Exhibit 99.3
Introduction to the unaudited pro forma
condensed consolidated financial statements of Sara Creek Gold Corp.
The unaudited pro forma condensed consolidated financial statements present the impact on Sara Creek Gold Corp. (“Sara Creek”) results of operations and financial position attributable to:
(1) The closing of Sara Creek’s acquisition of SCRNG on October 25, 2013. As a result of the reverse merger, SCNRG became a wholly-owned subsidiary of Sara Creek. However, for accounting purposes, SCNRG is deemed to be the acquirer. Accordingly, the historical results of Sara Creek consist of SCNRG’s historical results consolidated with Sara Creek’s beginning October 25, 2013. See Sara Creek’s Current Report on Form 8-K/A filed with the SEC on December 24, 2013.
(2) The acquisition by its wholly-owned subsidiary SCNRG, LLC of a 20.5108% working interest in the DEEP Lease (“20.5% Working Interest”). The closing of the acquisition of the 20.5% Working Interest occurred on February 4, 2014 and was effective February 1, 2014. Closing of this acquisition increased SCNRG’s working interest from 66.67% to 87.1808%. See Sara Creek’s Current Report on Form 8-K/A filed with the SEC on April 10, 2014.
(3) The acquisition by its wholly-owned subsidiary SCNRG, LLC of a 12.8192% working interest in the DEEP Lease (“12.8% Working Interest”). The closing of the acquisition of the 12.8% Working Interest occurred on May 15, 2014 and was effective May 15, 2014. Closing of this acquisition increased SCNRG’s working interest from 87.1808% to 100.0%.
The unaudited pro forma consolidated balance sheet as of February 28, 2014, and the unaudited pro forma consolidated statement of operations for the year ended August 31, 2013 and six months ended February 28, 2014, are based on the historical financial statements of Sara Creek, SCNRG, the 20.5% Working Interest and the 12.8% Working Interest. The unaudited pro forma combined balance sheet has been prepared as if the 12.8% Working Interest had been acquired by SCNRG on February 28, 2014 (Sara Creek’s acquisition of SCNRG and the 20.5% Working Interest are already included as those acquisitions closed October 25, 2013 and February 4, 2014, respectively). The unaudited pro forma consolidated statement of operations for the year ended August 31, 2013, and February 28, 2014, have been prepared as if Sara Creek, the 20.5% Working Interest and the 12.8% Working Interest had each been acquired by SCNRG on September 1, 2012. The unaudited pro forma consolidated financial statements have also been prepared based on certain pro forma adjustments, as described in the accompanying note.
The following unaudited pro forma consolidated financial statements are qualified in their entirety by reference to, and should be read in conjunction with, such historical financial statements and related notes contained in: (1) Sara Creek’s audited historical financial statements set forth in its Annual Report on Form 10-K as of and for the year ended August 31, 2013, and unaudited historical financial statements set forth in its Quarterly Report on Form 10-Q as of and for the three and six months ended February 28, 2014, both as filed with the SEC; (2) SCNRG’s audited historical and unaudited pro forma financial statements as of and for the year ended August 31, 2013, set forth in Sara Creek’s Current Report on Form 8-K/A, as filed with the SEC; (3) the 20.5% Working Interest audited historical financial statements as of and for the year ended August 31, 2013, and unaudited interim condensed financial statements for the three months ended November 30, 2013, set forth in Sara Creek’s Current Report on Form 8-K/A, as filed with the SEC; and (4) the 12.8% Working Interest audited historical financial statements as of and for the year ended August 31, 2013, and unaudited interim condensed financial statements for the three and six months ended February 28, 2014, both as included in this Current Report on Form 8-K/A.
