Attached files
| file | filename |
|---|---|
| 8-K/A - CIRCLE STAR ENERGY CORP. | circlestarenergy8k083111.htm |
| EX-23.1 - CIRCLE STAR ENERGY CORP. | ex23-1.htm |
| EX-99.1 - CIRCLE STAR ENERGY CORP. | ex99-1.htm |
Exhibit 99.2
JHE HOLDINGS, LLC
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The unaudited pro forma financial data for the year ended April 30 2011, which reflects our acquisition of JHE Holdings LLC (“JHE”) on June 1, 2011, was derived from the audited financial statements of Circle Star as of and for the year ended April 30, 2011 and the unaudited financial data of JHE as of and for the year ended April 30, 2011. The unaudited pro forma financial information for the year ended April 30, 2011 was prepared as if the transaction occurred on May 1, 2010. The unaudited pro forma financial information as of April 30, 2011 was prepared as if the transaction had occurred on April 30, 2011. If the acquisition had been completed on the dates assumed in the pro forma financial statements, the combined company might have performed differently. The unaudited pro forma condensed combined financial statements are presented for illustrative purposes only and do not reflect the impact of possible cost savings and operational efficiencies. You should not rely on the pro forma financial information as an indication of the financial position or results of operations that the combined company would have achieved had the acquisition taken place earlier or the future results that the combined company will achieve.
The Circle Star unaudited condensed pro forma combined financial statements reflect a total purchase price of approximately $7.0 million, which is comprised of the following amounts:
|
Cash payment at closing
|
$
|
1,000,000
|
||
|
Note to seller
|
5,271,531
|
|||
|
Revenue interest (10%) to High Plains Oil, LLC
|
404,101
|
|||
|
Shares issued
|
400,000
|
|||
|
$
|
7,075,632
|
Circle Star Energy also incurred closing costs totaling approximately $255,000 in connection with the transaction.
JHE HOLDINGS, LLC
Combined Pro Forma Balance Sheet (Unaudited)
|
April 30, 2011
|
|||||||||||||||||
|
Circle Star
|
JHEH
|
Pro Forma Adjustments
|
Pro Forma
|
||||||||||||||
|
Assets
|
|||||||||||||||||
|
Current Assets:
|
|||||||||||||||||
|
Cash
|
$ | 6,696 | $ | 2,474 | $ | $ | 9,170 | ||||||||||
|
Trade accounts receivable
|
– | 276,236 | 276,236 | ||||||||||||||
|
Other receivables
|
– | – | |||||||||||||||
|
Prepaid expenses
|
99 | 5,050 | 5,149 | ||||||||||||||
|
Total current assets
|
6,795 | 283,760 | 290,555 | ||||||||||||||
|
Investment in partnership
|
– | (17,615 | ) | 155,219 |
(A)
|
137,604 | |||||||||||
|
Oil and gas properties, net
|
– | 324,552 | 2,867,820 |
(A)
|
3,192,372 | ||||||||||||
|
Total Assets
|
$ | 6,795 | $ | 590,697 | $ | 3,023,039 | $ | 3,620,531 | |||||||||
|
Liabilities and Shareholders’ Equity
|
|||||||||||||||||
|
Current Liabilities :
|
|||||||||||||||||
|
Accounts payable
|
$ | 25,074 | $ | 11,609 | $ | 255,000 | (A) | $ | 291,683 | ||||||||
|
Due at closing
|
1,000,000 |
(A)
|
1,000,000 | ||||||||||||||
|
Due to related party
|
24,521 | 24,521 | |||||||||||||||
|
Total current liabilities
|
49,595 | 11,609 | 1,255,000 | 1,316,204 | |||||||||||||
|
Seller note payable
|
5,271,531 |
(A)
|
5,271,531 | ||||||||||||||
|
Total shareholders’ equity
|
(42,800 | ) | 579,088 | (3,503,492 | ) | (B) | (2,967,204 | ) | |||||||||
|
Total liabilities and shareholders’ equity
|
$ | 6,795 | $ | 590,697 | $ | 3,023,039 | $ | 3,620,531 | |||||||||
JHE HOLDINGS, LLC
Combined Pro Forma Statement of Operations (Unaudited)
|
Year Ended April 30, 2011
|
Pro Forma
|
Circle Star
|
|||||||||||||||
|
Circle Star
|
JHEH
|
Adjustments
|
Pro Form
|
||||||||||||||
|
Oil sales
|
$
|
–
|
$
|
863,636
|
$
|
$
|
863,636
|
||||||||||
|
Gas sales
|
–
|
248,092
|
248,092
|
||||||||||||||
|
Partnership income
|
–
|
45,510
|
45,510
|
||||||||||||||
|
Total revenues
|
–
|
1,157,238
|
–
|
1,157,238
|
|||||||||||||
|
Lease operating expense
