United States Securities and Exchange Commission

Washington, D.C. 20549

 

FORM 8-K/A

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act

 

June 24, 2015

Date of Report (Date of earliest event reported)

 

Freestone Resources, Inc.

(Exact name of registrant as specified in its charter)

 

 

Nevada	000-28753	90-0514308
(State or other jurisdiction of incorporation)	(Commission File No.)	(I.R.S. Employer Identification No.)

 

 

Republic Center, Suite 1350 325 N. St. Paul St. Dallas, TX 75201

(Address of Principal Executive Offices)

 

214-880-4870

(Issuer Telephone number)

 

Check the appropriate  box  below  if the  Form  8-K  filing  is  intended  to simultaneously  satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2 below):

 

[  ]   Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

[  ]   Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

[  ]   Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

[  ]   Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

EXPLANATORY NOTE

 

As previously reported under Item 2.01 of the Current Report on Form 8-K of Freestone Resources, Inc. (the “Company”), filed on June 29, 2015 (the “Original 8-K”), completed the acquisition of all the outstanding shares of C.C. Crawford Retreading Company, Inc. (“CTR”) on June 24, 2015.

 

This Current Report Form 8-K/A amends the Original 8-K in order to file the financial information required by items 9.01 of Form 8-K.

 

 

 

 

 

Forward-Looking Statements

 

This Current Report 8-K/A contains certain forward-looking statements, and for this purpose, any statements contained in this Current Report 8-K/A that are not statements of historical fact may be deemed to be forward-looking statements.  Without limiting the foregoing, words such as “may,” “will,” “expect,” “believe,” “anticipate,” “estimate” or “continue” or comparable terminology are intended to identify forward-looking statements.  These statements by their nature involve substantial risks and uncertainties, and actual results may differ materially depending on a variety of factors, many of which are not within our control.  These factors include, but are not limited to, economic conditions generally in the United States and internationally, and in the markets in which we have and may participate in the future, competition within our chosen industries, the state of our technology and technological advances and plans and our failure to successfully develop, compete in and finance our current and intended business operations.

 

Item 9.01           Financial Statements and Exhibits   

 

 

Exhibit No.

Description

 

99.3	The historical audited financial statements of CTR at June 30, 2014 and June 30, 2015.

 

99.4	The Unaudited Pro Forma Condensed Consolidated Financial Statements.

 

 

SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

		FREESTONE RESOURCES, INC.
September 8, 2015	By:	/s/  Clayton Carter
		Clayton Carter Chief Executive Officer

 

 

 

Exhibit 99.3

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

 

To the Board of Directors and Stockholder of

C.C. Crawford Retreading Company, Inc.

Ennis, Texas

 

 

We have audited the accompanying balance sheets of C.C. Crawford Retreading Company, Inc. (the "Company") as of June 30, 2014 and 2015 and the related statements of operations, changes in stockholder’s equity and cash flows for each of the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform an audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of C.C. Crawford Retreading Company as of June 30, 2014 and 2015 and the results of its operations and its cash flows for each of the years then ended, in conformity with accounting principles generally accepted in the United States of America.

 

The accompanying financial statements have been prepared assuming that C.C. Crawford Retreading Company, Inc. will continue as a going concern. As discussed in Note 9 to the financial statements, C.C. Crawford Retreading Company, Inc. has negative working capital and an accumulated deficit, which raises substantial doubt about its ability to continue as a going concern. Management’s plans regarding those matters also are described in Note 9. The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of this uncertainty.

 

 

/s/ MaloneBailey, LLP

www.malonebailey.com

Houston, Texas

September 8, 2015

 

 

 

C.C. Crawford Retreading Co., Inc.
Balance Sheets
As of June 30, 2015 and 2014
		June 30,
		2015				2014
ASSETS
Current Assets
Cash		$	18,225			$	30,465
Accounts receivable			97,908				123,889
Inventory			24,576				26,544
Prepaid and Other Assets			49,000				48,473
Total Current Assets			189,709				229,371
Property, plant and equipment, net of accumulated depreciation of
$787,754 and $727,102			592,268				652,920
TOTAL ASSETS		$	781,977			$	882,291
LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities
Accounts payable and accrued liabilities		$	103,379			$	75,579
Accrued bonus payable			209,964				264,964
Environmental liability			320,000				320,000
Current portion of long term debt			56,051				52,577
Total Current Liabilities			689,394				713,120
Long term debt, less current portion			84,913				140,964
TOTAL LIABILITIES			774,307				854,084
STOCKHOLDERS' EQUITY
Common stock, $10 par value, 100,000 and 100,000 shares
authorized and outstanding			1,000,000				1,000,000
Additional paid in capital			(557,816	)			(557,816	)
Accumulated deficit			(434,514	)			(413,977	)
			7,670				28,207
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY		$	781,977			$	882,291
The Accompanying Notes Are An Integral Part of These Financial Statements