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The pro forma adjustments reflected in the unaudited pro forma consolidated statement of operations is based upon currently available information and certain assumptions and estimates; therefore the actual effects of these transactions will differ from the pro forma adjustments. However, management considers the applied estimates and assumptions to provide a reasonable basis for the presentation of the significant effects of certain transactions that are expected to have a continuing impact on Sara Creek, SCRNG, the 20.5% Working Interest and the 12.8% Working Interest. In addition, management considers the pro forma adjustments to be factually supportable and appropriately represent the expected impact of items that are directly attributable to the acquisition of Sara Creek by SCNRG (for accounting purposes), the 20.5% Working Interest by SCNRG and the 12.8% Working Interest by SCNRG.
The unaudited pro forma consolidated statement of operations is not necessarily indicative of the results that would have occurred if SCNRG had acquired Sara Creek (for accounting purposes), the 20.5% Working Interest and the 12.8% Working Interest on the dates indicated nor are they indicative of the future operating results of Sara Creek including SCNRG, the 20.5% Working Interest and the 12.8% Working Interest.
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Sara Creek Gold Corp. |
Pro Forma Combined Consolidated Balance Sheet |
As of February 28, 2014 |
Sara Creek | 12.8% DEEP Lease | Pro Forma | Sara Creek | ||||||||||||||
Historical | Historical | Adjustments | Pro Forma | ||||||||||||||
ASSETS | |||||||||||||||||
Current assets: | |||||||||||||||||
Cash | $ | 74,287 | $ | - | $ | 120,000 | a | $ | 69,287 | ||||||||
(125,000 | ) | b | |||||||||||||||
Accounts receivable | 11,801 | 1,341 | - | 13,142 | |||||||||||||
Inventory | 9,841 | 1,665 | - | 11,506 | |||||||||||||
Prepaid expenses | 17,920 | 249 | - | 18,169 | |||||||||||||
Total current assets | 113,849 | 3,255 | (5,000 | ) | 112,104 | ||||||||||||
Machinery and equipment, net | 14,619 | 2,141 | - | 16,760 | |||||||||||||
Capitalized oil properties, net | 578,959 | 55,373 | 109,522 | b | 743,854 | ||||||||||||
Deposits | 5,000 | - | - | 5,000 | |||||||||||||
TOTAL ASSETS | $ | 712,427 | $ | 60,769 | $ | 104,522 | $ | 877,718 | |||||||||
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||||||||||||
Current liabilities: | |||||||||||||||||
Accounts payable and accrued liabilities | $ | 202,818 | $ | 1,761 | $ | - | $ | 204,579 | |||||||||
Net profits interest payable, current portion | 16,643 | 2,447 | - | 19,090 | |||||||||||||
Loans payable to related parties, short term | 13,000 | - | 40,000 | a | 53,000 | ||||||||||||
Convertible notes payable, short term | - | - | 50,000 | a | 50,000 | ||||||||||||
Total current liabilities | 232,461 | 4,208 | 90,000 | 326,669 | |||||||||||||
Long term liabilities: | |||||||||||||||||
Loans payable to related parties, long term | 90,572 | - | - | 90,572 | |||||||||||||
Asset retirement obligations | 140,819 | 20,707 | - | 161,526 | |||||||||||||
Net profits interest payable, long term portion | 138,874 | 20,376 | - | 159,250 | |||||||||||||
Total liabilities | 602,726 | 45,291 | 90,000 | 738,017 | |||||||||||||
Stockholders' equity: | |||||||||||||||||
Common stock | 35,737 | - | 300 | a | 36,037 | ||||||||||||
Common stock payable | 40,000 | - | - | 40,000 | |||||||||||||
Additional paid in capital | 637,714 | - | 29,700 | a | 667,414 | ||||||||||||
Owners' equity | - | 15,478 | (15,478 | ) | b | - | |||||||||||
Deficit | (603,750 | ) | - | - | (603,750 | ) | |||||||||||
Total stockholders' equity | 109,701 | 15,478 | 14,522 | 139,701 | |||||||||||||
Total liabilities and stockholders' equity | $ | 712,427 | $ | 60,769 | $ | 104,522 | $ | 877,718 |
See accompanying notes to the Pro Forma financial statements.
