 2007, the Company
amended its certificate of incorporation changing its name to Petrocorp Inc.
and effectuated a five for one forward stock split which increased the
authorized common stock to 100,000,000 shares at $.0001 par value.
On August 13, 2008, the Companys board of directors
approved a stock dividend on its outstanding common stock. The ratio for the
stock dividend was four shares to each share owned (4:1).
All share and per share amounts have been
restated to reflect these common stock transactions.
Note 2 - Summary of Significant Accounting Policies
Basis of presentation
The Companys consolidated financial statements
have been prepared in accordance with accounting principles generally accepted
in the United States of America (U.S. GAAP).
The consolidated financial statements include
the 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 and
transactions have been eliminated.
Exploration stage company
The Company is an exploration stage company as defined
by Statement of Financial Accounting Standards No. 7
Accounting and
Reporting by Development Stage Enterprises
(SFAS No. 7). Although the
Company has recognized some nominal amount of revenue, the Company is still
devoting substantially all of its efforts on establishing the business and,
therefore, still qualifies as a development stage company. All losses since
inception have been considered part of the Companys exploration stage
activities.
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 in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Cash equivalents
The Company considers all highly liquid
investments with a maturity of three months or less when purchased to be cash
equivalents.
Oil and gas properties
The Companys oil and gas exploration and
production activities are accounted for using the successful efforts method.
Under this method, all property acquisition costs and costs of exploratory and
development wells are capitalized when incurred, pending determination of
whether the well has found proved reserves. If an exploratory well does not
find proved reserves, the costs of drilling the well are charged to expense and
included within cash flows from investing activities in the Consolidated Statements
of Cash Flows pursuant to Statement of Financial
Accounting Standards No. 19
Financial Accounting and Reporting by
Oil and Gas Producing Companies
(SFAS No. 19). The costs of development
wells are capitalized whether productive or nonproductive. Oil and gas lease
acquisition costs are also capitalized. Interest cost is capitalized as a
component of property cost for significant exploration and development projects
that require greater than six months to be readied for their intended use.
Other exploration costs, including certain
geological 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 proved
property is accounted for as a cost recovery and no gain or loss is recognized
as long as this treatment does not significantly affect the unit-of-production
amortization rate. A gain or loss is recognized for all other sales of proved
properties and is classified in other operating revenues. Maintenance and
repairs are charged to expense, and renewals and betterments are capitalized to
the appropriate property and equipment accounts.
Unevaluated properties are assessed periodically
on 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. Proceeds
from sales of partial interests in unproved leases are accounted for as a
recovery of cost without recognizing any gain until all costs are recovered.
The Company reviews its
proved oil and gas properties for impairment whenever events and circumstances
indicate a decline in the recoverability of their carrying value may have
occurred. The Company estimates the expected undiscounted future cash flows of
its oil and gas properties and compares such undiscounted future cash flows to
the carrying amount of the oil and gas properties to determine if the carrying
amount is recoverable. If the carrying amount exceeds the estimated
undiscounted future cash flows, the Company will adjust the carrying amount of
the oil and gas properties to fair value. The factors used to determine fair
value include, but are not limited to, recent sales prices of comparable
properties, estimates of proved reserves, future commodity pricing, future
production estimates, anticipated capital expenditures, and a discount rate
commensurate with the risk associated with realizing the expected cash flows
projected.
F-7
PETROCORP INC.
(An Exploration Stage Company)
Notes to the Consolidated Financial Statements
December 31, 2008 and 2007
The provision for
depreciation, depletion and amortization (DD&A) of oil and gas properties
is 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 to
six Mcf. Taken into consideration in the calculation of DD&A are estimated
future dismantlement, restoration and abandonment costs, which are net of
estimated salvage values.
Furniture, equipment and
other
Furniture and other office and field equipment
are recorded at cost. Costs of renewals and improvements that substantially
extend the useful lives of the assets are capitalized. Leasehold improvements
are amortized over the lesser of five years or the life of the lease.
Maintenance and repairs are expensed when incurred. Depreciation of other
property and equipment is computed using the straight-line method over their
estimated useful lives of three to ten years. Upon retirement or disposition
of assets, the costs and related accumulated depreciation are removed from the
accounts with the resulting gains or losses, if any, reflected in results of
operations.
