Notes to the Financial Statements
September 30, 2007
(UNAUDITED)
NOTE 1 - ORGANIZATION AND OPERATIONS
Petrocorp Inc. (formerly GD Conference Center, Inc.) (a development
stage company) (“Petrocorp”, the “Company”, or
“Registrant”) was incorporated on June 19, 2006 under the laws of the State
of Delaware. The Company planned to engage in telephonic conferencing services to
businesses, organizations and individuals in North America and a substantial portion of
the Company’s activities were involved developing a business plan and
establishing contacts and visibility in that marketplace. The Company had made efforts
to acquire additional capital, but these were not successful.
Due to capital constraints and because its executives could no longer
serve the Company without being compensated, the Company decided to change direction
and enter the oil and gas sector when the Company came across an opportunity to enter
into oil and gas farm out agreements with James Fitzsimons.
On September 20, 2007, the Company entered into three (3) separate oil
and gas farm out agreements (“Agreements”) with James Fitzsimons. The
Agreements represent leasehold properties totaling approximately 980 gross acres
located in Okfuskee County, Oklahoma. Pursuant to the terms of the Agreements, the
Company acquired the right to earn 22 oil and gas leases. The Company obtained the
right to earn each of the oil and gas leases in exchange for the Company agreeing to
begin to drill a test well in each region of the specific oil and/or gas lease on or
before certain specified dates through December 31, 2008, prepare specified reports and
conduct certain production tests. In connection with the Company’s completion of
the Agreements, James Fitzsimons became a director on September 20, 2007. Also on
September 20, 2007, Mr. Fitzsimons purchased 4,450,000 of the Company’s shares
from certain stockholders, resulting in him owning approximately 84.5% of the
Company’s issued and outstanding common stock, for $454,000 and his agreement to
enter into the farm out agreements with the Company.
On October 19, 2007, the Company filed a certificate of amendment to its
certificate of incorporation changing the Company’s name to “Petrocorp
Inc.” and effected a five for one forward stock split which increased the
authorized common stock to 100,000,000 at $0.0001 par value. The number of shares of
preferred stock, par value $0.0001 per share which the Registrant is authorized to
issue has not been changed by the Amendment. All references to share and per share data
in the accompanying unaudited financial statements and related notes have been adjusted
retroactively to reflect the forward stock split.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited financial statements and related notes have
been prepared in accordance with accounting principles generally accepted in the United
States of America (U.S. GAAP)
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for
interim financial information and with the rules and regulations of the Securities and
Exchange Commission for Form 10-QSB. Accordingly, they do not include all of the
information and footnotes required by accounting principles generally accepted in the
United States of America for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation of the financial position, results of operations and
cash flows for the interim periods have been included. These financial statements
should be read in conjunction with the financial statements of the Company for the year
ended December 31, 2006 and notes thereto contained in Form SB-2 as filed with the
United States Securities and Exchange Commission (“SEC”) on April 10, 2007,
which was declared effective on May 10, 2007. Interim results are not necessarily
indicative of the results for a full year.
Development stage company
The Company is a development stage company as defined by Statement of
Financial Accounting Standards No. 7
“Accounting and
Reporting by Development Stage Enterprises”
(“SFAS No. 7”). The Company is still devoting substantially
all of its efforts on establishing the business and its planned principal operations
have not commenced. All losses accumulated since inception have been considered as part
of the Company’s development stage activities.
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. Actual results could differ from
those estimates. Due to the limited level of operations, the Company has not had to
make material assumptions or estimates other than the assumption that the Company is a
going concern.
Cash equivalents
The Company considers all highly liquid investments with a maturity of
three months or less when purchased to be cash equivalents.
Property and equipment
Property and equipment are recorded at cost. Expenditures for major
additions and betterments are capitalized. Maintenance and repairs are charged to
general and administrative expenses as incurred. Depreciation of property and equipment
is computed by the straight-line method (after taking into account their respective
estimated residual values) over the assets estimated useful lives ranging from five (5)
to seven (7) years. Leasehold improvements, if any, are amortized on a straight-line
basis over the term of the lease or the estimated useful life, whichever is shorter.
