Exhibit 99.3

 

RIO BRAVO OIL, INC., PAN AMERICAN OIL COMPANY, LLC THE PROPERTIES ACQUIRED FROM RIO BRAVO OIL, LLC ON FEBRUARY 13, 2012

UNAUDITED PRO FORMA BALANCE SHEET AND PRO FORMA STATEMENTS OF OPERATIONS

 

On February 13, 2012, the Company has entered into a Share Exchange Agreement (“SEA”) with Pan American Oil Company, LLC (“Pan American”), whereby Pan American became a wholly-owned subsidiary of the Company. The SEA with Pan American resulted in the Company acquiring said interests, assets and properties that are within the working fields and the Company will then have the ability to manage the capital spending with respect to the exploitation of those properties. The consideration for the purchase of the Pan American assets was the issuance 5,500,000 shares of the Series A Convertible Preferred Stock and the assumption of certain debt and liabilities aggregating approximately $3,017,250 in exchange for a 100% ownership interest in Pan American.

 

Before the Rio Bravo Oil, Inc. acquisition of Pan American, in July 2011, Pan American entered into an agreement to purchase all of the rights, interest and obligations associated with the Luling Edwards Field from Rio Bravo Oil, LLC, a company related through common ownership to Pan American, for approximately $1.5 million which was to close by November 30, 2011. Subsequently Pan American, LLC and Rio Bravo entered into a verbal agreement to amend the sale agreement to extend the closing until such time as the Company had fully funded the amended purchase price, and to include the Bateman Field assets and to increase the purchase price to $1.7 million in cash and $3 million in preferred equity. Pan American and Rio Bravo Oil, LLC amended the agreement again in February 2012 such that Pan American agreed to acquire all of the rights, interest and obligations associated with the Luling Edwards Field for $1.6 million and it also acquired an option to acquire the assets associated with the Bateman formation for $375,000 and which expired on March 31, 2012. The agreement was consummated on February 13, 2012. In March 2012, Pan American notified Rio Bravo Oil, LLC that it would not exercise its option for the Bateman formation assets.

 

The pro forma balance sheet and statements of operations reflects preliminary estimates and assumptions based on the information available at the time of preparation, including, but not limited to, the preliminary estimates of the amortization and depreciation of intangible assets and property, plant and equipment based on the fair value estimates of assets and liabilities. The pro forma statement of operations is not necessarily indicative of what the companies’ results of operations actually would have been had the Acquisition been completed at the date indicated. The pro forma statement of operations should be read in conjunction with:

 

•

the accompanying notes to the pro forma condensed combined balance sheet and statements of operations; and

 

•

the financial statements of Rio Bravo Oil, Inc. as of and for the year ended September 30, 2011 included in a Form 10K Annual Report and for the three month period ended December 31, 2011, included in a Form 10Q Quarterly Report  previously filed with the SEC.

 

 

Pro Forma

As of December 31, 2011

See Accompanying Notes

 

		Historical
										Properties
						Pan				Acquired										Pan Am
						American				from						Pan Am				&Prop Acq						Inc
		Rio Bravo				Oil				Rio Bravo						Pro Forma				Pro Forma						Pro Forma				Pro Forma
		Oil, Inc.				Company, LLC				Oil, LLC						Adjustments				Combined						Adjustments				Combined
ASSETS
CURRENT ASSETS
Cash and cash equivalents			172,500				5,159														5,159										177,659
Prepaid expenses			852				10,000														10,000										10,852
Prepaid drilling costs			-				149,704														149,704										149,704
TOTAL CURRENT ASSETS			173,352				164,863				-						-				164,863						-				338,215
FIXED ASSETS
Proved oil and gas property							617,082				4,251						-				621,333			F			5,866,747				6,488,080
Furniture, fixtures and equipment											412,044			A			(116,255	)			295,789										295,789
Accumulated depreciation											(116,255	)		A			116,255				-										-
TOTAL FIXED ASSESTS			-				617,082				300,040						-				917,122						5,866,747				6,783,869
OTHER ASSETS
Interest receivable – related party							8,633							B			(7,625	)			1,008										1,008
Advances receivable – related party							1,429,736							B			(927,736	)			502,000										502,000
			173,352				2,220,314				300,040						(935,361	)			1,584,993						5,866,747				7,625,092
LIABILITIES AND STOCKHOLDERS’ DEFICIT
CURRENT LIABILITIES
Accounts Payable							17,776														17,776			G			(17,776	)			-
Accounts Payable - related party											513,652										513,652			G			(513,652	)			-
Accrued Expense			8,797				37,670				92,264			C			(92,264	)			37,670			G			(37,670	)			8,797
Advances payable – related party							87,000				927,736			B			(927,736	)			87,000										87,000
Accrued interest - related party											7,625			B			(7,625	)			-										-
Purchase price of Rio Bravo Assets payable														D			146,029				146,029			G			(146,029	)			-
Fees payable associated with the closing of transaction																								H			350,000				350,000
Loan from former director			3,332																		-										3,332
Loan from stockholder			199,395																		-										199,395
Leasehold purchase consideration payable							500,000														500,000			G			(500,000	)			-
Bridge notes payable							1,855,000														1,855,000										1,855,000
TOTAL CURRENT LIABILITIES			211,524				2,497,446				1,541,277						(881,596	)			3,157,127						(865,127	)			2,503,524
NON CURRENT LIABILITIES
Asset Retirement Obligation			-				4,782				4,958										9,740										9,740
TOTAL LIABILITIES			211,524				2,502,228				1,546,235						(881,596	)			3,166,867						(865,127	)			2,513,264
Commitments and contingencies			-				-				-						-				-						-				-
Series A redeemable preferred stock																								F			5,500,000				5,500,000
Stockholders' Deficit
Common Stock, $0.001 par value, 120,000,000 Authorized 95,250,000 Issued and outstanding shares			95,250																		-										95,250
Series A Preferred Stock, $0.001 par value, 30,000,000 Authorized, 5,500,000 outstanding																					-										-
Additional paid-in capital			-																		-										-
Deficit accumulated during the development stage			(133,422	)																	-			H			(350,000	)			(483,422	)
Members' deficit accumulated in the exploratory stage							(281,914	)			(1,246,195	)		E			1,246,195				(1,581,874	)		I			281,914				-
														A			(1,299,960	)						F			1,299,960
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT			173,352				2,220,314				300,040						(935,361	)			(1,584,993	)					5,866,747				7,625,092

