UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-KSB
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ANNUAL REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended
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December 31, 2007
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o
TRANSITION REPORT PURSUANT TO SECTION
13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the
transition period from _______________ to _______________
Commission file number:
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333-141993
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Petrocorp Inc.
(Exact name of registrant as specified in its charter)
DELAWARE 20-5134664
State
or other jurisdiction of (I.R.S. employer
incorporation or organization identification no.)
1065 Dobbs Ferry Road, White Plains, New York
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10607
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(Address of principal executive offices)
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(Zip code)
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Registrant’s Telephone Number, including area code: (914)
674-4373
Securities Registered pursuant to Section 12(b) of the Act:
______
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Title of each class
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Name of each exchange where registered
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Securities Registered pursuant to Section 12(g) of the
Act:
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Common Stock, par value $0.001 per share
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Indicate by check mark if the registrant is a well-known seasoned issuer
as defined in Rule 405 of the Securities Act.
Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or 15(d) of the Act.
Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Act).
The
aggregate market value of voting and non-voting stock held by non-affiliates of the
registrant as of March 20, 2008 was $8,540,000.
There
were 5,670,000 shares of common stock outstanding as of March 20, 2008.
Documents Incorporated by Reference:
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None
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PETROCORP INC.
FORM 10-KSB
INDEX
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Page
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PART
I
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Item 1.
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Business
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2
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Item 1A.
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Risk Factors
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7
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Item 2.
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Properties
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14
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Item 3.
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Legal Proceedings
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14
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Item 4.
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Submission of Matters to a Vote of Security
Holders
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14
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PART II
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Item 5.
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Market for Registrant's Common Equity, Related
Stockholder Matters and Issuer Purchases of Equity
Securities
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15
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Item 6.
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Selected Financial Data
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15
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Item 7.
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Management’s Discussion and Analysis of
Financial Condition and Results of Operation
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17
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Item 7A.
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Quantitative and Qualitative Disclosures About Market
Risk
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Item 8.
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Financial Statements and Supplementary
Data
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20
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Item 9.
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Changes in and Disagreements With Accountants on
Accounting and Financial Disclosure
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20
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Item 9A.
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Controls and Procedures
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20
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Item 9B.
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Other Information
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20
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PART
III
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Item 10.
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Directors, Executive Officers and Corporate
Governance
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21
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Item 11.
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Executive Compensation
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22
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Item 12.
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Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters
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Item 13.
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Certain Relationships and Related Transactions, and
Director Independence
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Item 14.
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Principal Accounting Fees and Services
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23
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PART
IV
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Item 15.
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Exhibits, Financial Statement
Schedules
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24
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Index to Consolidated Financial
Statements
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F-1
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Index to Exhibits
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24
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Signatures
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25
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-I-
Cautionary Note Regarding 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 its subsidiary.
1
BACKGROUND
We
were incorporated as GD Conference Center, Inc. under the laws of Delaware on June 16,
2006.
Prior to September 2007, the Company’s 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 into three separate oil and gas farm out
agreements with James Fitzsimons. The farm outs represent leasehold properties totaling
980 gross acres located in Okfuskee County, Oklahoma. Pursuant to the agreement terms,
the Company acquired the right to earn 22 oil and gas leases. The Company earns each
oil and gas lease in exchange for the Company agreeing to drill a test well in each
region of the leases on or before December 31, 2008; prepare specified reports and
conduct certain production tests. Mr. Fitzsimons also purchased 4,450,000 shares of the
Company’s common stock from certain shareholders, resulting in him owning 84.5%
of the Company’s 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 effected a five for one forward stock split
which increased the authorized common stock to 100,000,000 shares at $0.0001 par value.
The Company’s authorized preferred stock was not changed by this
Amendment.
On
December 27, 2007, the Company sold 200,000 shares of its common stock to one investor
at $2.50 per share (an aggregate of $500,000). On
March 18,
2008
, the Company sold 200,000 shares of its common stock
to one investor at $5.00 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
We
are an exploration stage Company engaged in the acquisition, exploration and, if
warranted, development of prospective oil and gas properties. Our office is located at
1065 Dobbs Ferry Road, White Plains, NY 10607 and our telephone number is (914)
674-4373. We do not maintain a web-site.
CURRENT
ACTIVITIES
Our
plan of operation is 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. There is no assurance that a commercially viable
oil and gas reserve exists on any of our current and future properties, and a great
deal of further exploration will be required before a final evaluation as to the
economic feasibility for our future exploration is determined. To date, we do not know
if any economically viable oil and gas reserves exist on any of our current or future
properties and there is no assurance that we will discover any.
2
The
Oklahoma leases are near oil and gas fields with proved developed production and within
the general area of the "Woodford shale play," however, the Company has not yet
conducted detailed geological mapping of the leases and does not make any
representations as to their future production, if any.
Each
Oklahoma farm out agreement contains the following principal terms:
•We must commence drilling an oil and gas test well on any legal
location within any drilling and spacing unit established by the Oklahoma Corporation
Commission which includes all or part of the leasehold acreage that is the subject of
each farm out agreement by December 31, 2008. If we do not drill a test well by the
deadline date indicated, we forfeit our farm out interest in the leased land. There is
no other penalty if we fail to drill such a well;
•We must drill each test well and conduct due diligence in a
workmanlike manner to a depth sufficient to thoroughly test common sources of supply
defined within any established drilling and spacing unit; and,
•Upon completion of the test well, James Fitzsimons shall execute
an assignment of the leasehold acreage that is subject to the farm out agreement for
the portion of the lease included in the drilling and spacing unit, retaining the
difference between the base royalty and 75%, delivering to us a 75% net revenue
interest.
All
of the farm out agreements, which have been filed as exhibits to our current report,
dated September 20, 2007, were prepared using an industry standard Form 635. A schedule
of the oil and gas lease agreements is attached as an exhibit to each of the farm out
agreements. The underlying lease agreement terms all provide time for the drilling of
the oil and gas test wells indicated in the farm out agreements.
In
Oklahoma we have retained Keith Summar (a member of the American Association of
Petroleum Geologists) as a consultant to assist us in our operations pursuant to an
agreement that requires him to devote 65 hours a month to our affairs
The
Alaska leases are in areas which the Company believes, based upon current available
geological data and maps within the public domain, 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.
