EX-99.3 5 ex99_3.htm EXHIBIT 99.3 ex99_3.htm
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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