Exhibit 99.2
American Standard Energy Corp.
Unaudited Pro Forma Combined Financial Statements
On December 1, 2010, American Standard Energy Corp. (“ASEC” or the “Company”), formerly known as Uncle Al’s Famous Hot Dogs & Grille, Inc., entered into a Purchase of Partial Leaseholds Agreement (the “Agreement”) with Geronimo Holding Corporation (“Geronimo”). Pursuant to the Agreement, the Company purchased certain non-operated mineral rights leaseholds held on properties located in North Dakota (the “Properties”). In consideration for the mineral rights the Company paid Geronimo $500,000 cash and issued 1,200,000 shares of the Company’s common stock. The acquisition of the Properties from Geronimo was a transaction under common control and accordingly, the Company recorded the assets and liabilities acquired from Geronimo at their historical carrying values and no goodwill or other intangible assets were recognized. The accompanying unaudited pro forma combined financial statements have been prepared to assist investors in their analysis of the financial effects of the acquisition of the Properties by ASEC on December 1, 2010.
This information is based on the historical financial statements of the Properties and ASEC and should be read in conjunction with the Company’s (a) historical audited financial statements and related notes filed in ASEC’s Form 8-K for the year ended December 31, 2009, filed with the United States Securities and Exchange Commission (“SEC”) on October 4, 2010, and (b) historical unaudited financial statements of ASEC as of September 30, 2010, and for the three and nine months ended September 30, 2010 and 2009, and related notes in ASEC’s Current Report on Form 8-K filed with the SEC on November 15, 2010, and the Properties’ historical financial statements and related notes which are included in this filing.
ASEC and Geronimo are entities under common control. As a result, the acquisition of the Properties by ASEC from Geronimo will not be accounted for as a purchase, but as a reorganization of entities under common control. Accordingly, the accompanying unaudited pro forma balance sheet of ASEC as of September 30, 2010, and the unaudited pro forma statements of operations of ASEC for the nine months ended September 30, 2010 and the year ended December 31, 2009, have been prepared to give effect to the Properties acquisition as if the Properties had been historically combined with ASEC for all periods presented.
The unaudited pro forma combined financial statements included herein are not necessarily indicative of the results that might have occurred had the transaction taken place on September 30, 2010 or January 1, 2009 and are not intended to be a projection of future results. In addition, future results may vary significantly from the results reflected in the accompanying unaudited pro forma combined financial statements because of normal production declines, changes in commodity prices, future acquisitions and divestitures, future development and exploration activities and other factors.
Unaudited Pro Forma Combined Balance Sheet
September 30, 2010
| | | ASEC Historical | | | The Properties Historical | | | Pro Forma Adjustments | | | Pro Forma Combined | |
| | | | | | | | | (Notes A and B) | | | | |
| Assets | | | | | | | | | | | | |
| Current assets: | | | | | | | | | | | | |
| Cash and cash equivalents | | $ | 159,172 | | | $ | - | | | $ | (159,172 | ) | | $ | - | |
| Oil and gas sales receivable | | | 155,310 | | | | 182,258 | | | | - | | | | 337,568 | |
| Total current assets | | | 314,482 | | | | 182,258 | | | | (159,172 | ) | | | 337,568 | |
| | | | | | | | | | | | | | | | | |
| Oil and natural gas properties, at cost,successful efforts method | | | | | | | | | | | | | | | | |
| Proved oil and natural gas properties | | | 3,513,772 | | | | 1,760,121 | | | | - | | | | 5,273,893 | |
| Drilling in progress | | | 3,009,566 | | | | 542,739 | | | | - | | | | 3,552,305 | |