On
October 25, 2007, Union Energy (Alaska) LLC (“UEA”), a wholly owned
subsidiary, was the winning bidder for tracts 254, 258 and 259 in the North Slope
Areawide 2007 Competitive Oil and Gas Lease Sale. UEA bid $449,971.20 for the three
5,760 acre tracts and paid deposits
3
with
its winning bids totaling $90,000 to the State of Alaska. Based upon current available
land title information, the Company estimates these tracts, covering approximately
17,280 gross acres, contain 14,807.41 net leaseable acres and that additional payments
to the State of Alaska, in an amount yet to be determined, will be approximately
$279,500. These leases, when issued, will be for a term of seven years and will be
subject to a 12.5% royalty interest in favor of the State of Alaska, and such other
limitations as a complete title search reveals.
The
tracts acquired by UEA, designated as 254, 258 and 259, are contiguous and are believed
by the Company, based upon current available geological data and maps within 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"). While
the USGS evaluation is encouraging, the Company can not assure that gas in commercial
paying quantities will be recovered.
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 oil and gas
lease sale. UEA bid $269,568 for the nine 5,760 acre tracts and paid deposits with its
winning bids totaling $54,000 to the State of Alaska. Based upon current available land
title information, the Company estimates that these tracts, covering approximately
51,840 gross acres, contain approximately 9,600 net leaseable acres and that the
additional payment to the State of Alaska, in an amount yet to be determined, will be
zero.
These leases, when issued, will be for a term of 10 years and will be
subject to a 12.5% royalty interest in favor of the State of Alaska and such other
limitations as a complete title search reveals. Tracts 922, 923, 927, 988, 989, 990,
991, 992 and 925 are contiguous and are believed by the Company, based upon current
available geological data and maps within 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 accumulation and is now interpreting the East Kurupa well to have
encountered a thick section of over-pressured gas in Brookian strata. The Company
intends to conduct a detailed geological evaluation of the Kurupa anticline, acquiring
seismic data where available. While these indications are favorable, the Company can
not assure that gas in commercial paying quantities will be recovered.
In
relation to Alaska 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 in respect of their acreage and to acquire other land interests
within the vicinity of various tracts
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
4
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 as
an oil and gas exploration 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.
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 establishing 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.
5
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.
6
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.
SUBSIDIARIES
Our
only subsidiary is Union Energy (Alaska), LLC, an Alaska limited liability company
which is wholly owned by us.
Item
1A Risk Factors.
In
addition to other information in this current report, the following risk factors should
be carefully considered in evaluating our business because such factors may have a
significant impact on our business, operating results, liquidity and financial
condition. As a result of the risk factors set forth below, actual results could differ
materially from those projected in any forward-looking statements. Additional risks and
uncertainties not presently known to us, or that we currently consider to be
immaterial, may also impact our business, operating results, liquidity and financial
condition. If any such risks occur, our business, operating results, liquidity and
financial condition could be materially affected in an adverse manner. Under such
circumstances, the trading price of our securities could decline, and you may lose all
or part of your investment.
RISKS
RELATING
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.
We
intend to drill test wells on the Oklahoma properties covered by the farm out
agreements as well as on our anticipated leaseholds in Alaska. 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 (v) 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.
7
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.
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.
8
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.
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.
9
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 RELATING TO OUR COMPANY
If
we do not continue to obtain additional financing we may not be able to fully develop
all of our properties.
While
our current operating funds are sufficient to enable us to commence and complete all
intended test wells on the Oklahoma properties covered by the oil and gas leases, we
may encounter unforeseen costs and expenses. If we incur unforeseen costs and expenses,
we will need to obtain additional financing in order to complete our business plan. We
currently do not have any income producing operations or commitments to provide any
additional funds that may be needed in the future.
Our
cash on hand at March 31, 2008, less known liabilities is approximately $1,320,000. We
do not currently have any arrangements for financing and may not be able to find
such
10
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, we may be required to
delay or limit the development of certain of our properties.l.
We
are a new entrant into the oil and gas industry without a profitable or long operating
history. We do not have any 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 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
11
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.
None of
the Oklahoma or Alaska properties covered by the oil and gas leases 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 approximately 78.5% of the
shares of common stock and his 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 4,450,000 shares of our common stock, or
78.5% of our issued and outstanding common stock, as of the date hereof. Due to his
stock ownership, James Fitzsimons is able to substantially influence all matters
requiring stockholder 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 ofthe 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
12
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 RELATING 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.
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, $0.0001 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
13
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 our registered securities , 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.
Item
1B. Unresolved Staff Comments.
None
Item
2. Properties.
Our
present level of operations has not required us to establish regular executive offices
and we use the offices of our counsel and secretary, Frank J. Hariton, 1065 Dobbs Ferry
Road, White Plains, New York 10607 without charge. 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 are
not currently party to any legal proceedings and are not aware of any threatened legal
proceedings against us.
Item
4. Submission of Matters to a Vote of Security Holders.
14
On
October 19, 2007, we filed a Certificate of Amendment to our Certificate of
Incorporation (the "Amendment"). The Amendment changed our name from "GD Conference
Center, Inc." to "Petrocorp Inc." and effected a five for one stock split (the "Stock
Split"). The Amendment was approved by the written consent of James Fitzsimons who, at
the time of such action owned 890,000 (4,450,000 as adjusted for the Stock Split) of
our 1,054,000 (5,270,000 as adjusted for the Stock Split) issued and outstanding
shares, then representing approximately 84.5% of our issued and outstanding
shares
Part II.
Item
5.
Market for Registrant's Common Equity, Related
Stockholder Matters and Issuer Purchases of Equity
Securities
.
Our
common stock trades on the Over the Counter Bulletin Board under the symbol
“PTCP”. The volume and frequency of both quotations and trades in our stock
has been limited. There are presently six holders of record of our common stock. The
number of holders does not include the shareholders for whom shares are held in a
"nominee" or "street" name. We have not paid any cash dividends and do not anticipate
doing so in the foreseeable future. Future dividends, if any, will depend upon our
results of operations, financial condition, capital needs and such other factors as the
Board of Directors deems relevant.
Recent Sales of Unregistered Securities
On
December 27, 2007, the Company sold 200,000 shares of its common stock to one investor
at $2.50 per share (an aggregate of $500,000). On
March 18,
2008
, the Company sold 200,000 shares of its common stock
to one investor at $5.00 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 it was
acquiring the shares for its own account, for investment, and that the purchaser was
not a US Person 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
.
We were
organized in June 2006. The following information is derived from our financial
statements contained elsewhere herein and should be reviewed in conjunction with those
financial statements, the notes thereto and “Item 7. Management’s
Discussion and Analysis of Financial Condition and Results of Operations”
included in this annual report.
