Proforma financial statements for the year ended December 31, 2003 giving effect to the acquisition of Flowstar and Flowray
WESCORP ENERGY INC.
(formerly CTI Diversified Holdings, Inc.)
PROFORMA FINANCIAL STATEMENTS
The following proforma financial statements reflect the combination of Wescorp Energy Inc. (“Wescorp”) with Flowray Inc. (“Flowray”) and Flowstar Technologies Inc. (“Flowstar”) for the periods presented. The Flowstar and Flowray proforma statements of operations are presented for the twelve months ended September 30, 2003 and the three months ended March 31, 2004 (unaudited). The Wescorp proforma statements of operations are presented for the twelve months ended December 31, 2003 and the three months ended March 31, 2004 (unaudited). The proforma balance sheet is presented at September 30, 2003 for Flowstar and Flowray and at December 31, 2003 for Wescorp. The proformas reflect the result of the satisfaction of the purchase agreement between Wescorp, and the shareholders of Flowray and Flowstar.
The proforma financial statements have been prepared utilizing the historical financial statements of Wescorp, Flowray and Flowstar. These proforma financial statements should be read in conjunction with the historical financial statements and notes thereto of Wescorp, Flowray and Flowstar.
The proforma financial statement of operations assumes that the combination occurred at the beginning of the periods presented in the statements. All inter-company accounts and transactions have been eliminated. Wescorp’s year end is December 31, whereas Flowray and Flowstar had a year end of September 30.
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WESCORP ENERGY INC.
(formerly CTI Diversified Holdings, Inc.)
PROFORMA FINANCIAL STATEMENTS
The proforma financial statements do not purport to be indicative of the financial positions and results of operations, which actually would have been obtained if the combination had occurred on the dates indicated, or the results, which may be obtained in the future.
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| WESCORP ENERGY INC. (formerly CTI Diversified Holdings, Inc.) (A Development Stage Enterprise) Balance Sheets (U.S. Dollars) | |
| PROFORMA | |
| Wescorp Energy | Flowray | Flowstar | ||||||||||||||
| Inc. | Inc. | Technologies Inc. | Proforma | |||||||||||||
| December 31, | September 30, | September 30, | Combined | |||||||||||||
| 2003 | 2003 | 2003 | Eliminations | Total | ||||||||||||
| Assets | ||||||||||||||||
| Current | ||||||||||||||||
| Cash and equivalents | $ | 2,064 | $ | 12,925 | $ | 17 | $ | - | $ | 15,006 | ||||||
| Cash trust accounts | 111,822 | - | - | 111,822 | ||||||||||||
| Accounts receivable | - | 14,574 | 111,003 | (13,686 | ) | a | 111,891 | |||||||||
| Goods and services tax recoverable | - | 36,224 | 42,313 | - | 78,537 | |||||||||||
| Prepaid expenses | - | - | 5,313 | - | 5,313 | |||||||||||
| Inventory | - | - | 198,741 | - | 198,741 | |||||||||||
| Due from stockholders | - | 346,500 | - | - | 346,500 | |||||||||||
