PETRO RIVER OIL CORP. AND SUBSIDIARIES
Exhibit 99.2
PETRO RIVER OIL CORP. AND SUBSIDIARIES
Notes to Unaudited Pro Forma Consolidated Financial Statements
The Horizon Purchase Agreement
On December 1, 2015, the Company entered into a conditional purchase agreement with Horizon. The agreement was amended and restated on May 3, 2016 (the “Purchase Agreement”). Under the terms of the Purchase Agreement, the Company acquired (i) assignment of Horizon’s 20% membership interest in Horizon Energy Partners, LLC ("Horizon Energy"); (ii) an assignment or novation of the promissory notes receivable held by Horizon to the Company at the time of closing; (iii) the release of the funds held in escrow; and (iv) certain bank, investment and other accounts maintained by Horizon, in an amount which, together with the amounts issued under the Petro Note and the Closing Proceeds, total not less than $5.0 million (collectively, the "Purchased Assets"). The consideration for the Purchased Assets is 11,564,249 shares of the Company’s common stock, $0.0001 par value, which shares shall be issued to Horizon on the Closing Date.
As a result of the Purchase Agreement, the Company acquired 100% of the member units of Horizon and consequently, control of the business and operations of Horizon.
The following unaudited pro forma consolidated financial statements of Petro River Oil Corp. and Subsidiaries, (the “Company” or “Petro”) and Horizon I Investments, LLC (“Horizon”) are provided to show the financial aspects of the proposed consolidated entity on a non-generally accepted accounting principle basis.
The unaudited pro forma combined financial information should be read in conjunction with the Registrant’s audited financial statements as of and for the year ended April 30, 2015 which are included in its April 30, 2015 Annual Report on Form 10-K. The financial information of the Registrant is filed together with this Unaudited Pro Forma Condensed Combined Financial Statements on Form 8-K. The unaudited pro forma consolidated statement of operations for the nine months ended January 31, 2016 of the Company have been combined with the period from October 22, 2015 (Inception) to December 31, 2015 historical statements of operations of Horizon from an annual pro forma consolidated statement of operations is not presented as the inception of Horizon was October 22, 2015.
The unaudited pro forma combined statements of operations for the nine months ended January 31, 2016 assumes that the Purchase Agreement was consummated at the beginning of the period presented.
The unaudited pro forma consolidated balance sheet combines the historical balance sheets of the Company as of January 31, 2016 and Horizon as of December 31, 2015.
The pro forma is presented as if the below transaction was accounted for as an acquisition under common control. All assets and liabilities were merged into the Company at their carrying values.
The unaudited Pro Forma Consolidated Financial Statements are presented for illustrative purposes only and do not purport to represent what our financial position or results of operations would have been if the transactions had occurred as presented, or to project our financial position or results of operations for any future periods. The pro forma adjustments are based on available information and certain assumptions that management believes are reasonable. The pro forma adjustments are directly attributable to the transactions and are expected to have a continuing impact on our results of operations. In the opinion of management, all adjustments necessary to present fairly the unaudited Pro Forma Consolidated Financial Statements have been made.
The unaudited pro forma adjustments are based upon available information and certain assumptions that we believe are reasonable under the circumstances.
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Unaudited Pro Forma Financial Information
The unaudited pro forma combined balance sheet as of January 31, 2016 combines the unaudited balance sheet of the Registrant as of January 31, 2016 and the unaudited balance sheet of Horizon as of December 31, 2015 and assumes that the Exchange was consummated on January 31, 2016.
The information presented in the unaudited pro forma condensed combined financial statements does not purport to represent what our financial position or results of operations would have been had the Exchange occurred as of the dates indicated, nor is it indicative of our future financial position or results of operations for any period. You should not rely on this information as being indicative of the historical results that would have been achieved had the companies always been combined or the future results that the combined company will experience after the Exchange.