15
Balance Sheet Data
:
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
2007
|
|
2006
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
827,755
|
|
$
|
22,532
|
|
|
|
|
|
|
|
Total current assets
|
|
|
827,755
|
|
|
22,532
|
|
|
|
|
|
|
|
Undeveloped oil and gas properties
|
|
|
385,286
|
|
|
-
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
1,213,041
|
|
$
|
22,532
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’
EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
Accrued expenses
|
|
$
|
18,886
|
|
$
|
19,829
|
State of Alaska payable
|
|
|
279,500
|
|
|
-
|
Notes to an officer/stockholder
|
|
|
440,000
|
|
|
-
|
Total current liabilities
|
|
|
738,386
|
|
|
19,829
|
|
|
|
|
|
|
|
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
|
|
|
|
|
|
|
5,470,000 and 5,150,000 shares issued and outstanding,
respectively
|
|
|
547
|
|
|
515
|
Additional paid-in capital
|
|
|
562,629
|
|
|
29,585
|
Deficit accumulated during exploration stage
|
|
|
(88,521)
|
|
|
(27,397)
|
|
|
|
474,655
|
|
|
2,703
|
|
|
|
|
|
|
|
Total liabilities and stockholders’
equity
|
|
$
|
1,213,041
|
|
$
|
22,532
|
16
Statement of Operations Data:
|
|
|
|
|
Period from
|
|
|
|
|
|
June 19, 2006
|
|
|
|
|
(inception) through
|
|
|
|
|
December 31,
|
|
|
2007
|
|
2006
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses:
|
|
|
|
|
|
|
|
|
|
General and administrative
|
|
$
|
36,248
|
|
$
|
26,597
|
|
$
|
62,845
|
Depreciation
|
|
|
1,071
|
|
|
-
|
|
|
1,071
|
Impairment of equipment
|
|
|
16,929
|
|
|
-
|
|
|
16,929
|
Interest
|
|
|
6,076
|
|
|
-
|
|
|
6,076
|
Franchise taxes
|
|
|
800
|
|
|
800
|
|
|
1,600
|
Net loss applicable to common shareholders
|
|
$
|
(61,124)
|
|
$
|
(27,397)
|
|
$
|
(88,521)
|
|
|
|
|
|
|
|
|
|
|
Net loss per common share - basic and diluted
|
|
$
|
(0.01)
|
|
$
|
(0.01)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common
|
|
|
|
|
|
|
|
|
|
shares outstanding – basic and diluted
|
|
|
5,259,205
|
|
|
5,085,625
|
|
|
|
Item
7. Management’s Discussion and Analysis of Financial Condition and Results of
Operations
.
PLAN
OF OPERATIONS AND CASH REQUIREMENTS
Our
plan of operation for year ending December 31, 2008 is to commence, subject to the
satisfactory completion of the detailed geological mapping of the leases, test wells on
the Oklahoma prospects covered by the oil and gas leases. We anticipate the cost of
these programs will be approximately $1,000,000, 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 also
anticipate being required to pay at least $275,000 to obtain leases from the State of
Alaska during the year ending December 31, 2008 or the following year in connection
with our Alaska prospects.
In year
ending December 31, 2008 we also anticipate spending an additional $40,000 on
administrative expenses, including fees payable in connection with our compliance with
our reporting obligations as a public company, such as legal, accounting and audit
fees.
Total
expenditures in year ending December 31, 2008 therefore could be at least $1,315,000.
While we have the cash on hand necessary to cover these expenses, we could require
additional funding to meet unforeseen costs. We anticipate that additional funding will
be
17
provided in the form of equity financing from the sale of our common
stock or from director loans. However, we cannot provide investors with any assurance
that we will be able to raise sufficient funding. We do not have any arrangements in
place for any future equity financing.
We are
in the process of determining our personnel needs. We intend to continue hire
consultants over the course of the next twelve months. To attract qualified personnel,
we may offer percentages of the working interest in the company's oil and gas
properties.
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.
Capital Resources
As of
December 31, 2007, we had cash of $827,755 and working capital of $89,369 . Our net
cash provided by financing activities during the period from our inception to December
31, 2007 was $994,100 .
On
September 20, 2007, a director, James Fitzsimons, loaned $350,000 to our company.
During the year ended December 31, 2007, Mr. Fitzsimons also advanced $90,000 to our
subsidiary Union Energy (Alaska), LLC as a deposit in connection with a bid for Alaskan
oil and gas leases.
In
December 2007 we raised $500,000 from the private sale of 250,000 shares of our stock
at $2.50 per share. In March 2008 we raised $1,000,000 from the private sale of
$200,000 shares of our stock at $5.00 per share. These sales were arms length sales to
unaffiliated parties completed pursuant to the exemption from registration under the
Securities Act of 1933, as amended, by Regulation S issued thereunder.
OIL
AND GAS PROPERTIES
Undeveloped Acreage
In
Oklahoma we hold farm out interests in approximately 980 gross (426 net) acres located
in Okfuskee County, Oklahoma plus a further 28 net acres leased directly from mineral
owners by the Company. The farm out agreements provide that to earn the leases,
we must commence drilling an oil and gas test well in the regions covered by the
leaseholds by December 31, 2008. A summary of the leased land covered by our farm
out interests plus acreage leased directly by the Company is as follows:Township 11
North, Range 10 East, Okfuskee Count, Oklahoma
Section
10: 400.000 gross acres (158.7760 net acres)
Section
11: 500.000 gross acres (214.5090 net acres)
18
Section
35: 80.0000 gross acres (80.0000 net acres)
We
anticipate being awarded leases with respect to additional acreage in Alaska in
approximately 26,680 gross (24,407 net) acres. However these leases have not yet
been issued and the acreage in the eventual leases may
vary.
Drilling Activity
As of
the date of this current report, we do not hold an interest in any oil and gas wells
that are in the process of drilling (including wells temporarily suspended),
waterfloods in process of installation, pressure maintenance operations or any other
related operations of material importance.
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 adverse
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 and Estimates
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 current 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.
Off-Balance Sheet Arrangements
We have
no significant 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 stockholders.
Employees and Purchase of Plant or Equipment
We are
in the process of determining our personnel needs. We intend to hire employees or
consultants over the course of the next twelve months but do not currently have an
estimate of how many employees we will hire or how much it will cost.
19
Item
8 Financial Statements and Supplementary Data
.
See
Financial Statements beginning on Page F-1.
