EXHIBIT 99.4

 

Viking Energy Group, Inc.

Unaudited Pro Forma Condensed Combined Financial Statements

 

 

 
1
 
 

 

VIKING ENERGY GROUP, INC.

UNAUDITED PRO FORMA CONSDENSED COMBINED FINANCIAL STATEMENTS

 

On December 22, 2017, Viking Energy Group, Inc, ("Viking") completed the acquisition of all of the issued and outstanding membership interests in Petrodome Energy, LLC, ("Petrodome") and each of its subsidiaries described in the Acquisition Agreement. The acquisition will be accounted for using the acquisition method of accounting in accordance with GAAP. Under the acquisition method of accounting, Viking will record all assets acquired and liabilities assumed at their respective acquisition-date fair values at the Effective Time.

 

The following unaudited pro forma condensed combined financial statements and the related notes present the combination of the historical consolidated financial statements of Viking and Petrodome, to give effect to the acquisition. See additional information in Note 1 – Basis of Presentation to the Unaudited Pro Forma Condensed Combined Financial Information

 

VIKING ENERGY GROUP, INC.

UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET

AS OF SEPTEMBER 30, 2017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Historical

 

 

 

 

 

 

 

 

 

Viking Energy Group, Inc. 9/30/17

 

 

Petrodome Energy LLC 10/31/17

 

 

Pro Forma Adjustments

 

 

Pro Forma

Combined

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$ 568,222

 

 

$ 3,114,725

 

 

 

(1,860,956) (a)

 

$ 1,821,991

 

Accounts receivable

 

 

63,257

 

 

 

496,401

 

 

 

(496,401) (b)

 

 

63,257

 

Prepaid expenses and other current assets, net

 

 

83,488

 

 

 

-

 

 

 

79,309 (c)

 

 

162,797

 

Assets held for sale - net

 

 

-

 

 

 

3,820,375

 

 

 

(3,820,375) (d)

 

 

-

 

Total current assets

 

 

714,967

 

 

 

7,431,501

 

 

 

 

 

 

 

2,048,045

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Oil and gas properties, net

 

 

3,421,308

 

 

 

-

 

 

 

16,906,610 (e)

 

 

20,327,918

 

Other property and equipment, net

 

 

-

 

 

 

-

 

 

 

 

 

 

 

-

 

Investments

 

 

-

 

 

 

3,151,823

 

 

 

(3,151,823) (f)

 

 

-

 

Other assets

 

 

683

 

 

 

-

 

 

 

 

 

 

 

683

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TOTAL ASSETS

 

$ 4,136,958

 

 

$ 10,583,324

 

 

 

 

 

 

$ 22,376,646

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND MEMBERS' EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts payable and accrued expenses

 

$ 369,376

 

 

$ 842,783

 

 

 

148,314 (g)(j)

 

$ 1,360,473

 

Derivative liability

 

 

606,878

 

 

 

-

 

 

 

 

 

 

 

606,878

 

Amounts due directors

 

 

1,056,147

 

 

 

-

 

 

 

 

 

 

 

1,056,147

 

Undistributed revenue and royalties

 

 

-

 

 

 

-

 

 

 

1,253,769 (i)

 

 

1,253,769

 

Current portion of long term debt

 

 

1,518,464

 

 

 

-

 

 

 

 

 

 

 

1,518,464

 

Total current liabilities

 

 

3,550,865

 

 

 

842,783

 

 

 

 

 

 

 

5,795,731

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Long term debt - net of current portion

 

 

2,568,568

 

 

 

-

 

 

 

3,000,000 (k)

 

 

5,568,568

 

Asset retirement obligations

 

 

1,067,232

 

 

 

-

 

 

 

694,489 (h)

 

 

1,761,721

 

Total Liabilities

 

 

7,186,665

 

 

 

842,783

 

 

 

 

 

 

 

13,126,020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders' Equity (Deficit)

 

 

(3,049,707 )

 

 

9,740,541

 

 

 

2,559,792 (l)

 

 

9,250,626

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT

 

$ 4,136,958

 

 

$ 10,583,324

 

 

 

 

 

 

$ 22,376,646

 

 
 
2
 
 

 

VIKING ENERGY GROUP, INC.

UNAUDITED PRO FORMA CONSDENSED COMBINED FINANCIAL STATEMENTS

 

VIKING ENERGY GROUP, INC.