  

  

Pro Forma

Three Months Ended December 31, 2011

See Accompanying Notes

 

			Historical
											Properties
							Pan				Acquired
							American				from
			Rio Bravo				Oil				Rio Bravo								Pro Forma				Pro Forma
			Oil, Inc.				Company, LLC				Oil, LLC								Adjustments				Combined
Operating Expenses
Lease operating and workover expenses											38,751												38,751
Depreciation											14,716												14,716
General and administrative - related party							70,000																70,000
General and administrative			41,240				87,801				18,282												147,323
Impairment of oil and gas interests											(155,105	)											(155,105	)
Total operating expenses			41,240				157,801				(83,356	)							-				115,685
Loss from operations			(41,240	)			(157,801	)			83,356								-				(115,685	)
Other Income and expense
Interest expense			(145	)			(26,805	)			(7,841	)			J				7,625				(27,166	)
Interest income							8,632				-				J				(7,625	)			1,007
Total other income			(145	)			(18,173	)			(7,841	)							-				(26,159	)
Net Loss			(41,385	)			(175,974	)			75,515								-				(141,844	)
Pro forma earnings per share
basic and diluted loss per share																							(0.00	)
basic and diluted weighted average common
shares outstanding																							95,250,000

 

 

Pro Forma 

Year Ended September 30, 2011

See Accompanying Notes

 

		Historical
										Properties
						Pan				Acquired
						American				from
		Rio Bravo				Oil				Rio Bravo				Pro Forma				Pro Forma
		Oil, Inc.				Company, LLC				Oil, LLC				Adjustments				Combined
Operating Expenses
Lease operating and workover expenses											26,881								26,881
Depreciation											58,270								58,270
General and administrative - related party											-								-
General and administrative			19,346				105,874				73,023								198,243
Impairment of oil and gas interests											259,591								259,591
Total operating expenses			19,346				105,874				417,765				-				542,985
Loss from operations			(19,346	)			(105,874	)			(417,765	)			-				(542,985	)
Other Income and expense
Interest expense											-								-
Interest income											-								-
Total other income			-				-				-				-				-
Net Loss			(19,346	)			(105,874	)			(417,765	)			-				(542,985	)
Pro forma earnings per share
basic and diluted loss per share																			(0.01	)
basic and diluted weighted average common
shares outstanding																			95,250,000

 

 

RIO BRAVO OIL, INC., PAN AMERICAN OIL COMPANY, LLC AND THE PROPERTIES ACQUIRED FROM RIO BRAVO OIL, LLC ON FEBRUARY 13, 2012

NOTES TO PRO FORMA CONDENSED COMBINED

BALANCE SHEET AND STATEMENTS OF OPERATIONS

(Unaudited)

 

1. BASIS OF PRO FORMA PRESENTATION

 

The unaudited pro forma condensed combined statement of operations (the “pro forma statement of operations”) has been derived from the historical consolidated statements of operations of Rio Bravo Oil, Inc., Pan American Oil Company, LLC and the Properties Acquired from Rio Bravo Oil, LLC on February 13, 2012 after giving effect to the Acquisition transaction, and after applying the assumptions, reclassifications and adjustments described in these notes to the pro forma statement of operations. The pro forma condensed combined (the “pro forma balance sheet”) balance sheet as of December 31, 2011 is presented as if the Acquisition had occurred on December 31, 2011. The pro forma statements of operations for the year ended September 30, 2011 and for the three months ended December 31, 2011 are presented as if the Acquisition had occurred on October 1, 2010 and 2011, respectively, as required under Article 11 of Regulation S-X.