Item
9
Changes in and Disagreements With Accountants on
Accounting and Financial Disclosure
No
events have occurred which would require disclosure under this item.
Item
9A Controls and Procedures.
Conclusions Regarding the Effectiveness of Disclosure Controls and
Procedures
We
maintain disclosure controls and procedures, as defined in Exchange Act Rule 13a-15(e),
that are designed to ensure that information required to be disclosed by the company in
the reports that it files or submits under the Securities Exchange Act of 1934, as
amended, is recorded, processed, summarized, and reported within the time periods
specified in the Securities and Exchange Commission’s rules and forms, and that
such information is accumulated and communicated to the company’s management,
including its chief executive officer and chief financial officer, as appropriate to
allow timely decisions regarding required disclosure. Our management evaluated, with
the participation of the Chief Executive Officer and Chief Financial Officer, the
effectiveness of the design and operation of our disclosure controls and procedures as
of December 31, 2007. Based on this evaluation, our principal executive and principal
financial officers concluded that our disclosure controls and procedures were effective
as of December 31, 2007, the end of the period covered by this annual
report.
Management’s Report on Internal Control over Financial
Reporting
This
Annual Report on Form 10-KSB does not include a report of management’s assessment
regarding internal control over financial reporting or an attestation report of the
Company’s independent registered public accounting firm due to a transition
period established by rules of the Securities and Exchange Commission for newly public
companies.
Changes in Internal Control over Financial Reporting
There
has been no change in our internal control over financial reporting that occurred
during our fiscal quarter ended December 31, 2007, 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 that was not reported.
20
Part III
Item 10 Executive Officers and Corporate Governance
Our
current directors and executive officers are:
|
James Fitzsimons
|
47
|
President, CEO and a Director
|
|
Stephen M. Siedow
|
57
|
Director
|
|
Frank J. Hariton
|
59
|
Secretary
|
James Fitzsimons
has been a director
of our Company since September 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 as a member of 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 active
within the oil and gas industry in the state of Oklahoma 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.
StephenM. Siedow
, has been a
director since December 2007 and is a member of The American Institute of Certified
Public Accountants and the Colorado Society of Certified Public Accountants was
appointed to the Registrant’s Board of Directors. 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.
Frank J. Hariton
has been corporate
secretary 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.
There are no family relationships among members of our management.
Directors serve for one year terms or until their successors shall have been elected
and shall qualify. Officers serve at the pleasure of the board. Due to its small size,
the Company has not adopted a code of ethics. The Board of Directors does not have any
committees.
21
Item 11. Executive Compensation
The following table sets forth the cash and non-cash annual remuneration
of each of the three highest paid persons who are officers and directors and officers
and directors as a group during our last fiscal year:
Name of
individual or identity of group
|
Capacities
in which remuneration was received
|
Salary
|
Bonus
|
Stock
Awards
|
All
Other Compensation
|
Aggregate remuneration
|
James Fitzsimons
|
CEO
|
$0
|
$0
|
$0
|
$0
|
$0
|
Stephen M. Siedow
|
Director
|
$0
|
$0
|
$0
|
$0
|
$0
|
Frank J. Hariton
|
Secretary
|
$0
|
$0
|
$0
|
$0
|
$0
|
|
|
The
Company has not paid any compensation in cash to any officer or director and does not
intend to do so until such time as its capital resources are sufficient in the judgment
of its Board of Directors and such officers are required to devote significant time to
the Company’s affairs.
The
Company has not paid and has no present plan to give any compensation other than cash.
The Company does not have any Stock Option Plan or other equity compensation plans, but
is considering adopting a royalty bonus pool plan for its management in the
future.
Mr.
Hariton was paid $10,000 for legal services in connection with our September 2007
transaction with Mr. Fitzsimons. Mr. Siedow has accrued $2,300 in accounting fees as of
December 31, 2007.
Item
12 Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters.
The information in the following table sets forth the beneficial
ownership of our shares of common stock as of March 20, 2008, by: (i) each of the three
highest paid persons who are our officers and directors (or in the alternative, each
officer and director); (ii) all officers and directors as a group; (iii) each
shareholder who beneficially owns more than 5% of any class of our securities,
including those shares subject to outstanding options. A person deemed to be a
beneficial owner of any securities that such a person has a right to acquire within 60
days.
22
Name and Address
|
Number of Shares
|
Percent of Class
|
James Fitzsimons
|
4,450,000
|
78.5%
|
Selnaustrasse 3
8001
Zurich
Switzerland
13047 W
Iliff Drive
Lakewood, CO 80228
1065
Dobbs Ferry Road
White
Plains, NY 10607
All
officers and Directors
as a group (3 persons)
|
4,450,000
|
78.5%
|
Item
13. Certain Relationships and Related Transaction, and Director
Independence.
On
December 17, 2007, James Fitzsimons caused an entity that he controls (Union Energy
(Alaska) LLC (“UEA”)), to contribute its 100% working interest and 87.5%
net revenue interest in its rights to three seven-year oil and gas leases from the
State of Alaska in tracts designated 254, 258 and 259 in the North Slope of Alaska
covering approximately 17,280 gross (14,807.41 net) acres in total (the
“Leases”) to us. UEA had already paid $90,000 for the Leases and the Leases
are subject to an additional payment to the State of Alaska, for which we will be
responsible, in an amount yet to be determined, but believed by UEA and Mr. Fitzsimons
to be approximately $279,500. The Leases were obtained by UEA in a competitive bidding
process. The balance of the net revenue interest in the Leases (12.5%) represents the
State of Alaska's royalty interest. The Board of Directors has determined that the
terms of transaction with Mr. Fitzsimons and UEA with respect to the Leases was in our
best interests and in the best interests of our shareholders. Subsequent to this
transaction, Mr. Fitzsimons contributed his interest in UEA to us.
Upon
his acquisition of a controlling interest in the Company in September 2007, Mr.
Fitzsimanos loaned the Company $350,000 for working capital. Mr. Fitzsimons loaned
Union Energy (Alaska), LLC (“UEA”) $90,000 in October 2007 to enable it to
bid on leaseholds in a State of Alaska auction. The Company subsequently acquired UEA
on December 17, 2007
Mr.
Siedow owns no stock and has received no compensation from the Company, may be
considered an independent director.
Item
14. Principal Accounting Fees and Services.
Audit
Fees
23
The
aggregate fees billed for professional services rendered by our principal accountant
for the audit of our annual financial statements and review of financial statements
included in the registrant's 10-QSB (17 CFR 249.308b) for the fiscal periods ended
December 31, 2007 and 2006 were $7,500 and $11,000, respectively.