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 2017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Historical

 

 

 

 

 

 

 

 

 

Viking Energy Group, Inc. - Nine Months Ended 9/30/17

 

 

Petrodome Energy LLC - Ten Months Ended 10/31/17

 

 

Pro Forma Adjustments

 

 

Pro Forma Combined

 

 

 

 

 

 

 

 

 

 

 

 

 

 

REVENUE

 

 

 

 

 

 

 

 

 

 

 

 

Oil and gas sales

 

$ 588,622

 

 

$ 6,111,847

 

 

 

 

 

$ 6,700,469

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OPERATING EXPENSES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Lease operating expenses and production taxes

 

 

437,477

 

 

 

1,732,830

 

 

 

 

 

 

2,170,307

 

Depreciation, depletion and amortization

 

 

146,602

 

 

 

3,829,441

 

 

 

 

 

 

3,976,043

 

Impairment of oil and gas properties

 

 

-

 

 

 

-

 

 

 

 

 

 

-

 

General and administrative

 

 

666,323

 

 

 

4,378,258

 

 

 

 

 

 

5,044,581

 

Stock based compensation

 

 

1,304,175

 

 

 

-

 

 

 

 

 

 

1,304,175

 

Accretion of asset retirement obligation

 

 

29,167

 

 

 

53,423

 

 

 

 

 

 

82,590

 

Other expense

 

 

-

 

 

 

1,081

 

 

 

 

 

 

1,081

 

TOTAL OPERATING EXPENSES

 

 

2,583,744

 

 

 

9,995,033

 

 

 

 

 

 

12,578,777

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

INCOME (LOSS) FROM OPERATIONS

 

 

(1,995,122 )

 

 

(3,883,186 )

 

 

 

 

 

(5,878,308 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OTHER INCOME (EXPENSE)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized loss on assets held for sale

 

 

-

 

 

 

(35,856,376 )

 

35,856,376

(o)

 

 

-

Equity in loss of limited partnership

 

 

-

 

 

 

-

 

 

 

 

 

 

-

 

Interest expense

 

 

(1,160,875 )

 

 

-

 

 

 

(250,000) (n)

 

 

(1,410,875 )

Other income (expense)

 

 

489,729

 

 

 

127,871

 

 

 

 

 

 

 

617,600

 

TOTAL OTHER INCOME (EXPENSE)

 

 

(671,146 )

 

 

(35,728,505 )

 

 

 

 

 

 

(793,275 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET INCOME (LOSS)

 

$ (2,666,268 )

 

$ (39,611,691 )

 

 

 

 

 

$ (6,671,583 )

 
 
3
 
 

 

VIKING ENERGY GROUP, INC.

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Historical

 

 

 

 

 

 

 

 

 

Viking Energy Group, Inc.

 

 

Petrodome Energy LLC

 

 

Pro Forma Adjustments

 

 

Pro Forma Combined

 

 

 

 

 

 

 

 

 

 

 

 

 

 

REVENUE

 

 

 

 

 

 

 

 

 

 

 

 

Oil and gas sales

 

$ 376,829

 

 

$ 10,360,645

 

 

 

 

 

$ 10,737,474

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OPERATING EXPENSES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Lease operating expenses and production taxes

 

 

248,294

 

 

 

3,020,910

 

 

 

 

 

 

3,269,204

 

Depreciation, depletion and amortization

 

 

98,572

 

 

 

9,765,742

 

 

 

 

 

 

9,864,314

 

Impairment of oil and gas properties

 

 

1,710,393

 

 

 

8,463,290

 

 

 

 

 

 

10,173,683

 

General and administrative

 

 

780,859

 

 

 

6,615,016

 

 

 

 

 

 

7,395,875

 

Stock based compensation

 

 

766,882

 

 

 

-

 

 

 

 

 

 

766,882

 

Accretion of asset retirement obligation

 

 

22,963

 

 

 

25,237

 

 

 

 

 

 

48,200

 

Other expense

 

 

-

 

 

 

193,641

 

 

 

 

 

 

193,641

 

TOTAL OPERATING EXPENSES

 

 

3,627,963

 

 

 

28,083,836

 

 

 

 

 

 

31,711,799

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

INCOME (LOSS) FROM OPERATIONS

 

 

(3,251,134 )

 

 

(17,723,191 )

 

 

 

 

 

(20,974,325 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OTHER INCOME (EXPENSE)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized loss on assets held for sale

 

 

-

 

 

 

-

 

 

 

 

 

 

-

 

Equity in loss of limited partnership

 

 

-

 

 

 

(3,246,906 )

 

3,246,906

(p)

 

 

-

Interest expense

 

 

(2,483,308 )

 

 

-

 

 

 

(300,000

)(m)

 

 

(2,783,308 )

Other income (expense)

 

 

446,233

 

 

 

170,621

 

 

 

 

 

 

 

616,854

 

TOTAL OTHER INCOME (EXPENSE)

 

 

(2,037,075 )

 

 

(3,076,285 )

 

 

 

 

 

 

(2,166,454 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET INCOME (LOSS)

 

$ (5,288,209 )

 

$ (20,799,476 )

 

 

 

 

 

$ (23,140,779 )

 

 
4
 
 

 

VIKING ENERGY GROUP, INC.