| Unproved properties | | | 4,306,197 | | | | - | | | | - | | | | 4,306,197 | |
| Accumulated depreciation, depletion and amortization | | | (1,205,550 | ) | | | (617,904 | ) | | | - | | | | (1,823,454 | ) |
| Total oil and natural gas properties, net | | | 9,623,985 | | | | 1,684,956 | | | | - | | | | 11,308,941 | |
| | | | | | | | | | | | | | | | | |
| Total assets | | $ | 9,938,467 | | | $ | 1,867,214 | | | $ | (159,172 | ) | | $ | 11,646,509 | |
| | | | | | | | | | | | | | | | | |
| Liabilities and Stockholders’ Equity | | | | | | | | | | | | | | | | |
| Current liabilities: | | | | | | | | | | | | | | | | |
| Accounts payable | | $ | 373,306 | | | $ | 9,870 | | | $ | - | | | $ | 383,176 | |
| Accounts payable – related parties | | | 761,795 | | | | - | | | | 340,828 | | | | 1,102,623 | |
| Accrued capital expenditures | | | 187,466 | | | | 335,156 | | | | - | | | | 522,622 | |
| Accrued capital expenditures–related party | | | 343,665 | | | | - | | | | - | | | | 343,665 | |
| | | | | | | | | | | | | | | | | |
| Total current liabilities | | | 1,666,232 | | | | 345,026 | | | | 340,828 | | | | 2,352,086 | |
| | | | | | | | | | | | | | | | | |
| Asset retirement obligations | | | 65,207 | | | | 9,061 | | | | - | | | | 74,268 | |
| | | | | | | | | | | | | | | | | |
| Total liabilities | | | 1,731,439 | | | | 354,087 | | | | 340,828 | | | | 2,426,354 | |
| | | | | | | | | | | | | | | | | |
| Stockholders’ equity: | | | | | | | | | | | | | | | | |
| Common stock, $0.001 par value | | | 21,560 | | | | - | | | | 1,200 | | | | 22,760 | |
| Additional paid-in capital | | | 13,241,949 | | | | - | | | | 1,246,503 | | | | 14,488,452 | |
| Geronimo net investment | | | - | | | | 1,747,703 | | | | (1,747,703 | ) | | | - | |
| Deficit | | | (5,056,481 | ) | | | (234,576 | ) | | | - | | | | (5,291,057 | ) |
| Total stockholders’ equity | | | 8,207,028 | | | | 1,513,127 | | | | (500,000 | ) | | | 9,220,155 | |
| | | | | | | | | | | | | | | | | |
| Total liabilities and stockholders’ equity | | $ | 9,938,467 | | | $ | 1,867,214 | | | $ | (159,172 | ) | | $ | 11,646,509 | |
The accompanying notes are an integral part of these unaudited pro forma combined financial statements.
American Standard Energy Corp.
Unaudited Pro Forma Combined Statement of Operations
Nine Months Ended September 30, 2010
(Note A)
| | | ASEC Historical | | | The Properties Historical | | | Pro Forma Combined | |
| | | | | | | | | | |
| Oil and natural gas revenues | | $ | 481,301 | | | $ | 444,977 | | | $ | 926,278 | |
| | | | | | | | | | | | | |
| Operating costs and expenses: | | | | | | | | | | | | |
| Oil and natural gas production | | | 324,350 | | | | 86,924 | | | | 411,274 | |
| Exploration expenses | | | 247,463 | | | | - | | | | 247,463 | |
| Impairment of oil and gas properties | | | - | | | | 46,553 | | | | 46,553 | |
| Depreciation, depletion and amortization | | | 143,046 | | | | 190,800 | | | | 333,846 | |
| Accretion of asset retirement obligations | | | 4,372 | | | | 188 | | | | 4,560 | |
| General and administrative | | | 4,228,010 | | | | 49,060 | | | | 4,277,070 | |
| | | | | | | | | | | | | |
| Total operating costs and expenses | | | 4,947,241 | | | | 373,525 | | | | 5,320,766 | |
| | | | | | | | | | | | | |
| (Loss) income from operations before income taxes | | | (4,465,940 | ) | | | 71,452 | | | | (4,394,488 | ) |
| | | | | | | | | | | | | |
| Income taxes | | | - | | | | - | | | | - | |
| | | | | | | | | | | | | |
| Net (loss) income | | $ | (4,465,940 | ) | | $ | 71,452 | | | $ | (4,394,488 | ) |
| | | | | | | | | | | | | |
| Basic and diluted loss per share: | | | | | | | | | | | | |
| Net loss per share | | $ | (.21 | ) | | | | | | $ | (.19 | ) |
| | | | | | | | | | | | | |
| Weighted average shares used in basic and diluted loss per share | | | 21,560,006 | | | | 1,200,000 | | | | 22,760,006 | |
The accompanying notes are an integral part of these unaudited pro forma combined financial statements.