All of the fees paid to our independent auditor
were
for auditing or review of financial statements
Part IV
Item
15. Exhibits, Financial Statement Schedules.
(A)
Financial Statements
|
See index to Financial Statements on Page F-1
|
(B)
Exhibits.
Exhibit Number
|
Exhibit Description
|
3.1
|
Certificate of Incorporation - Incorporated by reference
to like numbered exhibit to the Company’s Registration Statement
on Form SB-2 File Number 333-141993
|
3.2
|
Bylaws - Incorporated by reference to like numbered
exhibit to the Company’s Registration Statement on Form SB-2 File
Number 333-141993
|
3.3
|
Certificate of Amendment to Certificate of Incorporation
- Incorporated by reference to Exhibit 3.1 to Current Report on Form
8-K filed November 5, 2007.
|
4.1
|
Specimen Stock Certificate - Filed Herewith
|
10.1
|
Consulting Agreement, dated March 12, 2008, between the
Company and Keith G. Summar - Filed Herewith
|
21
|
Subsidiary of the Registrant: Union Energy (Alaska) LLC,
an Alaska limited liability company. (100% owned)
|
31.1
|
Certification pursuant to Section 302 of the
Sarbanes-Oxley Act
|
31.2
|
Certification pursuant to Section 302 of the
Sarbanes-Oxley Act
|
32
|
Certification pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
|
( C)
Financial Statement Schedules - None
24
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.
|
(Principal Executive, Financial and
|
April 10, 2008
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.
Name
|
Signature
|
Date
|
Capacities
|
James Fitzsimons
|
/s/ James Fitzsimons
|
April 10 , 2008
|
Director and
|
President
Stephen M. Siedow
|
/s/ Stephen M. Siedow
|
April 10 , 2008
|
Director
|
25
PETROCORP INC.
(Formerly GD Conference Center, Inc.)
(An Exploration Stage Company)
INDEX TO FINANCIAL STATEMENTS
December 31, 2007
Contents
|
|
Page
|
|
|
|
Report of Independent Registered Public Accounting
Firm
|
|
F-2
|
|
|
|
Consolidated Balance Sheets at December 31, 2007 and
2006
|
|
F-3
|
|
|
|
Consolidated Statements of Operations for the Year Ended
December 31, 2007, for the Period from June 19, 2006 (Inception)
through December 31, 2006, and for the Period from June 19, 2006
(Inception) through December 31, 2007
|
|
F-4
|
|
|
|
Consolidated Statement of Stockholders’ Deficit
for the Year Ended December 31, 2007
|
|
F-5
|
|
|
|
Consolidated Statements of Cash Flows for the Year Ended
December 31, 2007, for the Period from June 19, 2006 (Inception)
through December 31, 2006, and for the Period from June 19, 2006
(Inception) through December 31, 2007
|
|
F-6
|
|
|
|
Notes to the Consolidated Financial
Statements
|
|
F-7 to F-14
|
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
To
the Board of Directors and Stockholders
Petrocorp Inc.
(An
exploration stage company)
White Plains, New York
We
have audited the accompanying consolidated balance sheets of Petrocorp Inc. (formerly
GD Conference Center, Inc.) and subsidiaries, an exploration stage
company, (collectively, “Petrocorp” or the “Company”) as
of December 31, 2007 and 2006 and the related statements of operations,
stockholders’ equity and cash flows for the year ended December 31, 2007 and for
the period from June 19, 2006 (inception) through December 31, 2006, and for the period
from June 19, 2006 (inception) through December 31, 2007. These consolidated financial
statements are the responsibility of the Company’s management. Our responsibility
is to express an opinion on these financial statements based on our audit.
We
conducted our audit in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and perform the
audit 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, 2007 and
2006 and the results of its operations and its cash flows for the year ended December
31, 2007 and for the period from June 19, 2006 (inception) through December 31, 2006,
and for the period from June 19, 2006 (inception) through December 31, 2007 in
conformity with accounting principles generally accepted in the United States of
America.
/s/Li & Company, PC
Li & Company, PC
Skillman, New Jersey
March 28, 2008
F-2
PETROCORP INC.
(Formerly GD Conference Center, Inc.)
(An Exploration Stage Company)
Consolidated Balance Sheets
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
2007
|
|
2006
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
827,755
|
|
$
|
22,532
|
|
|
|
|
|
|
|
Total current assets
|
|
|
827,755
|
|
|
22,532
|
|
|
|
|
|
|
|
Undeveloped oil and gas properties
|
|
|
385,286
|
|
|
-
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
1,213,041
|
|
$
|
22,532
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’
EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
Accrued expenses
|
|
$
|
18,886
|
|
$
|
19,829
|
State of Alaska payable
|
|
|
279,500
|
|
|
-
|
Notes to an officer/stockholder
|
|
|
440,000
|
|
|
-
|
Total current liabilities
|
|
|
738,386
|
|
|
19,829
|
|
|
|
|
|
|
|
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
|
|
|
|
|
|
|
5,470,000 and 5,150,000 shares issued and outstanding,
respectively
|
|
|
547
|
|
|
515
|
Additional paid-in capital
|
|
|
562,629
|
|
|
29,585
|
Deficit accumulated during exploration stage
|
|
|
(88,521)
|
|
|
(27,397)
|
|
|
|
474,655
|
|
|
2,703
|
|
|
|
|
|
|
|
Total liabilities and stockholders’
equity
|
|
$
|
1,213,041
|
|
$
|
22,532
|
See
notes to consolidated financial statements.
F-3
PETROCORP INC.
(Formerly GD Conference Center, Inc.)
(An Exploration Stage Company)
Consolidated Statements of Operations
|
|
|
|
|
Period from
|
|
|
|
|
|
June 19, 2006
|
|
|
|
|
(inception) through
|
|
|
|
|
December 31,
|
|
|
2007
|
|
2006
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses:
|
|
|
|
|
|
|
|
|
|
General and administrative
|
|
$
|
36,248
|
|
$
|
26,597
|
|
$
|
62,845
|
Depreciation
|
|
|
1,071
|
|
|
-
|
|
|
1,071
|
Impairment of equipment
|
|
|
16,929
|
|
|
-
|
|
|
16,929
|
Interest
|
|
|
6,076
|
|
|
-
|
|
|
6,076
|
Franchise taxes
|
|
|
800
|
|
|
800
|
|
|
1,600
|
Net loss applicable to common shareholders
|
|
$
|
(61,124)
|
|
$
|
(27,397)
|
|
$
|
(88,521)
|
|
|
|
|
|
|
|
|
|
|
Net loss per common share - basic and diluted
|
|
$
|
(0.01)
|
|
$
|
(0.01)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common
|
|
|
|
|
|
|
|
|
|
shares outstanding – basic and diluted
|
|
|
5,259,205
|
|
|
5,085,625
|
|
|
|
See
notes to consolidated financial statements.