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PETRO RIVER CORP. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
|
As of January 31, 2016
|
Horizon I Investments,
LLC |
Combined
As of January 31, 2016 |
Pro Forma
Adjustments DR (CR) |
# |
Pro Forma Consolidated As of January 31, 2016
|
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Assets
|
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Current Assets:
|
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Cash and cash equivalents
|
$ | 1,324,288 | $ | 3,383,447 | $ | 4,707,735 | $ | 690,000 | 4 | $ | 4,647,735 | |||||||||||
| (750,000 | ) | 5 | ||||||||||||||||||||
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Certificate of deposit - restricted
|
125,00 | - | 125,000 | 125,000 | ||||||||||||||||||
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Cash in escrow
|
- | 690,000 | 690,000 | (690,000 | ) | 4 | - | |||||||||||||||
|
Accounts receivable - oil and gas
|
8,044 | - | 8,044 | 8,044 | ||||||||||||||||||
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Accounts receivable - related party
|
5,980,339 | - | 5,980,339 | 5,980,339 | ||||||||||||||||||
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Accrued interest on notes receivable - related party
|
44,095 | - | 44,095 | 44,095 | ||||||||||||||||||
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Note receivable from PTRC
|
- | 750,000 | 750,000 | (750,000 | ) | 3 | - | |||||||||||||||
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Real estate - held for sale
|
3,282,292 | - | 3,282,292 | 3,282,292 | ||||||||||||||||||
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Prepaid expenses and other current assets
|
45,964 | - | 45,964 | 45,964 | ||||||||||||||||||
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Prepaid oil and gas asset development costs
|
735,798 | - | 735,798 | 735,798 | ||||||||||||||||||
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Total Current Assets
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11,545,820 | 4,823,447 | 16,369,267 | (1,500,000 | ) | 14,869,267 | ||||||||||||||||
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Oil and gas assets, full cost method
|
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Costs subject to amortization, net
|
690,420 | - | 690,420 | 690,420 | ||||||||||||||||||
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Costs not being amortized, net
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100,000 | - | 100,000 | 100,000 | ||||||||||||||||||
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Property, plant and equipment, net of accumulated depreciation
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||||||||||||||||||||||
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of $308,032
|
2,532 | - | 2,532 | 2,532 | ||||||||||||||||||
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Intangible assets, net of accumulated amortization of $110,632
|
2,113,054 | - | 2,113,054 | 2,113,054 | ||||||||||||||||||
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Notes receivable - related party
|
16,348,000 | - | 16,348,000 | 16,348,000 | ||||||||||||||||||
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Other assets
|
28,132 | - | 26,132 | 28,132 | ||||||||||||||||||
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Investment in Horizon Energy Partners, LLC
|
- | 688,000 | 688,000 | 688,000 | ||||||||||||||||||
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Total Other Assets
|
19,282,138 | 688,000 | 19,970,138 | - | 19,970,138 | |||||||||||||||||
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Total Assets
|
$ | 30,827,958 | $ | 5,511,447 | $ | 36,339,405 | $ | (1,500,000 | ) | $ | 34,839,405 | |||||||||||
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Liabilities and Equity
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Current Liabilities:
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Accounts payable and accrued expenses
|
$ | 137,028 | $ | - | $ | 137,028 | $ | $ | 137,028 | |||||||||||||
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Accrued income tax liability
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1,330,755 | - | 1,330,755 | 1,330,755 | ||||||||||||||||||
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Deposits on real estate sales
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363,750 | - | 363,750 | 363,750 | ||||||||||||||||||
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Escrow deposits payable
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- | 690,000 | 690,000 | (690,000 | ) | 4 | - | |||||||||||||||
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Notes payable Horizon
|
1,500,000 | - | 1,500,000 | 750,000 | 3 | - | ||||||||||||||||
| 750,000 | 5 | |||||||||||||||||||||
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Asset retirement obligations, current portion
|
541,959 | - | 541,959 | 541,959 | ||||||||||||||||||
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Total Current Liabilities
|
3,873,492 | 690,000 | 4,563,492 | 810,000 | 2,373,492 | |||||||||||||||||
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Long-term liabilities:
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Asset retirement obligations, net of current portion
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216,964 | - | 216,964 | 216,964 | ||||||||||||||||||
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Total Long-term Liabilities
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216,964 | - | 216,964 | - | 216,964 | |||||||||||||||||
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Total Liabilities
|
4,090,456 | 690,000 | 4,780,456 | 810,000 | 2,590,456 | |||||||||||||||||
The accompanying notes are an integral part of these pro forma consolidated financial statements.