 

 

 

 

C.C. Crawford Retreading Co., Inc.
Statements of Operations
Years Ended June 30, 2015 and 2014
		2015				2014
REVENUE
Tipping Fee Revenue		$	463,537			$	358,946
Tire Repair Revenue			432,039				377,459
Used Tire Sales			161,445				415,395
Scrap Material Sales			57,999				80,880
Total Revenue			1,115,020				1,232,680
COSTS OF REVENUE
Tipping Fee Operations			255,345				278,786
Tire Repair and Sales			163,011				207,924
Tire Disposal			161,721				146,167
Total Cost of Revenue			580,077				632,877
GROSS PROFIT			534,943				599,803
OPERATING EXPENSES
Selling			154,842				141,825
General and Administrative			329,456				345,375
Depreciation and Amortization			60,652				74,099
Total Operating Expense			544,950				561,299
INCOME (LOSS) FROM OPERATIONS			(10,007	)			38,504
OTHER EXPENSES
Interest Expense, net			(10,530	)			(13,474	)
			(10,530	)			(13,474	)
INCOME (LOSS) BEFORE TAXES			(20,537	)			25,030
PROVISION FOR INCOME TAXES			—				—
NET INCOME(LOSS)		$	(20,537	)		$	25,030
The Accompanying Notes Are An Integral Part of These Financial Statements

 

 

 

 

C.C. CRAWFORD TIRE RETREADING CO., INC.
Statement of Changes in Stockholder's Equity
Years Ended June 30, 2015 and 2014
				Common Stock				Paid-In		Accumulated
				Shares		Amount		Capital		Deficit		Totals
Balance, June 30, 2013				100,000	$	1,000,000	$	(557,816)	$	(439,007)	$	3,177
	Net  Income									25,030		25,030
Balance, June 30, 2014				100,000		1,000,000		(557,816)		(413,977)		28,207
	Net  Loss									(20,537)		(20,537)
Balance, June 30, 2015				100,000	$	1,000,000	$	(557,816)	$	(434,514)	$	7,670
The Accompanying Notes Are An Integral Part of These Financial Statements

 

 

 

 

 

 

 

 

 

 

 

C.C. Crawford Retreading Co., Inc.
Statements of Cash Flow
Years Ended June 30, 2015 and 2014
		2015				2014
CASH FLOW FROM OPERATING ACTIVITIES
Net Income (Loss)		$	(20,537	)		$	25,030
Adjustments to reconcile net income (loss) to net cash provided
by operating activities:
Depreciation			60,652				74,099
Loss on Disposal of Assets			—				510
Changes in operating assets and liabilities
Decrease in Accounts Receivable			25,981				3,086
Decrease in Inventory			1,968				18,807
Increase in Prepaid Expenses			(527	)			(19,342	)
Increase (Decrease) in Accounts Payable and Accrued Liabilities			27,800				(14,186	)
Decrease in Accrued Bonus Payable			(55,000	)			(5,000	)
Net Cash Provided by Operating Activities			40,337				83,004
CASH FLOW FROM INVESTING ACTIVITIES
Purchase of Fixed Assets			—				(19,339	)
Net Cash Used in Investing Activities			—				(19,339	)
CASH FLOW FROM FINANCING ACTIVITIES
Repayment of Debt			(52,577	)			(55,577	)
Net Cash Used In Financing Activities			(52,577	)			(55,577	)
Net Decrease in Cash			(12,240	)			8,088
Cash at Beginning of the Year			30,465				22,377
Cash at the End of the Year		$	18,225			$	30,465
Cash Transactions
Total Amount of Interest Paid in Cash		$	10,802			$	14,546
Total Income Taxes Paid in Cash		$	—			$	—
Non Cash financing and Investing Activities
Note Payabe for Purchase of Vehicle		$	—			$	15,114
Trade in of Vehecle and Note Payoff		$	—			$	5,942
The Accompanying Notes Are An Integral Part of These Financial Statements

 

 

 

 

 C.C. Crawford Retreading Company, Inc.

Notes to Financial Statements

June 30, 2015 and 2014

 

NOTE 1 – NATURE OF ACTIVITIES AND SIGNIFICANT ACCOUNTING POLICIES

 

C.C. Crawford Retreading Company, Inc. (“CTR” or the “Company”) is an Off-The-Road (“OTR”) tire company located in Ennis, Texas and incorporated under the laws of the State of Texas. CTR’s primary business is to repair, recycle, dispose of and sell OTR tires, which are used on large, industrial equipment.