|
–
|
40,904
|
40,904
|
||||||||||||||
|
Production taxes
|
–
|
96,419
|
96,419
|
||||||||||||||
|
Depreciation, depletion and amortization
|
–
|
93,516
|
225,592
|
(C) |
319,108
|
||||||||||||
|
Other expenses
|
–
|
6,963
|
6,963
|
||||||||||||||
|
Workover costs
|
–
|
2,457
|
2,457
|
||||||||||||||
|
Impairment charges
|
–
|
21,397
|
21,397
|
||||||||||||||
|
Dry hole/abandonment costs
|
–
|
23,751
|
23,751
|
||||||||||||||
|
General and administrative expense
|
33,218
|
87,474
|
120,692
|
||||||||||||||
|
Total operating expenses
|
33,218
|
372,881
|
225,592
|
631,691
|
|||||||||||||
|
Income (loss) from operations
|
(33,218
|
)
|
784,357
|
(225,592
|
)
|
525,547
|
|||||||||||
|
Other income (expense):
|
|||||||||||||||||
|
Interest expense
|
–
|
(2,342
|
)
|
(1,476,029
|
)
|
(D) |
(1,478,371
|
)
|
|||||||||
|
Gain on sale of assets
|
–
|
3,948
|
3,948
|
||||||||||||||
|
Miscellaneous income
|
1,500
|
3,669
|
5,169
|
||||||||||||||
|
Income (loss) before income taxes
|
(31,718
|
)
|
789,632
|
(1,701,621
|
)
|
(943,707
|
)
|
||||||||||
|
Income tax expense (benefit)
|
–
|
(330,297
|
)
|
(E) |
(330,297
|
)
|
|||||||||||
|
Net Income (Loss)
|
$
|
(31,718
|
)
|
$
|
789,632
|
$
|
(1,371,324
|
)
|
$
|
(613,410
|
)
|
||||||
JHE HOLDINGS, LLC
Combined Pro Forma Statement of Operations (Unaudited)
Summary of Pro Forma Adjustments
|
(A)
|
As a result of the acquisition, JHE’s assets and liabilities were adjusted to their fair values at the acquisition date. No adjustments were made to JHE’s assets and liabilities other than oil and gas properties and the interest in JH Energy Interests (JHE Units) units as their carrying value approximated fair value at the date of acquisition. As the consideration paid exceeded the fair value of JHE’s net assets, an impairment charge totaling approximately $3.1 million was recorded at the acquisition date. The calculation of the impairment charge follows:
|
|
Fair value of oil and gas properties
|
$
|
3,596,473
|
||
|
Investment in JH Energy Interests
|
137,604
|
|||
|
Note to seller, discounted to 28%
|
(5,271,531
|
)
|
||
|
Cash payment at closing
|
(1,000,000
|
)
|
||
|
Net revenue interest to seller (nets with oil and gas properties)
|
(404,101
|
)
|
||
|
Fair value of equity shares granted to seller
|
(400,000
|
)
|
||
| Working capital acquired | 272,151 | |||
|
Impairment charge
|
$
|
(3,069,404
|
)
|
Circle Star also incurred approximately $255,000 of closing costs in connection with the acquisition.
|
(B)
|
Elimination of JHE retained earnings and remaining net equity balance.
|
|
(C)
|
Additional depreciation, depletion and amortization expense resulting from fair value adjustments to oil and gas properties.
|
|
(D)
|
Interest expense accrued on seller note (stated rate 5% per annum – discounted at 28%.)
|
|
(E)
|
Income tax benefit at 35%.
|
The financial periods required to be presented in this Form 8-K/A are based on Circle Star’s fiscal periods. Circle Star and JHE have different fiscal year ends. For the purpose of presenting these pro forma financial statements, Circle Star used the financial statements for Circle Star’s fiscal year ended April 30, 2011, as filed with the Securities and Exchange Commission (“SEC”) in Circle Star’s most recent Annual Report on Form 10-K/A. To meet the SEC’s pro forma requirements of combining operating results for JHE for an annual period that ends within 93 days of the end of Circle Star’s latest annual fiscal period as filed with the SEC, Circle Star combined JHE’s audited financial statements for the fiscal year ended December 31, 2010 with Circle Star’s audited financial statements with the fiscal year ended April 30, 2011. In addition, Circle Star removed the interim period from January 1, 2010 to April 30, 2010 from JHE’s audited financial statements and added on JHE’s unaudited interim period statements from January 1, 2011 to April 30, 2011 to Circle Star’s audited financial statements for the year fiscal ended April 30, 2011.