Upon sale or retirement of property and equipment, the related cost and accumulated
depreciation are removed from the accounts and any gain or loss is reflected in
operations.
Impairment of long-lived assets
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The Company follows Statement of Financial Accounting Standards
No. 144
“Accounting for the Impairment or Disposal
of Long-Lived Assets”
(“SFAS No. 144”)
for its long-lived assets. The Company’s long-lived assets, which include
property and equipment, are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable.
The Company assesses the recoverability of its long-lived assets by
comparing the projected un-discounted net cash flows associated with the related
long-lived asset or group of long-lived assets over their remaining estimated useful
lives against their respective carrying amounts. Impairment, if any, is based on the
excess of the carrying amount over the fair value of those long-lived assets. Fair
value is generally determined using the long-lived asset’s expected future
discounted cash flows or market value, if readily determinable. If long-lived assets
are determined to be recoverable, but the newly determined remaining estimated useful
lives are shorter than originally estimated, the net book value of the long-lived
assets is depreciated over the newly determined remaining estimated useful lives. The
Company determined that there were $16,929 impairment charges on property and equipment
based on management’s evaluation for the nine month period ended September 30,
2007.
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Fair value of financial instruments
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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.
The Company will recognize revenue when the service is rendered, the
amount earned is fully determinable and realizable, and collectability is reasonably
assured.
The Company accounts for income taxes under Statement of Financial
Accounting Standards No. 109
“Accounting for Income
Taxes”
(“SFAS No. 109”). Deferred income
tax assets and liabilities are determined based upon differences between the financial
reporting and tax bases of assets and liabilities and are measured using the enacted
tax rates and laws that will be in effect when the differences are expected to reverse.
Deferred tax assets are reduced by a valuation allowance to the extent management
concludes it is more likely than not that the assets will not be realized. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a change in
tax rates is recognized in the statements of operations in the period that includes the
enactment date.
Net loss per common share
Net loss per common share is computed pursuant to Statement of Financial
Accounting Standards No. 128
“Earnings Per
Share”
(“SFAS No. 128”). Basic net loss per
common share is computed by dividing net loss by the weighted average number of shares
of common stock outstanding during the
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period. Diluted net loss per common share is computed by dividing net
loss by the weighted average number of shares of common stock and potentially
outstanding shares of common stock during each period. There were no potentially
dilutive shares outstanding as of September 30, 2007.
Recently issued accounting pronouncements
In July 2006, the Financial Accounting Standards Board
(“FASB”) issued FASB Interpretation Number 48
“Accounting for Uncertainty in Income Taxes, an Interpretation
of FASB Statement No. 109”
(“FIN 48”). FIN
48 prescribes a recognition threshold and measurement attribute for the financial
statement recognition and measurement of a tax position taken in a tax return. The
Company must determine whether it is “more-likely-than-not” that a tax
position will be sustained upon examination, including resolution of any related
appeals or litigation processes, based on the technical merits of the position. Once it
is determined that a position meets the more-likely-than-not recognition threshold, the
position is measured to determine the amount of benefit to recognize in the financial
statements. FIN 48 applies to all tax positions related to income taxes subject to FASB
Statement No. 109
“Accounting for Income
Taxes”.
The interpretation clearly scopes out income
tax positions related to FASB Statement No. 5
“Accounting for Contingencies”.
The Company will adopt the provisions of this statement on July 1, 2007.
The cumulative effect of applying the provisions of FIN 48, if any, will be reported as
an adjustment to the opening balance of retained earnings on July 1, 2007. The Company
does not anticipate that the adoption of this statement will have a material effect on
the Company’s financial condition and results of operations.
On September 15, 2006, the FASB issued FASB Statement No. 157
“Fair Value Measurements”
(“SFAS No. 157”). SFAS No. 157 defines fair
value, establishes a framework for measuring fair value and expands disclosures about
fair value measurements. SFAS No. 157 is effective as of the beginning of
the first fiscal year beginning after November 15, 2007. The Company does
not anticipate that the adoption of this statement will have a material effect on the
Company’s financial condition and results of operations.