 

Basis of Presentation:

 

The accompanying financial statements are prepared in accordance with accounting principles generally accepted in the United States of America.  The application of accounting principles requires the estimating, matching and timing of revenue and expense.  It is also necessary for management to determine, measure and allocate resources and obligations within the financial process according to those principles.  The accounting policies used have been consistently applied in the preparation of these financial statements. The Company was sold to Freestone Resources, Inc. (“Freestone”) as of June 24, 2015. The statements are prepared as of June 30, 2015. The statements do not reflect any adjustments due to the acquisition based on management’s decision that any adjustments would be immaterial.

 

Use of Estimates:

 

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures.  Accordingly, actual results could differ from those estimates.

 

Recently Issued Accounting Pronouncements:

 

The Company does not expect the adoption of recently issued accounting pronouncements to have a significant impact on the Company’s results of operations, financial position or cash flows.

 

Income Taxes:

 

The Company has adopted ASC 740-10, which requires the use of the liability method in the computation of income tax expense and the current and deferred income taxes payable.    A valuation allowance is provided for the amount of deferred tax assets that, based on available evidence, are not expected to be realized.

 

Cash:

 

Cash and cash equivalents include cash in banks with original maturities of three months or less. CTR maintains deposits in a financial institution which provides Federal Deposit Insurance Corporation coverage for interest bearing and non-interest bearing transaction accounts of up to $250,000.  At June 30, 2015, none of the Company’s cash was in excess of federally insured limits.

 

Revenue Recognition:

 

CTR recognizes revenue from the sale of products in accordance with ASC 605.  Revenue will be recognized only when all of the following criteria have been met:

 

	* Persuasive evidence of an arrangement exists;
	* Ownership and all risks of loss have been transferred to buyer, which is generally upon delivery
	* The price is fixed and determinable; and
	* Collectability is reasonably assured.

 

 

The three main sources of revenue are recognized as follows:

 

·

Revenues associated with tire disposals are recognized upon receipt of the tire by CTR.

 

·

Revenues associated with tire repairs are invoiced and recognized upon completion of repair and receipt of the tire by the customer.

 

·

Revenue associated with used tires and scrap sales are recognized upon delivery of the product to the customer.

 

Accounts Receivable:

 

Accounts Receivable consists of accrued OTR tire repair, disposal, recycling and used tire sales receivables due from customers and are unsecured. The receivables are generally unsecured and such amounts are generally due within 30 to 45 days after the date of the invoice.  Accounts Receivable are carried at their face amount, less an allowance for doubtful accounts.   CTR’s policy is generally not to charge interest on receivables after the invoice becomes past due.  A receivable is considered past due if payments have not been received within agreed upon invoice terms.   Write offs are recorded at a time when a customer receivable is deemed uncollectible.  CTR had no bad debt accruals at June 30, 2015 and 2014.

 

Inventory:

 

Inventory is carried at lower of cost or market. The Company’s inventory consists of processed rubber from disposed tires carried at cost of processing and used tires for resale carried at the cost of repairs. As of June 30, 2015 and June 30, 2014 inventory consisted of:

 

 

		2015				2014
Crum Rubber for Processing		$	10,246			$	10,121
Used Tire for Resale			14,330				16,423
		$	24,576			$	26,544

 

 

 

Property, Plant and Equipment:

 

Property, Plant and Equipment is carried at the cost of acquisition or construction and depreciated over the estimated useful lives of the assets. Costs associated with repair and maintenance are expensed as incurred. Costs associated with improvements which extend the life, increase the capacity or improve the efficiency of our property and equipment are capitalized and depreciated over the remaining life of the related asset. Gains and losses on dispositions of equipment are in operating income. Depreciation and amortization are provided using the straight-line and accelerated methods over the estimated useful lives of the assets as follows:

 

Buildings and Improvements                10 - 39 Years

Machinery and Equipment                    7 Years

Automotive Equipment                         5-7 Years

 

 

 

 

Impairment of Long-Lived Assets:

 

CTR evaluates, on a periodic basis, long-lived assets to be held and used for impairment in accordance with the reporting requirements of ASC 360-10. The evaluation is based on certain impairment indicators, such as the nature of the assets, the future economic benefit of the assets, any historical or future profitability measurements, as well as other external market conditions or factors that may be present. If these impairment indicators are present or other factors exist that indicate that the carrying amount of the asset may not be recoverable, then an estimate of the undiscounted value of expected future operating cash flows is used to determine whether the asset is recoverable and the amount of any impairment is measured as the difference between the carrying amount of the asset and its estimated fair value. The fair value is estimated using valuation techniques such as market prices for similar assets or discounted future operating cash flows.