F-4
PETROCORP INC.
(Formerly GD Conference Center, Inc.)
(An Exploration Stage Company)
Consolidated Statements of Stockholders’ Equity
For
the Period from June 19, 2006 (Inception) through December 31, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deficit
|
|
|
|
|
|
|
|
Common Stock, $0.0001 Par Value
|
|
|
Additional
|
|
|
Accumulated
|
|
|
Total
|
|
|
|
|
Number of
|
|
|
|
|
|
Paid-in
|
|
|
during the
|
|
|
Stockholders'
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Development Stage
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, June 19, 2006 (Inception)
|
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock for cash
|
|
5,000,000
|
|
|
500
|
|
|
(400)
|
|
|
-
|
|
|
100
|
|
($0.0001 per share)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock for cash ($1.00 per share
-
|
|
150,000
|
|
|
15
|
|
|
29,985
|
|
|
-
|
|
|
30,000
|
|
July 1, 2006 through December 31, 2006)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
(27,397)
|
|
|
(27,397)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2006
|
|
5,150,000
|
|
|
515
|
|
|
29,585
|
|
|
(27,397)
|
|
|
2,703
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for cash
|
|
120,000
|
|
|
12
|
|
|
23,988
|
|
|
|
|
|
24,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital contribution
|
|
|
|
|
|
|
|
3,000
|
|
|
|
|
|
3,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for cash
|
|
200,000
|
|
|
20
|
|
|
499,980
|
|
|
|
|
|
500,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest contribution
|
|
|
|
|
|
|
|
6,076
|
|
|
|
|
|
6,076
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
(61,124)
|
|
|
(61,124)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2007
|
|
5,470,000
|
|
$
|
547
|
|
$
|
562,629
|
|
$
|
(88,521)
|
|
$
|
474,655
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See
notes to consolidated financial statements.
F-5
PETROCORP INC.
(Formerly GD Conference Center, Inc.)
(An Exploration Stage Company)
Consolidated Statements of Cash Flows
|
|
|
|
|
Period from June 19, 2006
|
|
|
Year Ended
|
|
(inception) through
|
|
|
December 31
|
|
December 31
|
|
|
2007
|
|
2006
|
|
2007
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(61,124)
|
|
$
|
(27,397)
|
|
$
|
(88,521)
|
Adjustments to reconcile net loss to net
|
|
|
|
|
|
|
|
|
|
cash provided by (used in) operating
activities:
|
|
|
|
|
|
|
|
|
|
Capital contribution
|
|
|
3,000
|
|
|
|
|
|
3,000
|
Depreciation
|
|
|
1,071
|
|
|
|
|
|
1,071
|
Impairment of equipment
|
|
|
16,929
|
|
|
|
|
|
16,929
|
Interest contribution
|
|
|
6,076
|
|
|
|
|
|
6,076
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
Accrued expenses
|
|
|
(943)
|
|
|
19,829
|
|
|
18,886
|
State of Alaska payable
|
|
|
279,500
|
|
|
|
|
|
279,500
|
Net cash provided by (used in) operating
activities
|
|
|
244,509
|
|
|
(7,568)
|
|
|
236,941
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
Purchase of undeveloped oil and gas
properties
|
|
|
(385,286)
|
|
|
|
|
|
(385,286)
|
Purchase of equipment
|
|
|
(18,000)
|
|
|
|
|
|
(18,000)
|
Net cash used in investing activities
|
|
|
(403,286)
|
|
|
--
|
|
|
(403,286)
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
Notes to an officer/stockholder
|
|
|
440,000
|
|
|
|
|
|
440,000
|
Proceeds from sale of common stock
|
|
|
524,000
|
|
|
30,100
|
|
|
554,100
|
Net cash provided by financing activities
|
|
|
964,000
|
|
|
30,100
|
|
|
994,100
|
|
|
|
|
|
|
|
|
|
|
Net increase in cash
|
|
|
805,223
|
|
|
22,532
|
|
|
827,755
|
Cash at beginning of period
|
|
|
22,532
|
|
|
|
|
|
--
|
Cash at end of period
|
|
$
|
827,755
|
|
$
|
22,532
|
|
$
|
827,755
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow
information:
|
|
|
|
|
|
|
|
|
|
Cash paid for interest
|
|
|
|
|
|
|
|
$
|
--
|
Cash paid for taxes
|
|
|
|
|
|
|
|
$
|
--
|
Supplemental disclosure of noncash investing
and
|
|
|
|
|
|
|
|
|
|
financing activities:
|
|
|
|
|
|
|
|
|
|
Capital contribution
|
|
$
|
3,000
|
|
|
|
|
$
|
3,000
|
Interest contribution
|
|
$
|
6,076
|
|
|
|
|
$
|
6,076
|
See
notes to consolidated financial statements.
F-6
PETROCORP INC.
(Formerly GD Conference Center, Inc.)
(An Exploration Stage Company)
Notes to the Consolidated Financial Statements
NOTE 1 - ORGANIZATION AND OPERATIONS
Petrocorp Inc. (formerly GD Conference Center, Inc.), an exploration
stage company, was incorporated on June 19, 2006 under the laws of the State of
Delaware. Prior to September 2007, the Company’s 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 into three separate oil and gas farm out
agreements with James Fitzsimons. The farm outs represent leasehold properties totaling
980 gross acres located in Okfuskee County, Oklahoma. Pursuant to the agreement terms,
the Company acquired the right to earn 22 oil and gas leases. The Company earns each
oil and gas lease in exchange for the Company agreeing to drill a test well in each
region of the leases on or before December 31, 2008; prepare specified reports and
conduct certain production tests. Mr. Fitzsimons also purchased 4,450,000 shares of the
Company’s common stock from certain shareholders, resulting in him owning 84.5%
of the Company’s 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 effected a five for one forward stock split
which increased the authorized common stock to 100,000,000 shares at $0.0001 par value.