| Total Current Assets | 113,886 | 410,223 | 357,387 | (13,686 | ) | 867,810 | ||||||||||
| Property, Plant and Equipment | - | - | 123,369 | - | 123,369 | |||||||||||
| Other Assets | ||||||||||||||||
| Investments | 400,463 | - | - | - | 400,463 | |||||||||||
| Note receivable | 1,708,991 | - | - | (1,708,991 | ) | b | - | |||||||||
| Trademark | - | - | 1,001 | 1,001 | ||||||||||||
| Intellectual property | - | 591,487 | - | - | 591,487 | |||||||||||
| Goodwill | - | - | - | 140,316 | c | 140,316 | ||||||||||
| Deferred tax asset | - | - | 67,760 | - | 67,760 | |||||||||||
| Total Other Assets | 2,109,454 | 591,487 | 68,761 | (1,568,675 | ) | 1,201,027 | ||||||||||
| Total Assets | $ | 2,223,340 | $ | 1,001,710 | $ | 549,517 | $ | (1,582,361 | ) | $ | 2,192,206 | |||||
| Liabilities | ||||||||||||||||
| Current | ||||||||||||||||
| Bank overdraft payable | $ | - | $ | - | $ | 1,699 | $ | - | $ | 1,699 | ||||||
| Accounts payable and accrued liabilities | 183,410 | 2,136 | 174,161 | (13,686 | ) | a | 346,021 | |||||||||
| Due to shareholders | 75,775 | - | 95,234 | - | 171,009 | |||||||||||
| Current portion of long-term debt | - | - | 6,125 | - | 6,125 | |||||||||||
| Total Current Liabilities | 259,185 | 2,136 | 277,219 | (13,686 | ) | 524,854 | ||||||||||
| Long-Term Liabilities | ||||||||||||||||
| Notes payable, net of current | - | 796,950 | 581,350 | (1,378,300 | ) | b | - | |||||||||
| Notes payable, related party, net of unamortized discount | 1,677,227 | - | - | (330,691 | ) | b | 1,346,536 | |||||||||
| Finance contract, net of current | - | - | 23,493 | - | 23,493 | |||||||||||
| Deferred tax liability | - | 10,395 | - | - | 10,395 | |||||||||||
| Total Long-term Liabilities | 1,677,227 | 807,345 | 604,843 | (1,708,991 | ) | 1,380,424 | ||||||||||
| Commitments and Contingencies | - | - | - | - | - | |||||||||||
| Total Liabilities | 1,936,412 | 809,481 | 882,062 | (1,722,677 | ) | 1,905,278 | ||||||||||
| Stockholders' Equity (Deficiency) | ||||||||||||||||
| Preferred stock | - | - | - | - | - | |||||||||||
| Common stock | 2,592 | 154 | 154 | (308 | ) | c | 2,592 | |||||||||
| Additional paid-in capital | 7,083,347 | - | - | - | 7,083,347 | |||||||||||
| Retained earnings (deficit) during development stage | (6,799,025 | ) | 184,578 | (319,737 | ) | 135,159 | c | (6,799,025 | ) | |||||||
| Accumulated other comprehensive income (loss) | 14 | 7,497 | (12,962 | ) | 5,465 | 14 | ||||||||||
| Total Stockholders' Equity (Deficiency) | 286,928 | 192,229 | (332,545 | ) | 140,316 | 286,928 | ||||||||||
| Total Liabilities and Stockholders' Equity | $ | 2,223,340 | $ | 1,001,710 | $ | 549,517 | $ | (1,582,361 | ) | $ | 2,192,206 |
See accompanying notes to proforma financial statements.
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| WESCORP ENERGY INC. (formerly CTI Diversified Holdings, Inc.) (A Development Stage Enterprise) Statements of Operations (U.S. Dollars) | |
| PROFORMA | |
| Wescorp Energy | Flowray | Flowstar | ||||||||||||||
