EXHIBIT 99.3

 

Petrodome Energy, LLC

Unaudited Interim Consolidated Financial Statements

As of October 31, 2017, and December 31, 2016, and for the

Ten Months Ended October 31, 2017 and 2016

 

 

 

 
1
 
 

 

PETRODOME ENERGY, LLC

INTERIM CONSOLIDATED BALANCE SHEETS

OCTOBER 31, 2017 AND DECEMBER 31, 2016

 

 

 

October 31,

 

 

December 31,

 

 

 

2017

 

 

2016

 

 

 

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

Cash and cash equivalents

 

$ 3,114,725

 

 

 

4,238,784

 

Accounts receivable

 

 

496,401

 

 

 

1,239,037

 

Prepaid expenses and other current assets, net

 

 

-

 

 

 

67,520

 

Assets held for sale - net

 

 

3,820,375

 

 

 

-

 

Total current assets

 

 

7,431,501

 

 

 

5,545,341

 

 

 

 

 

 

 

 

 

 

Oil and gas properties, net

 

 

-

 

 

 

41,678,828

 

Other property and equipment, net

 

 

-

 

 

 

172,491

 

Investment in limited partnership

 

 

3,151,823

 

 

 

3,151,823

 

Other assets

 

 

-

 

 

 

14,200

 

 

 

 

 

 

 

 

 

 

TOTAL ASSETS

 

$ 10,583,324

 

 

$ 50,562,683

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND MEMBERS' EQUITY

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

Accounts payable and accrued expenses

 

$ 842,783

 

 

 

662,885

 

Undistributed revenue and royalties

 

 

 

 

 

 

1,174,500

 

Total current liabilities

 

 

842,783

 

 

 

1,837,385

 

 

 

 

 

 

 

 

 

 

Asset retirement obligations

 

 

-

 

 

 

641,066

 

Total Liabilities

 

 

842,783

 

 

 

2,478,451

 

Commitments & contigencies

 

 

-

 

 

 

-

 

Members' equity

 

 

9,740,541

 

 

 

48,084,232

 

 

 

 

 

 

 

 

 

 

TOTAL LIABILITIES AND MEMBERS' EQUITY

 

$ 10,583,324

 

 

$ 50,562,683

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 
2
 
 

 

PETRODOME ENERGY, LLC

INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS

TEN MONTHS ENDED OCTOBER 31, 2017 AND 2016

 

 

 

October 31,

 

 

October 31,

 

 

 

2017

 

 

2016

 

 

 

(unaudited)

 

 

(unaudited)

 

 

 

 

 

 

 

 

REVENUES

 

 

 

 

 

 

Oil and gas sales

 

$ 6,111,847

 

 

 

8,509,256

 

 

 

 

 

 

 

 

 

 

COSTS AND EXPENSES

 

 

 

 

 

 

 

 

Lease operating expense

 

 

1,228,986

 

 

 

1,912,461

 

Production taxes

 

 

503,844

 

 

 

618,274

 

Depreciation, depletion and amortization

 

 

3,829,441

 

 

 

8,138,118

 

Impairment of oil and gas properties

 

 

-

 

 

 

7,052,742

 

General and administrative

 

 

4,378,258

 

 

 

6,036,028

 

Accretion of asset retirement obligations

 

 

53,423

 

 

 

73,648

 

Other expense

 

 

1,081

 

 

 

330

 

TOTAL COSTS AND EXPENSES

 

 

9,995,033

 

 

 

23,831,601

 

 

 

 

 

 

 

 

 

 

INCOME (LOSS) FROM OPERATIONS

 

 

(3,883,186 )

 

 

(15,322,345 )

 

 

 

 

 

 

 

 

 

OTHER INCOME (LOSS)

 

 

 

 

 

 

 

 

COPAS overhead fees charged on well operations

 

 

122,146

 

 

 

114,143

 

Interest income

 

 

-

 

 

 

-

 

Unrealized loss on assets held for sale

 

 

(35,856,376 )

 

 

 

 

Equity in loss of limited partnership

 

 

-

 

 

 

(2,705,755 )

Other income

 

 

5,725

 

 

 

49,441

 

 

 

 

(35,728,505 )

 

 

(2,542,171 )

 

 

 

 

 

 

 

 

 

NET LOSS

 

$ (39,611,691 )

 

$ (17,864,516 )

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 
3
 
 

 

PETRODOME ENERGY, LLC

INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS

TEN MONTHS ENDED OCTOBER 31, 2017 AND 2016

 

 

 

October 31,

 

 

October 31,

 

 

 

2017

 

 

2016

 

 

 

(unaudited)

 

 

(unaudited)

 

 

 

 

 

 

 

 

Cash flows from operating activities

 

 

 

 

 

 

Net loss

 

$ (39,611,691 )

 

$ (17,864,516 )

Adjustments to reconcile net loss to net cash from

 

 

 

 

 

 

 

 

operating activities:

 

 

 

 

 

 

 

 

Unrealized loss on assets held for sale

 

 

35,856,376

 

 

 

-

 

Depreciation, depletion and amortization

 

 

3,829,441

 

 

 

8,138,118

 

Impairment of oil and gas properties

 

 

-

 

 

 

7,052,742

 

Accretion of asset retirement obligations

 

 

53,423

 

 

 

73,648

 

Equity in loss of limited partnership

 

 

-

 

 

 

2,705,755

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Restricted Cash

 

 

 1,253,769

 

 

