CROSS BORDER RESOURCES, INC. 8-K/A
EXHIBIT 99.1
CROSS BORDER RESOURCES, INC
Unaudited Pro Forma CoNDENSED FINANCIAL INFORMATION
On April 21, 2015, Cross Border Resources, Inc. (“Cross Border”) entered into a purchase and sale agreement (the “PSA”) with RMR Operating, LLC (“RMR Operating”), Black Rock Capital, Inc. (“Black Rock”), RMR KS Holdings, LLC (“RMR KS”) and Black Shale Minerals, LLC (“Buyer”). Each of Cross Border, RMR Operating, Black Rock and RMR KS is an operating subsidiary (together, the “Operating Subsidiaries”) of Red Mountain Resources, Inc. (“RMR,” and together with the Operating Subsidiaries, the “Companies”). Pursuant to the PSA the Operating Subsidiaries sold, assigned, transferred and conveyed to Buyer, effective as of April 1, 2015, fifty percent (50%) of their right, title, and interest in and to certain oil and natural gas assets and properties (the “Assets”), including their oil and natural gas leasehold interests, wells, contracts, and oil and natural gas produced after April 1, 2015 (the “Sale”). The aggregate purchase price for the Assets under the PSA was $25.0 million, subject to certain adjustments, including post-closing adjustments for any title or environmental benefits or title or environmental defects resulting from Buyer’s title and environmental reviews. The following unaudited pro forma condensed financial statements reflect the historical results of Cross Border as adjusted on a pro forma basis to give effect to the sale of Cross Border’s Assets for an allocated purchase price of $15.0 million.
The following unaudited pro forma condensed financial statements and explanatory notes present how the financial statements of Cross Border may have appeared had the Sale of the Assets occurred as of March 31, 2015 with respect to the balance sheet information and as of January 1, 2014 with respect to statements of operations information.
Assumptions and estimates underlying the unaudited adjustments to the pro forma financial statements (the “pro forma adjustments”) are described in the accompanying notes to the unaudited pro forma condensed financial statements. Since the pro forma financial statements have been prepared based on preliminary estimates, the final amounts recorded may differ materially from the information presented, as described further in the accompanying notes. 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 transaction and are expected to have a continuing impact on the results of operations of Cross Border. In the opinion of management, all adjustments necessary to present fairly the unaudited pro forma financial information have been made.
These unaudited pro forma condensed financial statements are provided for illustrative purposes only and are not necessarily indicative of the results that actually would have occurred had the transactions been in effect on the dates or for the periods indicated, or of results that may occur in the future. The pro forma financial statements should be read in conjunction with the historical financial statements and accompanying notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” which are set forth in Cross Border’s Annual Report on Form 10-K for the year ended December 31, 2014 and in Cross Border’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015.
| CROSS BORDER RESOURCES, INC. | |||||||
| UNAUDITED PRO FORMA CONDENSED BALANCE SHEET | |||||||
| MARCH 31, 2015 | |||||||
| (in thousands) |
| Historical | Pro Forma Adjustments | Pro Forma | ||||||||||
| Assets | ||||||||||||
| Current Assets: | ||||||||||||
| Cash and cash equivalents | $ | 715 | $ | 2,955 | (A) | $ | 3,670 | |||||
| Accounts receivable - oil and gas | 1,524 | — | 1,524 | |||||||||
| Assets held for sale | 16,543 | (16,543 | )(B) | — | ||||||||