| Inc. | Inc. | Technologies Inc. | ||||||||||||||
| Year ended | Year ended | Year ended | Proforma | |||||||||||||
| December 31, | September 30, | September 30, | Combined | |||||||||||||
| 2003 | 2003 | 2003 | Eliminations | Total | ||||||||||||
| Revenue | $ | - | $ | 8,324 | $ | 146,893 | $ | (13,226 | ) | d | $ | 141,991 | ||||
| Cost of Revenue | - | - | 147,037 | (7,339 | ) | d | 139,698 | |||||||||
| Gross Profit | - | 8,324 | (144 | ) | (5,887 | ) | 2,293 | |||||||||
| Operating Expenses | ||||||||||||||||
| Advertising and promotions | 92,891 | - | 93,093 | - | 185,984 | |||||||||||
| Administrative wages and benefits | 32,395 | - | 118,575 | - | 150,970 | |||||||||||
| Depreciation and amortization | - | - | 15,760 | - | 15,760 | |||||||||||
| Office expenses | 100,637 | - | 22,403 | - | 123,040 | |||||||||||
| Professional fees | 194,857 | - | 33,621 | - | 228,478 | |||||||||||
| Rent | - | 888 | 11,863 | (2,368 | ) | d | 10,383 | |||||||||
| Telephone | - | - | 5,152 | - | 5,152 | |||||||||||
| Travel and entertainment | 14,003 | - | 27,767 | - | 41,770 | |||||||||||
| General and administrative | - | 946 | 11,712 | - | 12,658 | |||||||||||
| Consulting | 321,635 | - | - | - | 321,635 | |||||||||||
| Amortization of loan discount | 28,927 | - | - | - | 28,927 | |||||||||||
| Total Operating Expenses | 785,345 | 1,834 | 339,946 | (2,368 | ) | 1,124,757 | ||||||||||
| Operating Income (Loss) | (785,345 | ) | 6,490 | (340,090 | ) | (3,519 | ) | (1,122,464 | ) | |||||||
| Other Income (Expenses) | ||||||||||||||||
| Interest and other income | 4,183 | 3,945 | - | - | 8,128 | |||||||||||
| Interest expense | (106,038 | ) | - | - | - | (106,038 | ) | |||||||||
| Interest, shareholders and related parties | (269,505 | ) | - | - | - | (269,505 | ) | |||||||||
| Research and development tax credit | - | 184,487 | - | - | 184,487 | |||||||||||
| Loss on disposition of assets | (10,103 | ) | - | (5,894 | ) | - | (15,997 | ) | ||||||||
| Total Other Income (Expenses) | (381,463 | ) | 188,432 | (5,894 | ) | - | (198,925 | ) | ||||||||
| Income (Loss) From Continuing Operations | (1,166,808 | ) | 194,922 | (345,984 | ) | (3,519 | ) | (1,321,389 | ) | |||||||
| Gain from Discontinued Operations, Net | 598,537 | - | - | - | 598,537 | |||||||||||
| Net Income (Loss) Before Taxes | (568,271 | ) | 194,922 | (345,984 | ) | (3,519 | ) | (722,852 | ) | |||||||
| Income Tax Benefit (Provision) | 308,337 | (9,990 | ) | 65,120 | - | 363,467 | ||||||||||
| Net Income (Loss) | (259,934 | ) | 184,932 | (280,864 | ) | (3,519 | ) | (359,385 | ) | |||||||
| Other Comprehensive Income (Loss) | (22,344 | ) | 7,497 | (11,386 | ) | - | (26,233 | ) | ||||||||
| Comprehensive Income (Loss) | $ | (282,278 | ) | $ | 192,429 | $ | (292,250 | ) | $ | (3,519 | ) | $ | (385,618 | ) | ||
| Net Income (Loss) Per Share | $ | (0.01 | ) | $ | 1,232.88 | $ | (1,872.43 | ) | $ | (0.02 | ) | |||||
| Weighted Average Number of Shares Outstanding | 22,946,766 | 150 | 150 | 22,946,766 |
See accompanying notes to proforma financial statements.