 

 -

 

Accounts receivable

 

 

742,636

 

 

 

(146,242 )

Prepaid expenses and other assets

 

 

2,411

 

 

 

(31,824 )

Accounts payable and accrued expenses

 

 

206,450

 

 

 

(484,218 )

Undistributed revenue and royalties

 

 

79,268

 

 

 

115,015

 

Drilling advances

 

 

-

 

 

 

(82,866 )

Net cash from operating activities

 

 

2,412,083

 

 

 

(524,388 )

 

 

 

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

 

 

 

Acquisitions of oil and gas properties

 

 

(4,804,142 )

 

 

(1,483,006 )

Acquisitions of other property and equipment

 

 

-

 

 

 

-

 

Net cash from investing activities

 

 

(4,804,142 )

 

 

(1,483,006 )

 

 

 

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

 

 

 

Member contributions

 

 

1,268,000

 

 

 

4,008,000

 

Member distributions

 

 

-

 

 

 

(10,000,000 )

Net cash from financing activities

 

 

1,268,000

 

 

 

(5,992,000 )

 

 

 

 

 

 

 

 

 

Net change in cash and cash equivalents

 

 

(1,124,059 )

 

 

(7,999,394 )

 

 

 

 

 

 

 

 

 

Cash and cash equivalents, beginning of year

 

 

4,238,784

 

 

 

11,685,873

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents, end of year

 

$ 3,114,725

 

 

$ 3,686,479

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 
4
 
 

 

PETRODOME ENERGY, LLC

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

FOR THE TEN MONTHS ENDED OCTOBER 31, 2017 AND 2016

 

NOTE 1 – BASIS OF PRESENTATION

 

The accompanying unaudited interim consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) and the rules of the Securities and Exchange Commission (“SEC”). In the opinion of management, all adjustments, consisting of normal recurring adjustments (unless otherwise indicated), necessary for a fair presentation of the financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements.

 

NOTE 2 – ASSETS HELD FOR SALE - NET

 

In 2017, the Company designated its oil & gas properties and related assets as held for sale and, accordingly, recorded them on our Consolidated Balance Sheet as assets held for sale. The sale of these assets was completed in the fourth quarter of 2017. The estimated loss on the sale of these assets is recorded in the Consolidated Statement of Operations for the ten months ended October 31, 2017.

 

Assets held for sale as of October 31, 2017 were as follows

Cash - restricted

 

$ 1,253,769

 

Prepaid expenses and other assets

 

 

79,309

 

Oil and gas properties

 

 

4,435,555

 

Undistributed revenue and royalties

 

 

(1,253,769 )

Asset retirement obligation

 

 

(694,489 )

 

 

 

 

 

Total

 

$ 3,820,375

 

 

NOTE 3 – INVESTMENT IN LIMITED PARTNERSHIP

 

A wholly owned subsidiary of the Company has an ownership interest in a limited partnership engaged in the acquisition, exploration, development and operation of oil and gas properties. The limited partnership is a private enterprise, and the subsidiary had previously accounted for this investment under the equity method of accounting and recognized its proportionate interest in gains and losses in other income (loss) on the consolidated statements of operations. As of the date of this filing, the limited partnership has not finalized its annual accounting for 2017, and consequently has not provided any information relative to results of operations to facilitate an adjustment in these financial statements.

 

NOTE 4 – RECENT ACCOUNTING PRONOUNCEMENTS

 

During the ten months ended October 31, 2017, there were several new accounting pronouncements issued by the Financial Accounting Standards Board. Each of these pronouncements, as applicable, has been or will be adopted by the Company. Management does not believe the adoption of any of these accounting pronouncements has had or will have a material impact on the Company’s consolidated financial statements.

 

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). This standard provides a single set of guidelines for revenue recognition to be used across all industries and requires additional disclosures. It is effective for private companies for annual and interim reporting periods beginning after December 15, 2018. This standard permits early adoption and permits the use of either the retrospective or cumulative effect transition method. We are currently evaluating the potential impact of this standard on our financial position and results of operations, as well as our selected transition method. Based on our preliminary assessment, we believe the new standard will not have a material impact on our financial position and results of operations, as we do not expect to change the manner or timing of recognizing revenue on a majority of our revenue transactions.

 

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). This standard requires all leases that have a term of over 12 months to be recognized on the balance sheet with the liability for lease payments and the corresponding right-of-use asset initially measured at the present value of amounts expected to be paid over the term. Recognition of the costs of these leases on the income statement will be dependent upon their classification as either an operating or a financing lease. Costs of an operating lease will continue to be recognized as a single operating expense on a straight-line basis over the lease term. Costs for a financing lease will be disaggregated and recognized as both an operating expense (for the amortization of the right-of-use asset) and interest expense (for interest on the lease liability). This standard will be effective for private companies for interim and annual periods beginning January 1, 2020 and must be applied on a modified retrospective basis to leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. Early adoption is permitted. We are currently evaluating the timing of adoption and the potential impact of this standard on our financial position, but we do not expect it to have a material impact on our results of operations.

 

NOTE 5 – SUBSEQUENT EVENTS

 

Management has evaluated subsequent events through March 12, 2018, the date which the financial statements were available to be issued.

 

On December 22, 2017, Viking Energy Group, Inc, completed the acquisition of all of the issued and outstanding membership interests in Petrodome Energy, LLC, and each of its subsidiaries described in the Membership Interest Purchase Agreement. 

 

 

5