In September 2007, the Company recorded an
impairment charge of $16,929 related to its telephonic equipment when the
Company changed the direction of its efforts from telephonic conferencing
services to the oil and gas sector.
Fair value of financial instruments
The fair value of a financial
instrument is the amount at which the instrument could be exchanged in a
current transaction between willing parties. The carrying amounts of financial
assets and liabilities, such as cash, revenue receivables, accounts payable,
accrued expenses, and the State of Alaska payable approximate their fair values
because of the short maturity of these instruments. The notes payable to majority stockholder approximate
the fair value of such instruments based upon managements best estimate of
interest rates that would be available to the Company for similar financial
arrangements at December
31, 2008
and 2007.
Revenue recognition
The Company follows the guidance of the United States
Securities and Exchange Commissions 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 realizable
and earned less estimated future doubtful
accounts. The Company considers revenue
realized or realizable and earned when all of the following criteria are met:
(i) persuasive evidence of an arrangement exists, (ii) the product has been
shipped or the services have been rendered to the customer, (iii) the sales price is fixed or
determinable, and (iv) collectability is reasonably assured. The
Company derives revenue primarily from the sale of produced natural gas and
crude oil. The Company reports revenue as the gross amount received before
taking into account production taxes and transportation costs, which are
reported as separate expenses. Revenue is recorded in the month the Companys
production is delivered to the purchaser, but payment is generally received
between thirty (30) and ninety (90) days after the date of production. No
revenue is recognized unless it is determined that title to the product has
transferred to the purchaser. At the end of each month, the Company estimates
the amount of production delivered to the purchaser and the price the Company
will 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 tax
liabilities and assets for the expected future tax consequences of events that
have been recognized in the financial statements or tax returns. Under this
method, deferred tax liabilities and assets are determined based on the
differences between the financial statement carrying amounts and the tax basis
of assets and liabilities using enacted tax rates in effect in the years in
which 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 of
basic and diluted earnings or loss per share (EPS) for all entities with
complex capital structures and requires a reconciliation of the numerator and
denominator of the basic EPS computation to the numerator and denominator of
the diluted EPS computation. Basic EPS excludes dilution; diluted EPS reflects
the potential dilution that could occur if securities or other contracts to
issue common stock were exercised or converted into common stock or resulted in
the issuance of common stock that then shared in the earnings of the entity.
Basic loss per share is computed by dividing net
loss applicable to common shareholders by the weighted average number of common
shares outstanding during the period. Diluted loss per share reflects the
potential dilution that could occur if dilutive securities and other contracts
to issue common stock were exercised or converted into common stock or resulted
in the issuance of common stock that then shared in the earnings of the
Company, unless the effect is anti-dilutive. The Company had no potentially dilutive
securities for the years ended December 31, 2008 or 2007.
Recently issued accounting pronouncements
In June 2003, the Securities and
Exchange Commission (SEC) adopted final rules under Section 404 of the
Sarbanes-Oxley Act of 2002 (Section 404), as amended by SEC Release No. 33-8934
on June 26, 2008. Commencing with its annual report for the year ending
December 31, 2009, the Company will be required to include a report of
management on its internal control over financial reporting. The internal
control report must include a statement
-
of managements
responsibility for establishing and maintaining adequate internal control
over its financial reporting;
-
of managements
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 Companys internal
control over financial reporting.
Furthermore, in the following fiscal year, it is
required to file the auditors attestation report separately on the Companys
internal control over financial reporting on whether it believes that the
Company has maintained, in all material respects, effective internal control
over 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 estimates
of contingent consideration and certain other potential liabilities during the
original purchase price allocation, expense acquisition costs as incurred and
does not permit certain restructuring activities previously allowed under
Emerging Issues Task Force Issue No. 95-3 to be recorded as a component of
purchase accounting. SFAS No. 141(R) applies prospectively to business
combinations for which the acquisition date is on or after the beginning of the
first annual reporting period beginning on or after December 15, 2008, except for the presentation and disclosure requirements,
which shall be applied retrospectively for all periods presented. The Company
has not determined the effect that the adoption of SFAS No. 141(R) will have on
its financial statements.