 

Historical financial information has been adjusted in the pro forma balance sheet and statements of operations to give effect to pro forma events that are: (1) directly attributable to the Acquisition; (2) factually supportable; and (3) expected to have a continuing impact on the Company’s results of operations. The pro forma statement of operations does not reflect nonrecurring costs resulting from the Acquisition. The pro forma statements of operations does not include the impact of any revenue, costs or other operating synergies that may result from the Acquisition. The pro forma adjustments presented in the pro forma statement of operations are described in Note 3— Pro Forma Adjustments .

 

The pro forma balance sheet and statements of operations has been prepared using the acquisition method of accounting in accordance with the accounting guidance on business combinations with Rio Bravo Oil, Inc. identified as the acquirer. In business combinations, purchase price allocation is often subject to revisions as additional information becomes available and further analyses are performed. The assets acquired and liabilities assumed in the acquisition were recorded at provisional amounts based on the preliminary purchase price allocation. The Company is in the process of obtaining additional information to identify and measure all assets acquired and liabilities assumed in the acquisition within the measurement period, which could be up to one year from the date of acquisition. Such provisional amounts will be retrospectively adjusted to reflect any new information about facts and circumstances that existed at the acquisition date that, if known, would have affected the measurement of these amounts. Additionally, key input assumptions and their sensitivity to the valuation of assets acquired and liabilities assumed are currently being reviewed by management.

 

2. PRELIMINARY PURCHASE PRICE ALLOCATION

 

The preliminary purchase price allocation of the fair value of assets acquired and liabilities assumed has resulted in an increase in the costs allocated to proved oil and gas property cots. The preliminary allocation of the purchase price is given in the table below (in thousands):

 

Acquisition of Pan American Oil Company, LLC by Rio Bravo Oil, Inc.
Cash		$	5
Prepaid expenses			161
Advances receivable			503
Furniture, fixtures and equipment			296
Proved oil and gas property costs			6,488
Assets acquired			7,453
Related party advances			87
Bridge notes			1,855
Asset retirement obligation			10
Liabilities assumed			1,952

 

 

3. PRO FORMA ADJUSTMENTS

 

The adjustments included in the pro forma balance sheet as of December 31, 2011 are as follows: Pan American, LLC and the Properties Acquired from Rio Bravo Oil, LLC on February 13, 2012

 

A

The net assets acquired from Rio Bravo Oil, LLC are transferred at their historical costs due to the common control that existed between Pan American Oil Company, LLC and Rio Bravo Oil, LLC. The excess of the consideration transferred over the net assets acquired is shown as a dividend to a member of Pan American Oil Company, LLC.

B

To eliminate intercompany receivables (applied toward the purchase price) and payables, including interest

C

To eliminate liabilities not acquired

D

To record the portion of the purchase price remaining to be paid as of December 31, 2011

E

To eliminate the deficit in the net investment of the properties acquired

 

The adjustments included in the pro forma balance sheet as of December 31, 2011 are as follows: Pan American, LLC and Rio Bravo Oil, Inc.

 

F

The purchase price allocated to the fair value of the assets acquired and liabilities assumed. The purchase price consists of 5,500,000 shares of Series A Preferred Stock, which the Company estimates has a fair value of $5,500,000 plus the assumption of liabilities of approximately $1,952,000 (certain liabilities included in the SEA were the result of transactions after December 31, 2011 and are not included herein). The Company has assumed that the book value of the current assets of Pan American, consisting of cash, prepaid expenses and drilling credits approximates fair value, as does the furniture, fixtures and equipment. The Company has also estimated that the fair value of the advances to a party related to Pan American approximate fair value as of December 31, 2011. The remainder of the purchase price was applied to the fair value of the oil and gas property interests acquired.

G

To record the contribution by the members of Pan American to settle all of the liabilities of Pan American not acquired by Rio Bravo Oil, Inc.

H

To record the liability for costs of acquiring the businesses

I

T record the elimination of the deficit accumulated in the exploration stage of Pan American.

 

The adjustments included in the pro forma statement of operations are as follows: Pan American, LLC and Rio Bravo Oil, LLC for the three months ended December 31, 2011

 

I

To eliminate intra company interest expense and income.