UNAUDITED PRO FORMA CONSDENSED COMBINED FINANCIAL STATEMENTS

 

Note 1—Basis of Presentation

 

The unaudited pro forma condensed combined financial statements were prepared in accordance with Article 11 of SEC Regulation S-X using the acquisition method of accounting in accordance with GAAP and are based on the historical consolidated financial statements of Viking and Petrodome, after giving effect to the acquisition as well as pro forma adjustments.

 

The unaudited pro forma condensed combined balance sheet combines the unaudited historical condensed consolidated balance sheets of Viking and Petrodome as of September 30, 2017, giving effect to the acquisition as if it had occurred on September 30, 2017.

 

The unaudited pro forma condensed combined statements of operations for the fiscal year ended December 31, 2016, and the nine months ended September 30, 2017, assume the acquisition took place on January 1, 2016, the beginning of Viking’s most recently completed fiscal year. Viking’s audited consolidated statement of operations for the fiscal year ended December 31, 2016, has been combined with Petrodome’s audited consolidated statement of operations for the fiscal year ended December 31, 2016. The unaudited pro forma condensed combined statement of operations for the nine months ended September 30, 2017, combines the unaudited consolidated statement of operations of Viking for the nine months ended September 30, 2017, with the unaudited consolidated statement of operations of Petrodome for the ten months ended October 31, 2017, as the effective date of the acquisition was November 1, 2017, and interim unaudited financial statements were prepared for Petrodome as of that date. Management does not believe the one-month variance has a material effect on the unaudited consolidated combined statement of operations.

 

The unaudited pro forma condensed combined financial statements are provided for illustrative purposes only and are not intended to represent the consolidated results of operations or financial position of the combined company that would have been recorded had the merger been completed as of the dates presented and should not be taken as representative of future results of operations or financial position of the combined company. The unaudited pro forma condensed combined financial statements do not reflect the impacts of any potential operational efficiencies, cost savings or economies of scale that Viking may achieve with respect to the combined operations of Viking and Petrodome. Additionally, the pro forma statements of operations do not include non-recurring charges or credits and the related tax effects that result directly from the acquisition.

 

The unaudited pro forma condensed combined financial statements reflect the estimated acquisition consideration, which does not represent what the actual merger consideration transferred will be at the Effective Time. In accordance with GAAP, the fair value of equity securities issued as the consideration transferred will be measured on the closing date of the acquisition at the then-current market price. Viking has estimated the total consideration to be approximately $4.4 million, which will be paid with cash, 2,000,000 common shares and the grant of a 1.5% Overriding Royalty Interest.

 

The unaudited pro forma condensed combined financial statements illustrate the assets and liabilities of Petrodome recorded at their preliminary estimated fair values at the effective date of the acquisition. The preliminary fair value estimates are subject to change based on the final valuations that will be determined as of the closing date of the acquisition. Actual results will differ from this unaudited pro forma condensed combined financial information once Viking has determined the final acquisition consideration and completed the valuation analysis and computations necessary to finalize the required purchase price allocations. Accordingly, the final allocations of acquisition consideration and their effects on results of operations may differ materially from the preliminary allocations and unaudited pro forma combined amounts included herein. Many of these fair value measurements can be highly subjective, and it is possible that other professionals, applying reasonable judgment to the same facts and circumstances, could develop and support a range of alternative estimated amounts.

 

The unaudited pro forma condensed combined financial statements should be read in conjunction with the historical consolidated financial statements and accompanying notes contained in the Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q of Viking Energy Group, Inc.

 

Note 2—Accounting Policies

 

The unaudited pro forma financial information has been compiled in a manner consistent with the accounting policies of Viking and Petrodome.

 

 
5
 
 

 

VIKING ENERGY GROUP, INC.

UNAUDITED PRO FORMA CONSDENSED COMBINED FINANCIAL STATEMENTS

 

Note 3—Estimated Acquisition Consideration and Allocation

 

Under the terms of the Membership Interest Purchase Agreement (MIPA), the Company, at closing, is required to provide a cash payment of $3,000,000, subject to certain post-closing adjustments described in the MIPA, the issuance of 2,000,000 common shares of the Company, and the assignment of a 1.5% Overriding Royalty Interest to the Seller.

 

Under the acquisition method of accounting, Viking will record all assets acquired and liabilities assumed at their respective acquisition-date fair values at the effective date of November 1, 2017. Under GAAP, if the fair value assigned to acquired assets and liabilities exceeds the consideration transferred in an acquisition, the difference is reflected as a bargain purchase gain. The purchase price allocation and resulting bargain purchase gain included in these pro forma financial statements is considered preliminary, particularly as it relates to the final valuation of oil & gas properties and equipment and intangible assets. There could be significant adjustments when the valuation is finalized. The following table summarizes our estimated bargain purchase gain computation as of November 1, 2017.