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| WESCORP ENERGY INC. (formerly CTI Diversified Holdings, Inc.) (A Development Stage Enterprise) Statements of Operations (U.S. Dollars) | |
| PROFORMA | |
| Wescorp Energy | Flowray | Flowstar | ||||||||||||||
| Inc. | Inc. | Technologies Inc. | ||||||||||||||
| Three Months | Three months | Three Months | ||||||||||||||
| ended | ended | ended | Proforma | |||||||||||||
| March 31, | March 31, | March 31, | Combined | |||||||||||||
| 2004 | 2004 | 2004 | Eliminations | Total | ||||||||||||
| (unaudited) | (unaudited) | (unaudited) | (unaudited) | (Unaudited) | ||||||||||||
| Revenue | $ | - | $ | - | $ | 469,589 | $ | (75,626 | ) | d | $ | 393,963 | ||||
| Cost of Revenue | - | - | 356,899 | (95,953 | ) | d | 260,946 | |||||||||
| Gross Profit | - | - | 112,690 | 20,327 | 133,017 | |||||||||||
| Operating Expenses | ||||||||||||||||
| Advertising and promotions | 54,413 | - | 110,777 | - | 165,190 | |||||||||||
| Administrative wages and benefits | 41,303 | - | 92,242 | - | 133,545 | |||||||||||
| Depreciation and amortization | - | - | 5,728 | - | 5,728 | |||||||||||
| Professional fees | 48,397 | 776 | 6,844 | - | 56,017 | |||||||||||
| Rent | - | - | 7,940 | - | 7,940 | |||||||||||
| Travel and entertainment | 2,258 | - | 10,014 | - | 12,272 | |||||||||||
| General and administrative | - | 17,660 | 47,391 | (27,494 | ) | d | 37,557 | |||||||||
| Consulting | 198,684 | - | - | - | 198,684 | |||||||||||
| Total Operating Expenses | 345,055 | 18,436 | 280,936 | (27,494 | ) | 616,933 | ||||||||||
| Operating Loss | (345,055 | ) | (18,436 | ) | (168,246 | ) | 47,821 | (483,916 | ) | |||||||
| Other Income (Expenses) | ||||||||||||||||
| Interest and other income | - | 84 | - | - | 84 | |||||||||||
| Interest, shareholders and related parties | (63,741 | ) | - | - | - | (63,741 | ) | |||||||||
| Total Other Income (Expenses) | (63,741 | ) | 84 | - | - | (63,657 | ) | |||||||||
| Net Loss Before Taxes | (408,796 | ) | (18,352 | ) | (168,246 | ) | 47,821 | (547,573 | ) | |||||||
| Income Tax | - | - | - | - | - | |||||||||||
| Net Loss | (408,796 | ) | (18,352 | ) | (168,246 | ) | 47,821 | (547,573 | ) | |||||||
| Other Comprehensive Income | 7,691 | - | - | - | 7,691 | |||||||||||
| Comprehensive Loss | $ | (401,105 | ) | $ | (18,352 | ) | $ | (168,246 | ) | $ | 47,821 | $ | (539,882 | ) | ||
| Net Loss Per Share | $ | (0.02 | ) | $ | (91.76 | ) | $ | (841.23 | ) | $ | (0.02 | ) | ||||
| Weighted Average Number of Shares | ||||||||||||||||
| Outstanding | 26,318,167 | 200 | 200 | 26,318,167 |
See accompanying notes to proforma financial statements.
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WESCORP ENERGY INC.
(formerly CTI Diversified Holdings, Inc.)
NOTES TO PROFORMA FINANCIAL STATEMENTS
On March 31, 2004, Wescorp Energy Inc. (“Wescorp”), through its Alberta subsidiary, 1049265 Alberta Ltd., completed the acquisition of 100% of the outstanding shares of Flowstar Technologies Inc. (“Flowstar”) and Flowray Inc. (“Flowray”) in consideration of cash to the selling shareholders totaling approximately $405,000 pursuant to the share purchase and subscription agreement dated June 9, 2003 as amended January 14, 2004.
The proforma financial statements contain adjustments to characterize the transactions of Flowray and Flowstar as those of Wescorp for the periods presented. The Flowstar and Flowray proforma statements of operations are presented for the twelve months ended September 30, 2003 and the three months ended March 31, 2004 (unaudited). The Wescorp proforma statements of operations are presented for the twelve months ended December 31, 2003 and the three months ended March 31, 2004 (unaudited). The proforma balance sheet is presented at September 30, 2003 for Flowstar and Flowray and at December 31, 2003 for Wescorp.
The adjustments to the proforma balance sheets are as follows: (a) to eliminate intercompany receivables, (b) to eliminate intercompany payables and loans and (c) to eliminate the equity of Flowstar and Flowray and to record goodwill. The adjustments to the proforma statements of operations are as follows: (d) to eliminate the intercompany revenue and expenses.
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