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Sara Creek Gold Corp. |
Pro Forma Combined Consolidated Statement of Operations |
Six Months Ended February 28, 2014 |
Sara Creek | Sara Creek | 20.5% DEEP | 12.8% DEEP | ||||||||||||||||||||||
Consolidated | Legal Entity | Lease | Lease | Pro Forma | Sara Creek | ||||||||||||||||||||
Historical(1) | Historical(2) | Historical | Historical | Adjustments | Pro Forma | ||||||||||||||||||||
Oil revenue | $ | 44,112 | $ | 6,673 | $ | 12,236 | $ | 7,648 | $ | (4,340 | ) | c | $ | 66,329 | |||||||||||
Expenses: | |||||||||||||||||||||||||
Direct operating expenses | 20,992 | 3,398 | 5,810 | 3,631 | (2,430 | ) | c | 31,401 | |||||||||||||||||
Depreciation, depletion and amortization | 15,957 | 1,547 | 4,301 | 2,688 | (1,057 | ) | d | 23,436 | |||||||||||||||||
Professional fees | 193,043 | 65,098 | - | - | (53,553 | ) | c | 204,588 | |||||||||||||||||
General and administrative | 59,896 | 56,395 | 915 | 572 | (55,135 | ) | c | 62,774 | |||||||||||||||||
131 | e | ||||||||||||||||||||||||
Total operating expenses | 289,888 | 126,438 | 11,026 | 6,891 | (112,044 | ) | 322,199 | ||||||||||||||||||
Net operating income (loss) | (245,776 | ) | (119,765 | ) | 1,210 | 757 | 107,704 | (255,870 | ) | ||||||||||||||||
Other expense: | |||||||||||||||||||||||||
Interest expense | 6,748 | - | 1,849 | 1,155 | 5,000 | f | 14,752 | ||||||||||||||||||
Total other expense | 6,748 | - | 1,849 | 1,155 | 5,000 | 14,752 | |||||||||||||||||||
Income (loss) before provision for income tax | (252,524 | ) | (119,765 | ) | (639 | ) | (398 | ) | 102,704 | (270,622 | ) | ||||||||||||||
Provision for income tax | - | - | - | - | - | - | |||||||||||||||||||
Net income (loss) | $ | (252,524 | ) | $ | (119,765 | ) | $ | (639 | ) | $ | (398 | ) | $ | 102,704 | $ | (270,622 | ) | ||||||||
Net loss per common share - basic and diluted | $ | (0.01 | ) | $ | (0.01 | ) | |||||||||||||||||||
Weighted average common shares outstanding - | |||||||||||||||||||||||||
basic and diluted | 24,477,454 | 8,172,790 | g | 32,650,244 |
(1) On October 25, 2013, Sara Creek Gold Corp. completed its acquisition of SCNRG, LLC. However, for accounting purposes, SCNRG is deemed to be the acquiror. Accordingly, the consolidated statement of operatons of Sara Creek consist of SCNRG's historical results consolidated with Sara Creek from the date of completion of the reverse merger on October 25, 2013. |
(2) Represents the non-consolidated statement of operations of Sara Creek Gold Corp., the legal entity, for the six months ended February 28, 2014. |
See accompanying notes to the Pro Forma financial statements.