In December 2007, the FASB issued FASB Statement No. 160
Non-controlling Interests in Consolidated Financial
Statements - an amendment of ARB No. 51
(SFAS No. 160), which causes
non-controlling interests in subsidiaries to be included in the equity section
of the balance sheet. SFAS No. 160 applies prospectively to business
combinations for which the acquisition date is on or after the beginning of the
first annual reporting period beginning on or after December 15, 2008, except for the presentation and disclosure requirements,
which shall be applied retrospectively for all periods presented. The Company
has not determined the effect that the adoption of SFAS No. 160 will have on
its financial statements.
In March 2008, the FASB issued FASB Statement No. 161,
Disclosures about Derivative Instruments and
Hedging Activities an amendment of FASB Statement No. 133
(SFAS No. 161).
This statement changes the disclosure requirements for derivative instruments
and hedging activities. Pursuant to SFAS No. 161, Entities are required to
provide enhanced disclosures about (a) how and why an entity uses derivative
instruments, (b) how derivative instruments and related hedged items are
accounted for under Statement 133 and its related interpretations, and (c) how
derivative instruments and related hedged items affect an entitys financial
position, financial performance, and cash flows. SFAS No. 161 is effective for
financial statements issued for fiscal years and interim periods beginning
after November 15, 2008 with early application encouraged. SFAS No. 161
encourages but does not require disclosures for earlier periods presented for
comparative purposes at initial adoption. In years after initial adoption,
this statement requires comparative disclosures only for periods subsequent to
initial adoption. The Company does not expect the application of SFAS No. 161
to have a material effect on its financial statements.
Management does not believe that any other
recently 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 been
prepared on a going concern basis, which assumes the Company will be able to
realize its assets and discharge its liabilities in the normal course of
business. At December 31, 2008, the Company had a deficit accumulated during
the exploration stage of $434,935, a net loss of $346,414 with revenues of $24,151
and cash used in operations of $453,421 for the year then ended. These
conditions raise substantial doubt about the Companys ability to continue as a
going concern.
While the Company is attempting to generate
measurable revenues, the Companys cash position may not be sufficient to
support its daily operations. Management intends to raise additional capital
through sales of its securities or loans from its majority shareholder. The
ability of the Company to continue as a going concern is dependent upon its ability to
further implement its business plan, generate sufficient revenues and raise
additional capital. The financial statements do not include any adjustments
that might be necessary if the Company is unable to continue as a going
concern.
Note
4 - Oil and Gas Properties
Leasehold Acreage
Petrocorp owns interests
in developed and undeveloped oil and natural gas acreage in the locations set
forth below as of December 31, 2008. These ownership interests generally take
the form of working interests in oil and natural gas leases or licenses that
have 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, the
Government of Italy made the preliminary award of the competitive oil and gas
exploration licenses, Fiorenzuola D'Arda located in the Po Valley and
Montottone located in the Marche region, in favor of Mac Oil SpA, our
subsidiary. On March 24, 2009, the Government of Italy made the preliminary
award of the competitive oil and gas exploration license, Melzo located in
the Po Valley, 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 exploration
license applications pending awaiting adjudication by the Ministry of Economic
Development in Italy covering a net surface area of 27,240 hectares (67,259
acres).
(2)
One license application pending covering a net surface area
of 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 has
capitalized leasehold acreage costs in developed and undeveloped oil and
natural gas acreage in the locations set forth below as of December 31, 2008
and 2007.
Capitalized
Acreage 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 Drilling
Activity
The Company owns working
interests 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 one
had dual completions. At December 31, 2008, Petrocorp had six gross wells in
progress.
Note 5 - Notes Payable to Majority Stockholder
At December 31, 2007, the Company had $440,000 in
unsecured, non-interest bearing notes (two), payable on demand with its president
and 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 transferred
his 78.5% stock ownership in Petrocorp Inc. and three outstanding promissory
notes (totaling $734,058) to Soladino Investments SA (Soladino), a Swiss
corporation owned by Mr. Fitzsimons. At December 31, 2008, the Company has a
note payable to Soladino for $734,058. The note is secured by the Companys oil and gas
leases, is non interest bearing and payable upon demand.