In September 2006, the FASB issued FASB Statement No.
158
“Employers’ Accounting for Defined Benefit
Pension and Other Postretirement Plans, an amendment of FASB Statements No 87, 88, 106
and 132(R)”
(“SFAS No.
158”)
.
SFAS No. 158 requires
the recognition of the overfunded or underfunded status of a defined benefit
postretirement plan as an asset or liability in the statement of financial position and
the recognition of changes in that funded status in the year in which the changes occur
through comprehensive income. SFAS No. 158 also requires the measurement of the funded
status of a plan as of the date of the year-end statement of financial position. The
Company does not anticipate that the adoption of this statement will have a material
effect on the Company’s financial condition and results of operations.
On February 15, 2007, the FASB issued FASB Statement No.
159
“The Fair Value Option for Financial Assets and
Financial Liabilities: Including an amendment of FASB Statement No.
115”
(SFAS No. 159). SFAS No. 159 permits all entities
to elect to measure many financial instruments and certain other items at fair value
with changes in fair value reported in earnings. SFAS No. 159 is effective as of the
beginning of the first fiscal year that begins after November 15, 2007, with earlier
adoption permitted. The Company does not anticipate that the adoption of this statement
will have a material effect on the Company’s financial condition and results of
operations.
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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 financial statements.
NOTE 3 – DEVELOPMENT STAGE ACTIVITIES AND GOING
CONCERN
The Company is currently in the development stage. The Company intended
to enter the teleconferencing business by offering a value added service; however, the
Company has not acquired the necessary equipment or begun operations. Its activities as
of September 30, 2007 have been organizational and developmental
(pre-operational).
As reflected in the accompanying financial statements, the Company had a
deficit accumulated during the development stage of $59,764 at September 30, 2007 and
had a net loss and cash used in operations of $32,367 and $31,196, respectively, for
the nine months ended September 30, 2007 with no revenue since inception.
While the Company is attempting to generate revenues, the
Company’s cash position may not be significant enough to support the
Company’s daily operations. Management intends to raise additional funds by way
of a public or private offering. Management believes that the actions presently being
taken to further implement its business plan and generate revenues provide the
opportunity for the Company to continue as a going concern. While the Company believes
in the viability of its strategy to increase revenues and in its ability to raise
additional funds, there can be no assurances to that effect. The ability of the Company
to continue as a going concern is dependent upon the Company’s ability to further
implement its business plan and generate revenues. The financial statements do not
include any adjustments that might be necessary if the Company is unable to continue as
a going concern.
NOTE 4 – PROPERTY AND EQUIPMENT
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At September 30, 2007, property and equipment consisted
of the following:
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Telecommunication equipment
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$
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18,000
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Less: Accumulated depreciation
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(1,071
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)
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16,929
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Less: Impairment of equipment (ii)
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(16,929
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)
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$
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-
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Depreciation expense is included in the statements of operations. For
the nine months ended September 30, 2007, depreciation expense was $1,071.
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Impairment of telecommunication
equipment
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On September 20, 2007, the Company decided to change 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 oil and gas farm out agreements with
James Fitzsimons. The
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Company determined that there was $16,929 of impairment charges on
equipment based on management’s evaluation for the nine month period ended
September 30, 2007.
NOTE 5 – NOTE PAYABLE - STOCKHOLDER
Note payable – stockholder is unsecured, non-interest bearing, and
payable on demand.
NOTE
6 – STOCKHOLDERS’ EQUITY
The Company was incorporated on June 19, 2006. On September 30, 2006 the
Company issued 5,000,000 shares of its common stock to its founders at par value of
$0.0001 per share. For the period from July 1, 2006 through December 31, 2006, the
Company sold 150,000 shares of its common stock in a private placement at $0.20 per
share to 16 individuals. For the period from January 1, 2007 through September 30,
2007, the Company sold 120,000 shares of its common stock at $0.20 per share for
$24,000 to 24 individuals.
NOTE
7 – RELATED PARTY TRANSACTION
The Company has been provided office space by its Chief Executive
Officer at no cost.