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PETRO RIVER CORP. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
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Commitments and contingencies
|
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Equity:
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Preferred shares - 5,000,000 authorized; par value $0.00001; 0 shares issued and outstanding
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- | - | - | - | ||||||||||||||||||
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Preferred B shares - 29,500 authorized; par value $0.00001; 0 shares issued and outstanding
|
- | - | - | - | ||||||||||||||||||
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Common shares - 100,000,000 authorized; par value $0.00001; 4,263,671 issued and outstanding
|
43 | - | 43 | 116 | 1 | 159 | ||||||||||||||||
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Members' equity
|
- | 4,876,000 | 4,876,000 | (4,876,000 | ) | 1 | - | |||||||||||||||
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Additional paid-in capital
|
38,749,173 | - | 38,749,173 | 5,565,884 | 1,4 | 44,260,504 | ||||||||||||||||
| (54,553 | ) | 2 | ||||||||||||||||||||
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Accumulated deficit
|
(24,268,505 | ) | (54,553 | ) | (24,323,058 | ) | 54,553 | 2 | (24,268,505 | ) | ||||||||||||
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Total Petro River Oil Corp. Equity
|
14,480,711 | 4,821,447 | 19,302,158 | 690,000 | 19,992,158 | |||||||||||||||||
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Non-controlling interest
|
12,256,791 | - | 12,256,791 | 12,256,791 | ||||||||||||||||||
|
Total Equity
|
26,737,502 | 4,821,447 | 31,558,949 | 690,000 | 32,248,949 | |||||||||||||||||
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Total Liabilities and Equity
|
$ | 30,827,958 | $ | 5,511,447 | $ | 36,339,405 | $ | 1,500,000 | $ | 34,839,405 |
The accompanying notes are an integral part of these pro forma consolidated financial statements.
|
1
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Issuance of the share consideration of 11,564,250 shares of Company's common stock to Horizon;
|
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2
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Reclassification of Horizon's accumulated deficit as additional pain-in capital upon consummation of the Horizon transaction.
|
||
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3
|
Cancellation of the promissory note payable to Horizon from the Company of $750,000;
|
||
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4
|
To record release of cash of $690,000 from escrow at closing;
|
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5
|
To eliminate the advance from Horizon to the Company in 2016.
|
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PETRO RIVER CORP. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
|
For the Nine Month Ended
|
Horizon I Investments, LLC
For the Period from October 22, 2015(Inception) through |
Pro-Forma
Consolidation For the Nine Months Ended |
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|
January 31, 2016
|
December 31, 2015
|
January 31, 2016
|
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REVENUES
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Oil and natural gas sales
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$ | 72,723 | $ | - | $ | 72,723 | ||||||
|
Sales of real estate
|
23,701,524 | - | 23,701,524 | |||||||||
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Total Revenues
|
23,774,247 | - | 23,774,247 | |||||||||
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OPERATING EXPENSES:
|
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Cost of revenue - sales of real estate
|
13,463,025 | - | 13,463,025 | |||||||||
|
Lease operating expenses
|
328,457 | - | 328,457 | |||||||||
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Depreciation, depletion and accretion
|
149,218 | - | 149,218 | |||||||||
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Amortization of intangibles
|
90,339 | - | 90,339 | |||||||||
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Gain on sale of equipment
|
(5,519 | ) | - | (5,519 | ) | |||||||
|
Loss on sale of oil and gas assets
|
7,519,460 | - | 7,519,460 | |||||||||
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Impairment of oil and gas assets
|
6,870,613 | - | 6,870,613 | |||||||||
|
General & administrative
|
2,483,990 | 54,553 | 2,538,543 | |||||||||
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Total Operating Expenses
|
30,899,583 | 54,553 | 30,954,136 | |||||||||
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Operating Loss
|
(7,125,336 | ) | (54,553 | ) | (7,179,889 | ) | ||||||
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Other Income
|
46,719 | - | 46,719 | |||||||||
|
Net Loss Before Income Tax Provision
|
(7,078,617 | ) | (54,553 | ) | (7,133,170 | ) | ||||||
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Income Tax Provision
|
1,330,755 | - |
1,330,755
|
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|
Net Loss
|
(8,409,372 | ) | (54,553 | ) | (8,463,925 | ) | ||||||
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Net Loss Attributable to Non-controlling Interest
|
(791,353 | ) | - | (791,353 | ) | |||||||
| Net Loss Attributable to Petro River Oil Corp. and Subsidiaries | $ | (7,618,019 | ) | $ | - | $ | (7,672,572 | ) | ||||
|
Net loss per common share - basic & diluted
|
$ | (1.79 | ) | $ | (0.48 | ) | ||||||
|
Weighted average common shares outstanding - basic & diluted
|
4,259,687 | 15,823,936 | 1 | |||||||||
The accompanying notes are an integral part of these pro forma consolidated financial statements.
|
1
|
The pro forma weighted average number of shares outstanding includes the weighted average shares outstanding of Petro River for the nine months ended January 31, 2016 of 4,259,687 and the weighted average shares outstanding of Horizon for the period from October 22, 2015 (inception) through December 31, 2015 of 11,564,250.
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