| Prepaid expenses and other current assets | 88 | — | 88 | |||||||||
| Total current assets | 18,870 | (13,588 | ) | 5,282 | ||||||||
| Oil and Natural Gas Properties, Successful Efforts Accounting: | ||||||||||||
| Oil and gas properties | 28,195 | — | 28,195 | |||||||||
| Less accumulated depreciation, depletion, amortization and impairment | (12,334 | ) | — | (12,334 | ) | |||||||
| Oil and natural gas properties, net | 15,861 | — | 15,861 | |||||||||
| Other Assets: | ||||||||||||
| Restricted cash | 215 | 400 | (A) | 615 | ||||||||
| Other property and equipment, net of accumulated depreciation and amortization | 26 | — | 26 | |||||||||
| Deferred financing costs | 37 | (37 | )(C) | — | ||||||||
| Other assets | 55 | — | 55 | |||||||||
| Total Assets | $ | 35,064 | $ | (13,225 | ) | $ | 21,839 | |||||
| Liabilities and Stockholders' Equity | ||||||||||||
| Current Liabilities: | ||||||||||||
| Accounts payable | $ | 3,322 | $ | (3,200 | )(D) | $ | 122 | |||||
| Accounts payable - related party | 163 | (163 | )(D) | — | ||||||||
| Accrued expenses and other payables | 802 | — | 802 | |||||||||
| Line of credit | 8,200 | (8,200 | )(D) | — | ||||||||
| Liabilities associated with assets held for sale | 1,625 | (1,625 | )(E) | — | ||||||||
| Environmental liability, current portion | 2,057 | — | 2,057 | |||||||||
| Total current liabilities | 16,169 | (13,188 | ) | 2,981 | ||||||||
| Non-Current Liabilities: | ||||||||||||
| Asset retirement obligations, net of current portion | 1,625 | — | 1,625 | |||||||||
| Total Liabilities | 17,794 | (13,188 | ) | 4,606 | ||||||||
| Commitments and Contingencies | ||||||||||||
| Stockholders' Equity: | ||||||||||||
| Common stock | 17 | — | 17 | |||||||||
| Additional paid-in capital | 33,463 | — | 33,463 | |||||||||
| Accumulated deficit | (16,210 | ) | (37 | )(C) | (16,247 | ) | ||||||
| Total stockholders' equity | 17,270 | (37 | ) | 17,233 | ||||||||
| Total Liabilities and Stockholders' Equity | $ | 35,064 | $ | (13,225 | ) | $ | 21,839 | |||||
See accompanying notes to unaudited pro forma condensed financial statements.
| CROSS BORDER RESOURCES, INC. | ||||||||
| UNAUDITED PRO FORMA CONDENSED STATEMENT OF OPERATIONS | ||||||||
| FOR THE THREE MONTHS ENDED MARCH 31, 2015 | ||||||||
| (in thousands except per share amounts) |
| Cross Borders Resources, Inc. | Pro Forma Adjustments | Pro Forma | ||||||||||
| Revenue: | ||||||||||||
| Oil and natural gas sales | $ | 1,453 | $ | (727 | )(F) | $ | 726 | |||||
| Operating Expenses: | ||||||||||||
| Production taxes | 133 | (67 | )(F) | 66 | ||||||||
| Operating costs | 749 | (375 | )(F) | 374 | ||||||||
| Natural gas transportation and marketing expenses | 24 | (12 | )(F) | 12 | ||||||||
| Depletion, depreciation, amortization, accretion and impairment | 377 | (188 | )(G) | 189 | ||||||||
| Accretion of discount on asset retirement obligation | 34 | (17 | )(H) | 17 | ||||||||
| General and administrative expense | 56 | — | 56 | |||||||||
| Total operating expense | 1,373 | (659 | ) | 714 | ||||||||
| Income from Operations | 80 | (68 | ) | 12 | ||||||||
| Other Income (Expense): | ||||||||||||
| Interest expense | (104 | ) | 104 | (I) | — | |||||||
| Total Other Income (Expense) | (104 | ) | 104 | — | ||||||||
| Loss Before Income Taxes | $ | (24 | ) | $ | 36 | $ | 12 | |||||
| Income tax provision | — | — | — | |||||||||
| Net Earnings/(Loss) | $ | (24 | ) | $ | 36 | $ | 12 | |||||
| Basic and diluted earnings/(loss) per common share | $ | 0.00 | $ | 0.00 | $ | 0.00 | ||||||
| Basic weighted average common shares outstanding | 17,336 | — | 17,336 | |||||||||
| Diluted weighted average common shares outstanding | 21,024 | — | 21,024 | |||||||||
See accompanying notes to unaudited pro forma condensed financial statements.