Unaudited Pro Forma Combined Statement of Operations
Year ended December 31, 2009
(Note A)
| | | | | | | | | | |
| | | ASEC Historical | | | The Properties Historical | | | Pro Forma Combined | |
| | | | | | | | | | |
| Oil and natural gas revenues | | $ | 651,384 | | | $ | 120,662 | | | $ | 772,046 | |
| | | | | | | | | | | | | |
| Operating costs and expenses: | | | | | | | | | | | | |
| Oil and natural gas production | | | 333,499 | | | | 24,371 | | | | 357,870 | |
| Exploration expenses | | | 240,382 | | | | - | | | | 240,382 | |
| Impairment of oil and natural gas properties | | | - | | | | 253,258 | | | | 253,258 | |
| Depreciation, depletion and amortization | | | 234,710 | | | | 127,293 | | | | 362,003 | |
| Accretion of asset retirement obligations | | | 3,027 | | | | - | | | | 3,027 | |
| General and administrative | | | 105,061 | | | | 21,768 | | | | 126,829 | |
| | | | | | | | | | | | | |
| Total operating costs and expenses | | | 916,679 | | | | 426,690 | | | | 1,343,369 | |
| | | | | | | | | | | | | |
| Loss from operations before income taxes | | | (265,295 | ) | | | (306,028 | ) | | | (571,323 | ) |
| | | | | | | | | | | | | |
| Income taxes | | | - | | | | - | | | | - | |
| | | | | | | | | | | | | |
| Net loss | | $ | (265,295 | ) | | $ | (306,028 | ) | | $ | (571,323 | ) |
| | | | | | | | | | | | | |
| Basic and diluted loss per share: | | | | | | | | | | | | |
| Net loss per share | | $ | (.01 | ) | | | | | | $ | (.03 | ) |
| | | | | | | | | | | | | |
| Weighted average shares used in basic and dilutedloss per share | | | 21,560,006 | | | | 1,200,000 | | | | 22,760,006 | |
| | | | | | | | | | | | | |
| Pro forma for change for tax status (unaudited): | | | | | | | | | | | | |
| Loss before income taxes | | $ | (265,295 | ) | | $ | (306,028 | ) | | $ | (571,323 | ) |
| Pro forma income taxes | | | 92,000 | | | | - | | | | 92,000 | |
| Pro forma net loss | | $ | (173,295 | ) | | $ | (306,028 | ) | | $ | (479,323 | ) |
The accompanying notes are an integral part of these unaudited pro forma combined financial statements.
Notes to Unaudited Pro Forma Combined Financial Statements
September 30, 2010 and December 31, 2009
Note A. Basis of Presentation
ASEC and Geronimo are entities under common control. As a result, the acquisition of the Properties by ASEC from Geronimo will not be accounted for as a purchase, but as a reorganization of entities under common control. Accordingly, the accompanying unaudited pro forma combined balance sheet of ASEC as of September 30, 2010, and the unaudited pro forma combined statements of operations of ASEC for the nine months ended September 30, 2010 and the year ended December 31, 2009, have been prepared to give effect to the acquisition of the Properties as if the Properties had been historically combined with ASEC for all periods presented.
Following are descriptions of the individual columns included in the accompanying unaudited pro forma combined financial statements and notes to unaudited pro forma combined financial statements:
ASEC Historical - | | Represents the historical consolidated balance sheet of ASEC as of September 30, 2010, and the historical consolidated results of operations of ASEC for the nine months ended September 30, 2010 and the year ended December 31, 2009. ASEC applies the successful efforts method for accounting for its oil and natural gas properties. The number of shares outstanding has been adjusted to reflect the effective 2 for 1 stock split which occurred on October 1, 2010 as part of the stock exchange agreement between American Standard Energy Corp. and Uncle Al’s Famous Hot Dogs & Grille, Inc. |
| | | |
The Properties Historical - | | Represents the historical statement of assets and liabilities of the Properties as of September 30, 2010, and the historical statements of revenues and expenses of the Properties for the nine months ended September 30, 2010 and the year ended December 31, 2009. These financial statements utilize the successful efforts method of accounting for oil and natural gas properties. |
Note B. Pro Forma Adjustments
To record the acquisition of the Properties as a reorganization of entities under common control and per the terms of the Purchase of Partial Leaseholds Agreement, under which ASEC paid $500,000 cash and issued 1,200,000 shares of the Company’s common stock and recorded the financial position of the Properties at their net historical cost basis. The acquisition of the Properties was funded partially with cash on hand and partially with the $1,200,000 of cash raised on the October 20, 2010 private placement offering. The 1,200,000 shares of common stock issued to acquire the Properties was recorded at its fair market value and the difference between the cash and fair market value of the stock and the historical costs of the net assets acquired was recorded as a deemed dividend to additional paid-in capital.
Notes to Unaudited Pro Forma Combined Financial Statements
September 30, 2010 and December 31, 2009
Note C. Supplementary Pro Forma Information for Oil and Natural Gas Producing Activities
The following tables present supplementary pro forma information for oil and natural gas producing activities.