During the years ended December 31, 2008 and
2007, the Company imputed interest expense related to these notes of $30,274
and $6,076, respectively. Interest was imputed at an implied rate of 6% per
annum and the amounts were recorded as capital contributions by the Company.
Note 6 - Stockholders Equity
Common stock
On September 30, 2006, the Company issued 20,000,000
shares of common stock to its founders at par value ($.0001 per share). During
the period July
1 through December
31, 2006,
the Company sold 600,000 shares of its common stock in a private placement
at $0.05 per share (an aggregate of $30,000) to 16 individuals.
During the period from January 1 through September 30, 2007, the
Company 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 800,000
shares 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 common
stock to one investor at $1.25 per share (an aggregate of $1,000,000). These shares
were sold in transactions exempt from registration under Regulation S of the
Securities Act of 1933, as amended (the Securities Act). These shares are
not registered under the Securities Act or any state securities laws and,
unless so registered, may not be offered or sold except pursuant to an
applicable exemption from the registration requirements of the Securities Act
and applicable state securities laws. The purchasers of these shares
represented that they were acquiring the shares for their own account, for
investment, and that the purchasers were not US Persons within the meaning of
Regulation S. The Company has no obligation to register the resale of these shares
under the Securities Act. The proceeds from the sale of these shares will be
used for working capital purposes.
Note 7 - Income Taxes
Deferred tax assets
The Company incurred no income taxes for the
years ended December 31, 2008 and 2007. The expected income tax benefit for
the years ended December 31, 2008 and 2007 was approximately $78,100 and $12,200,
respectively.
The components of deferred tax
assets 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 statements
of operations
A reconciliation of the federal statutory income
tax rate and the effective income tax rate as a percentage of income before
income 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 Companys net operating loss carry-forwards
of approximately $275,600 at December 31, 2008 are available to offset future
taxable income, if any, and expire in 2028.
F-13
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 from
its president, James Fitzsimons, a 50% working interest (41.25% net revenue
interest) in the Snake Creek prospect, a 3,200 gross (3,022 net) acre gas
development project located in northern Okmulgee County, Oklahoma. The first
well on this acreage, the Snake Creek #1, spaced on 160 acres, has been
successfully drilled and completed. The Middle Dutcher zone was fracture
stimulated and is in production. The Company reimbursed Mr. Fitzsimons for his
historic costs (acreage and drilling) by issuing a secured, non-interest
bearing note, payable on demand for $210,917 and assumed responsibility for all
further costs.
On November 30, 2008, the Company acquired from Mr.
Fitzsimons, a 100% working interest (81.25% net revenue interest) in the
Spanish Peak prospect, a 2,041 gross (900 net) acre gas development project
located in Okmulgee County, Oklahoma. The Company reimbursed Mr. Fitzsimons
for his historic costs (acreage) by issuing a secured, non-interest bearing
note, payable on demand for $173,141 and assumed responsibility for all further
costs.
On December 1, 2008, James Fitzsimons transferred
his 78.5% stock ownership in Petrocorp Inc. and three outstanding promissory
notes (totaling $734,058) to Soladino Investments SA (Soladino), a Swiss
corporation owned by Mr. Fitzsimons. The Company issued Soladino a $734,058
note, which
is secured by the Companys oil and gas leases, is non interest bearing and
payable upon demand.
The Company was provided management services by
its president, Mr. Fitzsimons during 2008 at no cost. The Company recorded the
$120,000 estimated value of these services as compensation expense and as a
capital contribution.
The Company was provided legal and
administrative services and office space by Mr. Hariton, our Corporate
Secretary. Mr. Hariton was paid $26,500 in 2008 and $16,000 in 2007 for these
services.
Note 9 - Subsequent Event
On March 31, 2009, the Company purchased 171 oil
and 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 Soladino
Investments SA at a cost of $583,823. The Company reimbursed Soladino for its
historic costs (acreage) by issuing a secured, non-interest bearing note,
payable on demand for $583,823 and assumed responsibility for all further
costs. The leases are held in the name of Frontier Land, Inc. as fiduciary
trustee for the benefit of the Companys subsidiary Petrocorp (Oklahoma) Inc.
F-14
Exhibit 21
SUBSDIARIES
Union Energy (Alaska), LLC, an Alaska limited
liability 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