The Company’s authorized preferred stock was not changed by this Amendment. All
references to shares and per share data have been adjusted retroactively to reflect the
forward stock split.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
The consolidated financial statements include the accounts of Petrocorp
Inc, and its wholly-owned subsidiary Union Energy (Alaska) LLC (“UEA”)
(collectively, “Petrocorp” or the “Company”). These statements
have been prepared in accordance with accounting principles generally accepted in the
United States of America (“U.S. GAAP”). All intercompany accounts and
transactions have been eliminated.
Exploration stage company
The
Company is an exploration stage company as defined by SFAS No 7
“
Accounting and Reporting by Development Stage
Enterprises”
. The Company is devoting substantially all
of its efforts on establishing the business and its planned principal operations have
not yet commenced. All losses since inception have been considered part of the
Company’s exploration stage activities.
Use of estimates
F-7
PETROCORP INC.
(Formerly GD Conference Center, Inc.)
(An Exploration Stage Company)
Notes to the Consolidated Financial Statements
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
Company’s 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
F-8
PETROCORP INC.
(Formerly GD Conference Center, Inc.)
(An Exploration Stage Company)
Notes to the Consolidated Financial Statements
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.
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
Land
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 changed the direction of its efforts from telephonic
conferencing services to the oil and gas sector when the Company came across an
opportunity to enter into three oil and gas farm out agreements with James Fitzsimons.
The Company’s management determined there was $16,929 of impairment charges
related to its telephonic equipment.
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, due to stockholder, note payable to
stockholder and accrued expenses, approximate their fair values because of the short
maturity of these instruments and market rates of interest.
Stock-based compensation
The
Company accounts for stock-based compensation in accordance with Statement of Financial
Accounting Standards No. 123 (revised 2004)
“Share-Based
Payment”
(“SFAS No.
123R”)
.
Under the fair value
recognition provisions of this statement, stock-based compensation cost is measured at
the grant date based on the fair value of the award and is recognized as expense on a
straight-line basis over the requisite service period, which is the vesting period. The
Company elected the modified-prospective method, under which prior periods are not
revised for comparative purposes. The valuation provisions of
F-9
PETROCORP INC.
(Formerly GD Conference Center, Inc.)
(An Exploration Stage Company)
Notes to the Consolidated Financial Statements
SFAS
No. 123R apply to new grants and to grants that were outstanding as of the effective
date and subsequently modified.
During the years ended December 31, 2007 and 2006, there were no stock
options granted or outstanding.
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 to reduce a loss or
increase earnings per share. The Company had no potential common stock instruments
which would result in a diluted loss per share at December 31, 2007 0r 2006. Therefore,
diluted loss per share is equivalent to basic loss per share.
Recently issued accounting pronouncements
On June 5, 2003, the United States 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. 33-8889 on February 1,
2008. Commencing with its annual report for the year ending December 31, 2008, 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
•
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Of management’s responsibility for establishing
and maintaining adequate internal control over its financial
reporting;
|
•
|
Of management’s assessment of the effectiveness of
its internal control over financial reporting as of year end;
and
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F-10
PETROCORP INC.
(Formerly GD Conference Center, Inc.)
(An Exploration Stage Company)
Notes to the Consolidated Financial Statements
•
|
Of the framework used by management to evaluate the
effectiveness of the Company’s internal control over financial
reporting.
|
Furthermore, in the following fiscal year, it is required to file the
auditor’s attestation report separately on the Company’s 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
September 2006, the FASB issued Statement of Financial Accounting Standards No. 157
“
Fair Value Measurements”
(“SFAS No. 157”). This statement defines fair value,
establishes a framework for measuring fair value in generally accepted accounting
principles, and expands disclosures about fair value measurements. This statement
applies under other accounting pronouncements that require or permit fair value
measurements. SFAS No. 157 is effective for fiscal years beginning after November 15,
2007. The Company does not expect the application of SFAS No. 157 to have a material
affect on its financial statements.
In
September 2006, the FASB issued Statement of Financial Accounting Standards No. 158
“
Employers’ Accounting for Defined Benefit Pension
and Other Post Retirement Plan”
(SFAS No. 158). SFAS
No. 158 requires the Company to recognize the funded status of its post retirement
plans on the balance sheet and recognize as a component of accumulated other
comprehensive income the gains and losses, prior service costs or credits that occur
during the financial year but are not recognized as components of the Company’s
pension costs. SFAS No. 158 is effective as of the beginning of an entity’s first
fiscal year that begins after December 15, 2008. The Company does not expect
application of SFAS No. 158 to have a material affect on its financial
statements.
In
February 2007, the FASB issued Statement of Financial Accounting Standards No. 159
“
The Fair Value Option for Financial Assets and
Financial Liabilities – Including an Amendment of FASB Statement No.
115”
(“SFAS No. 159”). This statement
permits entities to choose to measure many financial instruments and certain other
items at fair value. Most of the provisions of SFAS No. 159 apply only to entities that
elect the fair value option. However, the amendment to Statement of Financial
Accounting Standards No. 115 “
Accounting for Certain
Investments in Debt and Equity Securities”
(“SFAS
No. 115”) applies to all entities with available-for-sale and trading securities.
SFAS No. 159 is effective as of the beginning of an entity’s first fiscal year
that begins after November 15, 2007. Early adoption is permitted as of the beginning of
a fiscal year that begins on or before November 15, 2007, provided the entity also
elects to apply the provision of SFAS No. 157 “
Fair
Value Measurements”.
The Company does not expect the
application of SFAS No. 159 to have a material affect on its financial
statements.
In June 2007, the Emerging Issues Task Force of the FASB issued EITF
Issue No. 07-3
“Accounting for Nonrefundable Advance
Payments for Goods or Services to be Used in Future Research and Development
Activities”
(“EITF Issue No. 07-3”) which
is effective for fiscal years beginning after December 15, 2007. EITF Issue
No. 07-3 requires that nonrefundable advance payments for future research and
development activities be deferred and capitalized. Such amounts will be
recognized as an expense as the goods are delivered or the related services are
performed. The Company does not expect the adoption of EITF Issue No. 07-3
to have a material
F-11
PETROCORP INC.
(Formerly GD Conference Center, Inc.)
(An Exploration Stage Company)
Notes to the Consolidated Financial Statements
impact on the financial results of the Company.
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 will adopt this standard at the beginning of the Company’s
year ending December 31, 2008 for all prospective business acquisitions. The Company
has not determined the effect that the adoption of SFAS No. 141(R) will have on the
financial results of the Company.
In December 2007, the FASB issued FASB Statement No.