Pro Forma Combined Reserve Quantity Information
The following table provides a rollfoward of total net proved reserves for the year ended December 31, 2009, as well as disclosure of total proved developed and undeveloped reserves of ASEC and the Properties on a pro forma combined basis:
| | | ASEC Historical | | | The Properties Historical | | | Pro Forma Combined | |
| | | Oil | | | Natural Gas | | | Total | | | Oil | | | Natural Gas | | | Total | | | Oil | | | Natural Gas | | | Total | |
| | | (Bbls) | | | (Mcf) | | | (Boe) | | | (Bbls) | | | (Mcf) | | | (Boe) | | | (Bbls) | | | (Mcf) | | | (Boe) | |
| Total Proved Reserves: | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Balance, January 1, 2009 | | | 110,879 | | | | 388,595 | | | | 175,645 | | | | - | | | | - | | | | - | | | | 110,879 | | | | 388,595 | | | | 175,645 | |
| Discoveries and extensions | | | 415,547 | | | | 1,363,810 | | | | 642,849 | | | | 12,166 | | | | 4,016 | | | | 12,835 | | | | 427,713 | | | | 1,367,826 | | | | 655,684 | |
| Production | | | (7,905 | ) | | | (39,192 | ) | | | (14,437 | ) | | | (1,871 | ) | | | (485 | ) | | | (1,951 | ) | | | (9,776 | ) | | | (39,677 | ) | | | (16,388 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Balance, December 31, 2009 | | | 518,521 | | | | 1,713,213 | | | | 804,057 | | | | 10,295 | | | | 3,531 | | | | 10,884 | | | | 528,816 | | | | 1,716,744 | | | | 814,941 | |
| Proved Developed Reserves: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| January 1, 2009 | | | 46,249 | | | | 194,704 | | | | 78,700 | | | | - | | | | - | | | | - | | | | 46,249 | | | | 194,704 | | | | 78,700 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2009 | | | 57,975 | | | | 331,576 | | | | 113,238 | | | | 10,295 | | | | 3,531 | | | | 10,884 | | | | 68,270 | | | | 335,107 | | | | 124,122 | |
| Proved Undeveloped Reserves: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| January 1, 2009 | | | 64,630 | | | | 193,891 | | | | 96,945 | | | | - | | | | - | | | | - | | | | 64,630 | | | | 193,891 | | | | 96,945 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2009 | | | 460,546 | | | | 1,381,637 | | | | 690,819 | | | | - | | | | - | | | | - | | | | 460,546 | | | | 1,381,637 | | | | 690,819 | |
Notes to Unaudited Pro Forma Combined Financial Statements
September 30, 2010 and December 31, 2009
Pro Forma Combined Standardized Measure of Discounted Future Net Cash Flows
The following table sets forth the standardized measure of discounted future net cash flows relating to the proved oil and natural gas reserves of ASEC and the Properties on a pro forma combined basis as of December 31, 2009:
| | | | | | | | | | |
| | | ASEC Historical | | | The Properties Historical | | | Pro Forma Combined | |
| | | | | | | | | | |
| Future production revenues | | $ | 39,597,762 | | | $ | 538,176 | | | $ | 40,135,938 | |
| Future production costs | | | (18,576,078 | ) | | | (134,405 | ) | | | (18,710,483 | ) |
| Future development and abandonment costs | | | (11,890,000 | ) | | | - | | | | (11,890,000 | ) |
| Future income tax expense | | | (3,048,345 | ) | | | (33,605 | ) | | | (3,081,950 | ) |
| 10% annual discount factor | | | (4,238,964 | ) | | | (148,021 | ) | | | (4,386,985 | ) |
| | | | | | | | | | | | | |
| Standardized measure of discounted future cash flows | | $ | 1,844,375 | | | $ | 222,145 | | | $ | 2,066,520 | |
Pro Forma Combined Changes in the Standardized Measure of Discounted Future Net Cash Flows
The following table sets forth the changes in the standardized measure of discounted future net cash flows relating to the proved oil and natural gas reserves of ASEC and the Properties on a pro forma combined basis for the year ended December 31, 2009:
| | | | | | | | | | |
| | | ASEC Historical | | | The Properties Historical | | | Pro Forma Combined | |
| Oil and gas producing activities: | | | | | | | | | |
| Extensions and discoveries | | $ | - | | | $ | 352,041 | | | $ | 352,041 | |
| Net changes in prices and production costs | | | (4,888,092 | ) | | | - | | | | (4,888,092 | ) |
| Oil and gas sales, net of production costs | | | (317,885 | ) | | | (96,291 | ) | | | (414,176 | ) |
| Changes in future development costs | | | (8,889,048 | ) | | | - | | | | (8,889,048 | ) |
| Previously projected development costs incurred | | | 1,546 | | | | - | | | | 1,546 | |
| Revisions of previous quantity estimates | | | 15,803,564 | | | | - | | | | 15,803,564 | |
| Accretion of discount | | | 71,180 | | | | - | | | | 71,180 | |
| Changes in production rates, timing and other | | | 295,931 | | | | - | | | | 295,931 | |
| Net change in present value of future income taxes | | | (944,622 | ) | | | (33,605 | ) | | | (978,227 | ) |
| | | | | | | | | | | | | |
| Net increase | | | 1,132,574 | | | | 222,145 | | | | 1,354,719 | |
| Balance, beginning of year | | | 711,801 | | | | - | | | | 711,801 | |
| | | | | | | | | | | | | |
| Balance, end of year | | $ | 1,844,375 | | | $ | 222,145 | | | $ | 2,066,520 | |