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Sara Creek Gold Corp. |
Pro Forma Combined Consolidated Statement of Operations |
Twelve Months Ended August 31, 2013 |
Sara Creek | Sara Creek | 20.5% DEEP | 12.8% DEEP | ||||||||||||||||||||||
Consolidated | Legal Entity | Lease | Lease | Pro Forma | Sara Creek | ||||||||||||||||||||
Historical(1) | Historical(2) | Historical | Historical | Adjustments | Pro Forma | ||||||||||||||||||||
Oil revenue | $ | 80,792 | $ | 3,932 | $ | 24,857 | $ | 15,535 | $ | - | $ | 125,116 | |||||||||||||
Expenses: | |||||||||||||||||||||||||
Direct operating expenses | 58,797 | 2,380 | 17,843 | 11,152 | - | 90,172 | |||||||||||||||||||
Depreciation, depletion and amortization | 25,695 | - | 7,905 | 4,941 | 983 | d | 39,524 | ||||||||||||||||||
Professional fees | 16,790 | 61,090 | - | - | - | 77,880 | |||||||||||||||||||
General and administrative | 8,636 | 18,215 | 1,200 | 749 | - | 28,800 | |||||||||||||||||||
Total operating expenses | 109,918 | 81,685 | 26,948 | 16,842 | 983 | 236,376 | |||||||||||||||||||
Net operating income (loss) | (29,126 | ) | (77,753 | ) | (2,091 | ) | (1,307 | ) | (983 | ) | (111,260 | ) | |||||||||||||
Other expense (income): | |||||||||||||||||||||||||
Interest expense | 12,865 | 61,489 | 3,958 | 2,474 | 10,000 | f | 90,786 | ||||||||||||||||||
Other | - | (9,273 | ) | - | - | - | (9,273 | ) | |||||||||||||||||
Total other expense | 12,865 | 52,216 | 3,958 | 2,474 | 10,000 | 81,513 | |||||||||||||||||||
Loss before provision for income tax | (41,991 | ) | (129,969 | ) | (6,049 | ) | (3,781 | ) | (10,983 | ) | (192,773 | ) | |||||||||||||
Provision for income tax | - | - | - | - | - | - | |||||||||||||||||||
Net loss | $ | (41,991 | ) | $ | (129,969 | ) | $ | (6,049 | ) | $ | (3,781 | ) | $ | (10,983 | ) | $ | (192,773 | ) | |||||||
Net loss per common share - basic and diluted | $ | (0.01 | ) | $ | (0.01 | ) | |||||||||||||||||||
Weighted average common shares outstanding - | |||||||||||||||||||||||||
basic and diluted | 5,882,117 | 25,154,866 | g | 31,036,983 |
(1) On October 25, 2013, Sara Creek Gold Corp. completed its acquisition of SCNRG, LLC. However, for accounting purposes, SCNRG is deemed to be the acquiror. Accordingly, the consolidated statement of operations of Sara Creek for the year ended August 31, 2013, consist of SCNRG's historical results. |
(2) Represents the non-consolidated statement of operations of Sara Creek Gold Corp., the legal entity, for the twelve months ended August 31, 2013. |
See accompanying notes to the Pro Forma financial statements.
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SARA CREEK GOLD CORP.
NOTES TO THE PRO FORMA ADJUSTMENTS
(Unaudited)
(a) | To record the following sources of financing, which together with cash on hand funded the purchase price of the 12.8% Working Interest: |
a. | Short-term loan from D. Katic, an officer and significant shareholder in the amount of $40,000. This loan bears interest at 10% per annum. |
b. | Short-term convertible note payable in the amount of $50,000, which bears interest at 12.0% per annum. |
c. | Sale of 300,000 units at $0.10 per unit for total proceeds of $30,000. Each unit is comprised of one share of common stock and a warrant entitling the holder to buy 0.5 shares of common stock for $0.20 per share, exercisable for five years. |
(b) | To record the purchase of a 12.8% Working Interest in the DEEP Lease. |
(c) | To eliminate revenue and expenses for Sara Creek for the period October 25, 2013, to February 28, 2014, which amounts are included in both the Sara Creek Consolidated and Sara Creek Legal Entity columns. |
(d) | To record additional depletion expense on consideration assigned to oil properties for both the 20.5% and 12.8% Working Interest acquisitions. |
(e) | To eliminate expenses for the 20.5% Working Interest for the period February 1, 2014, to February 28, 2014, which amounts are included in both the Sara Creek Consolidated and the 20.5% Working Interest columns. |
(f) | To record interest expense associated with the short-term loan and the convertible notes payable in (a) above. |
(g) | To increase weighted average share count to reflect the recapitalization of SCNRG, LLC and the pro forma period, together with the unit offering in (a) above and the 4,775,000 units sold to finance the purchase of the 20.5% Working interest. These latter units had the same terms as described in (a) above. |
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