 

Calculation of estimated consideration given

 

 

 

Cash

 

$ 3,000,000

 

Issuance of 2m common shares at market - $0.2303

 

 

460,600

 

Estimate of value of ORRI - Total Discounted Proved Reserves @ 1.5%

 

 

974,955

 

Total estimate of consideration given

 

$ 4,435,555

 

 

 

 

 

 

Estimated value of oil and gas reserve evaluation and economic forecast - discounted at 9% - November 1, 2017

 

 

 

 

Total proved producing reserves

 

$ 16,906,610

 

Total proved behind pipe reserves

 

 

2,706,640

 

Total proved undeveloped reserves

 

 

45,384,440

 

Total proved reserves - discounted at 9%

 

$ 64,997,690

 

 

 

 

 

 

For the purpose of estimating a bargain purcase gain, the Company used the discounted dollar value of the total proved producing reserves for the value of the oil and gas properties acquired.

 

 

 

 

 

Calculation of Bargain Purchase Gain

 

 

 

 

Current assets

 

$ 1,333,078

 

Oil and gas properties - (total proved producing)

 

 

16,906,610

 

Total assets acquired

 

 

18,239,688

 

Liabilities assumed

 

 

(2,923,213 )

Net assets acquired

 

 

15,316,475

 

Less estimated acquisition consideration

 

 

(4,435,555 )

Post closing purchase price adjustments

 

 

484,820

 

Estimated bargain purchase gain

 

$ 11,365,740

 

 

 
6
 
 

 

VIKING ENERGY GROUP, INC.

UNAUDITED PRO FORMA CONSDENSED COMBINED FINANCIAL STATEMENTS

 

Note 4—Pro Forma Adjustments

 

(a)

Adjustment of cash balance

 

 

 

Cash reclassed from assets held for sale

 

$ 1,253,769

 

 

Cash distributed to seller pursuant to agreement

 

 

(3,114,725 )

 

 

 

$ (1,860,956 )

 

 

 

 

 

 

(b)

To record accounts receivable retained by seller as a post closing purchase price adjustment

 

$ (496,401 )

 

 

 

 

 

 

(c)

Prepaid expenses to benefit purchaser included in assets held for resale

 

$ 79,309

 

 

 

 

 

 

 

(d)

reclass of assets held for sale in recognition of closing

 

$ (3,820,375 )

 

 

 

 

 

 

(e)

Record estimated fair value of oil and gas properties acquired to total proved producing reserves discounted at 9%

 

$ 16,906,610

 

 

 

 

 

 

 

(f)

Investment in limited partnership distributed to seller pursuant to agreement

 

$ (3,151,823 )

 

 

 

 

 

 

(g)

To record accounts payable retained by seller as a post closing purchase price adjustment

 

$ (826,641 )

 

 

 

 

 

 

(h)

Assumption of asset retirement obligation associated with oil and gas properties

 

$ 694,489

 

 

 

 

 

 

 

(i)

Assumption of liabilities for undistributed revenue and royalties associated with oil and gas properties purchased

 

$ 1,253,769

 

 

 

 

 

 

 

(j)

Estimated liability for ORRI conveyed to seller as part of consideration given at closing

 

$ 974,955

 

 

 

 

 

 

 

(k)

Record the increase in long term debt for the new loan to facilitate the closing

 

$ 3,000,000

 

 

 

 

 

 

 

(l)

Adjustments to total equity

 

 

 

 

 

Cash distributed to seller pursuant to agreement

 

$ (3,114,725 )

 

Investment in limited partnership distributed to seller pursuant to agreement

 

 

(3,151,823 )

 

Cash that was borrowed to facilitate the closing distributed to seller

 

 

(3,000,000 )

 

Issuance of 2,000,000 common shares at market

 

 

460,600

 

 

Estimated bargain purchase gain

 

 

11,365,740

 

 

 

 

$ 2,559,792

 

 

 

 

 

 

 

(m)

Interest expense - for the year ended December 31, 2016, under the assumption the $ 3,000,000 was borrowed on January 1, 2016, at 10% interest only.

 

$ 300,000.00

 

 

 

 

 

 

 

(n)

Interest expense - for the ten months ended October 31, 2017, under the assumption the $ 3,000,000 was borrowed on January 1, 2016, at 10% interest only.

 

$ 250,000.00

 

 

 

 

 

 

 

(o)

Eliminate unrealized loss on assets held for sale, as this is not a part of normal go forward operations

 

$

39,619,213

 

 

 

 

 

 

 

(p)

Eliminate equity in loss of limited partnership as this is not a part of normal go forward operations

 

$

 3,246,906

 

 

 

7