160
“Noncontrolling Interests in Consolidated Financial
Statements - an amendment of ARB No. 51”
(“SFAS
No. 160”), which causes noncontrolling 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 will adopt this standard at the
beginning of the Company’s year ending December 31, 2008 for all prospective
business acquisitions. The Company has not determined the effect that the
adoption of SFAS No. 160 will have on the financial results of the Company.
Management does not believe that any other recently issued, but not yet
effective accounting pronouncements, if adopted, would have a material effect on the
accompanying consolidated financial statements.
NOTE
3 - UNDEVELOPED OIL AND GAS PROPERTIES
On
September 20, 2007, the Company entered into three separate oil and gas farm out
agreements with James Fitzsimons for 22 leases in sections 10, 11 and 35, Township 11
North, Range 10 East, Okfuskee County, Oklahoma. These farm out agreements expire on
December 31, 2008. In 2007, the Company retained Smyth Land Services of Tulsa, Oklahoma
to complete full title work over sections 10 and 11 and to lease all remaining open
acreage in sections 10 and 11. The Company has retained Keith G. Summar of Tulsa,
Oklahoma (an established consulting geologist and a member of the American Association
of Petroleum Geologists) to complete full geological mapping of all formations in
sections 10 and 11 in preparation for spacing and pooling hearings before the Oklahoma
Corporation Commission. The Company has obtained AFE estimates from contractors to
drill and complete oil and/or gas wells to the deepest known formations in the vicinity
of sections 10 and 11. At December 31, 2007 the Company has $15,786 in capitalized
Oklahoma costs.
On
October 25, 2007, UEA was the winning bidder for tracts 254, 258 and 259 in the North
Slope Areawide 2007 Competitive Oil and Gas Lease Sale. UEA bid $449,971.20 for the
three 5,760 acre tracts and paid deposits with its winning bids totaling $90,000 to the
State of Alaska. Based upon current available land title information, the Company
estimates these tracts, covering approximately 17,280 gross acres, contain 14,807.41
net leaseable acres and that additional payments to the State of Alaska, in an amount
yet to be determined, will be approximately $279,500. These leases, when issued, will
be for a
F-12
PETROCORP INC.
(Formerly GD Conference Center, Inc.)
(An Exploration Stage Company)
Notes to the Consolidated Financial Statements
term
of seven years and will be subject to a 12.5% royalty interest in favor of the State of
Alaska, and such other limitations as a complete title search reveals. At December 31,
2007 the Company has $369,500 in capitalized Alaska costs.
NOTE 4 - NOTES TO AN OFFICER/STOCKHOLDER
The
Company has two unsecured, non-interest bearing notes payable on demand totaling
$440,000 with its President and major stockholder James Fitzsimons. Interest expense of
$6,076 was computed at an implied rate of 6% and this amount was recorded as a capital
contribution by the Company.
NOTE 5 - STOCKHOLDERS’ EQUITY
Common stock
On
September 30, 2006 the Company issued 5,000,000 shares of common stock to its founders
at par value ($0.0001 per share). During the period July 1 through December 31, 2006,
the Company sold 150,000 shares of its common stock in a private placement at $0.20 per
share (an aggregate of $30,000) to 16 individuals. During the period from January 1
through September 30, 2007, the Company sold 120,000 shares of its common stock at
$0.20 per share (an aggregate of $24,000) to 24 individuals.
On
December 27, 2007, the Company sold 200,000 shares of its common stock (the
“Shares”) to one investor at $2.50 per share (an aggregate of $500,000).
The Shares were sold in a transaction exempt from registration under Regulation S of
the Securities Act of 1933, as amended (the “Securities Act”). 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 purchaser of the Shares represented that it was acquiring the Shares for its
own account, for investment, and that the purchaser was not a US Person 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.
The
Company is authorized to issue 100,000,000 shares of $.0001 par value common stock. The
Company has 5,470,000 shares of its common stock issued and outstanding at December 31,
2007. Dividends may be paid on outstanding shares as declared by the Board of
Directors. Each share of common stock is entitled to one vote.
Preferred stock
The
Company is authorized to issue 1,000,000 shares of $.0001 par value preferred stock. No
shares of preferred stock have been issued or are outstanding. Dividends, voting rights
and other terms, rights and preferences of the preferred shares have not been
designated but may be designated by the Board of Directors from time to
time.
F-13
PETROCORP INC.
(Formerly GD Conference Center, Inc.)
(An Exploration Stage Company)
Notes to the Consolidated Financial Statements
NOTE 6 - INCOME TAXES
The
Company incurred no income taxes for the year ended December 31, 2007 and
for the period from June 19, 2006 (inception) through December 31, 2006.
The expected income tax benefit for the years ended December 31, 2007 and 2006 is
approximately $12,200 and $5,500, respectively. The difference between the expected
income tax benefit and non-recognition of an income tax benefit in each period is the
result of a valuation allowance applied to deferred tax assets.
Net
operating loss carry-forwards of approximately $88,500 at December 31, 2007 are
available to offset future taxable income, if any, and expire in 2027. This results in
a net deferred tax asset of approximately $17,700 at December 31, 2007. A valuation
allowance in the same amount has been provided to reduce the deferred tax asset, as
realization of the asset is not assured.
NOTE 7 - RELATED PARTY TRANSACTION
The
Company has been provided office space by its President at no cost.
NOTE 8 - SUBSEQUENT EVENTS
On
February 27, 2008, UEA was the winning bidder for tracts 922, 923, 927, 988, 989, 990,
991, 992 and 925 in the North Slope Foothills Areawide 2008 Competitive Oil and Gas
Lease Sale. UEA bid $269,568 for the nine 5,760 acre tracts and paid deposits with its
winning bids totaling $54,000 to the State of Alaska. Based upon current available land
title information, the Company estimates that these tracts, covering approximately
51,840 gross acres, contain 9,600 net leaseable acres and that the additional payment
to the State of Alaska, in an amount yet to be determined, will be zero. These leases,
when issued, will be for a term of 10 years and will be subject to a 12.5% royalty
interest in favor of the State of Alaska and such other limitations as a complete title
search reveals.
On
March 18,
2008
, the Company sold 200,000 shares of its common stock
(the “Shares”) to one investor at $5.00 per share (an aggregate of
$1,000,000). The Shares were sold in a transaction exempt from registration under
Regulation S of the Securities Act of 1933, as amended (the “Securities
Act”). 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 purchaser of the Shares represented that it was
acquiring the Shares for its own account, for investment, and that the purchaser was
not a US Person 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.
F-14