| CROSS BORDER RESOURCES, INC. | ||||||||
| UNAUDITED PRO FORMA CONDENSED STATEMENT OF OPERATIONS | ||||||||
| FOR THE YEAR ENDED DECEMBER 31, 2014 | ||||||||
| (in thousands except per share amounts) |
| Historical | Pro Forma Adjustments | Pro Forma | ||||||||||
| Revenue: | ||||||||||||
| Oil and natural gas sales | $ | 12,352 | $ | (6,176 | )(F) | $ | 6,176 | |||||
| Operating Expenses: | ||||||||||||
| Production taxes | 999 | (500 | )(F) | 499 | ||||||||
| Operating costs | 2,288 | (1,144 | )(F) | 1,144 | ||||||||
| Natural gas transportation and marketing expenses | 103 | (51 | )(F) | 52 | ||||||||
| Depreciation, depletion, amortization and impairment | 9,154 | (4,577 | )(G) | 4,577 | ||||||||
| Accretion of discount on asset retirement obligation | 186 | (93 | )(H) | 93 | ||||||||
| General and administrative expense | 696 | — | 696 | |||||||||
| Total operating expense | 13,426 | (6,365 | ) | 7,061 | ||||||||
| Loss from Operations | (1,074 | ) | 189 | (885 | ) | |||||||
| Other Income (Expense): | ||||||||||||
| Gain (loss) on derivatives | (4 | ) | — | (4 | ) | |||||||
| Interest expense | (486 | ) | 486 | (I) | — | |||||||
| Loss on settlement of litigation | (900 | ) | — | (900 | ) | |||||||
| Total Other Income (Expense) | (1,390 | ) | 486 | (904 | ) | |||||||
| Loss Before Income Taxes | $ | (2,464 | ) | $ | 675 | $ | (1,789 | ) | ||||
| Income tax provision | — | — | — | |||||||||
| Net Loss | $ | (2,464 | ) | $ | 675 | $ | (1,789 | ) | ||||
| Basic loss per common share | $ | (0.14 | ) | $ | 0.04 | $ | (0.10 | ) | ||||
| Fully diluted loss per common share | $ | (0.12 | ) | $ | 0.03 | $ | (0.09 | ) | ||||
| Basic weighted average common shares outstanding | 17,336 | 17,336 | ||||||||||
| Fully diluted weighted average common shares outstanding | 21,024 | 21,024 | ||||||||||
See accompanying notes to unaudited pro forma condensed financial statements.
CROSS BORDER RESOURCES, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED
FINANCIAL STATEMENTS
MARCH 31, 2015 and DECEMBER 31, 2014
NOTE 1. BASIS OF PRO FORMA PRESENTATION
The accompanying unaudited pro forma condensed financial statements and explanatory notes present how the financial statements of Cross Border may have appeared had fifty percent (50%) of its right, title, and interest in and to certain oil and natural gas assets and properties (the “Assets”), including its oil and natural gas leasehold interests, wells, contracts, and oil and natural gas produced after April 1, 2015 (the “Sale”) occurred as of March 31, 2015 with respect to the balance sheet information and as of January 1, 2014 with respect to statements of operations information. The transaction for which these pro forma financial statements are presented is explained in more detail in the introductory paragraph to the accompanying pro forma financial information.
Following are descriptions of certain columns included in the accompanying unaudited pro forma condensed financial statements:
Historical—Represents the historical condensed balance sheet of Cross Border as of March 31, 2015 and the historical condensed statements of operations of Cross Border for the three months ended March 31, 2015 and the year ended December 31, 2014.
Pro Forma Adjustments—Represents the adjustments to the historical condensed financial statements necessary to arrive at the pro forma financial position of Cross Border as of March 31, 2015, as if the sale of the Assets occurred as of January 1, 2014, and the pro forma results of operations of Cross Border for the three months ended March 31, 2015 and the year ended December 31, 2014, as if the sale of the Assets occurred as of January 1, 2014.
The pro forma adjustments represent management’s estimates based on information available as of the time this document was prepared and are subject to revision as additional information becomes available and additional analyses are performed. The pro forma financial statements do not reflect the impact of possible revenue or earnings effects or cost savings from operating or administrative changes. Also, the pro forma financial statements do not reflect possible adjustments related to restructuring activities that have yet to be determined or transaction or other costs following the Sale that are not expected to have a continuing impact.
NOTE 2. PRO FORMA ADJUSTMENTS AND ASSUMPTIONS
| A. | To record excess cash remaining and restricted cash held for environmental work after using a portion of the sales proceeds of $15.0 million to repay indebtedness under the credit facility of $8.2 million and payables of $3.4 million. | |
| B. | To record the sale of the Assets. | |
| C. | To eliminate debt issue costs associated with the credit facility that was repaid using a portion of the sales proceeds. | |
| D. | To eliminate the outstanding balance under the credit facility of $8.2 million, accounts payable of $3.2 million and accounts payable–related party of $0.2 million which were repaid using a portion of the sales proceeds. | |
| E. | To eliminate the asset retirement obligations associated with the Assets. |
| F. | To eliminate revenues, operating expenses, production taxes and natural gas transportation and marketing expenses associated with the Assets. | |
| G. | To adjust depreciation, depletion, amortization and impairment to give effect to the reduction in revenue volumes and oil and gas properties as a result of the sale of the Assets. | |
| H. | To eliminate accretion expense attributable to asset retirement obligations associated with the Assets. | |
| I. | To adjust interest expense to give effect to the repayment of the credit facility. |