 

Fair Value Measurements:

 

ASC Topic 820, defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and requires certain disclosures about fair value measurements.  In general, fair value of financial instruments are based upon quoted market prices, where available.  If such quoted market prices are not available, fair value is based upon internally developed models that primarily use, as inputs, observable market based parameters.  Valuation adjustments may be made to ensure that financial instruments are recorded at fair value.  These adjustments may include amounts to reflect counterparty credit quality and the Company’s credit worthiness, among other things, as well as unobservable parameters.

Cash, accounts receivable, accounts payable and other accrued expenses and other current assets and liabilities are carried at amounts which reasonably approximate their fair values because of the relatively short maturity of those instruments. 

 

NOTE – 2 ACCOUNTS RECEIVABLE AND CONCENTRATION OF CREDIT RISK

 

At June 30, 2015 and 2014 two customers made up 53% and one customer made up 50% of the company’s outstanding accounts receivable balance, respectively. For the years ending June 30, 2015 and 2014 one customer accounted for 49% and two customers accounted for 65% of the Company’s net revenue, respectively.

 

NOTE 3 – PROPERTY, PLANT AND EQUIPMENT

At June 30, 2015 and 2014 Property, Plant and Equipment was as follows:
			2015				2014
Land		$	104,612			$	104,612
Buildings and Improvements			599,754				599,754
Machinery and Equipment			468,061				468,061
Automotive Equipment			207,595				207,595
			1,380,022				1,380,022
Less Accumulated Depreciation			787,754				727,102
		$	592,268			$	652,920
For the years ended June 30, 2015 and 2014 depreciation expense was $60,652 and $74,099, respectively.

 

 

 

NOTE 4 – ENVIRONMENTAL LIABILITY

 

The Company’s tire recycling permit requires the Company to ultimately dispose of all tires accepted for recycling.  Tire disposal occurs in the normal course of business however the Company always has tires stored at its facility that have not yet been disposed of. CTR has recorded liabilities totaling $320,000 and $320,000 at June 30, 2015 and June 30, 2014, respectively, for estimated costs related to dispose of all tires at its Ennis facility. The environmental liability was calculated by estimating the costs associated with the various disposal costs that would be necessary to remove the tires from the CTR permitted facility..

 

NOTE 5 – NOTES PAYABLE

 

At June 30, 2015 and 2014 Notes Payable were as follows:
			2015			2014
	Note payable to bank bearing interest at 4.5% with monthly payment of $390 maturing September, 2017.  The note is secured by an automobile	$	9,989		$	14,112
	Note payable to bank bearing interest at 6.5% with monthly payment of $4,892 maturing November, 2017.  The note is secured by machinery and equipment		130,975			179,429
			140,964			193,541
	Less current maturities		(56,051)			(52,577)
		$	84,913		$	140,964
At June 30, 2015 future maturities of long term debt were as follows:
	Year Ending June 30:
	2016	$	56,051
	2017		59,687
	2018		25,226
		$	140,964

 

 

 

 

 

 

 

 

NOTE 6 – EQUITY

 

At June 30, 2015 and 2014 the Company had 100,000 shares of common stock issued and outstanding.

The Company has no stock options or warrants outstanding.

 

NOTE 7 – INCOME TAXES

 

As of June 30, 2015 and 2014 the components of the Company's deferred tax assets were as follows:
			2015				2014
Depreciation Expense		$	(21,000	)		$	(26,000	)
Capitalized Loan Fees			31,000				42,000
Accrued Management Bonus			71,000				90,000
Environmental Liability			109,000				109,000
Inventory Impairment			—				33,000
Other			—				(1,000	)
Total Deferred Tax Asset			190,000				247,000
Valuation Allowance			(190,00	)			(247,000	)
Net Deferred Tax Asset		$	—			$	—
Income tax expense for the periods ended June 24, 2015 and June 30, 2014 consisted of the following
			2015				2014
Current Tax Expense (Benefit)		$	(64,000	)		$	15,000
Deferred Tax Expense (Benefit)			57,000				(6,500	)
Use of NOL Carryforward			—				(8,500	)
Valuation Allowance			7,000				—
Net Tax Expense (Benefit)		$	—			$	—

 

At June 30, 2015 the Company had a net operating loss carryforward of approximately $265,000 which expire from 2032 through 2036. Under IRC Code Sec 382 future use of the NOL carryforwards may be limited due to CTR’s acquisition by Freestone.

NOTE 8 – EMPLOYEE BENEFITS AND AGREEMENTS

 

Officer Agreement:

 

On June 5, 2012 CTR entered into a three year Employment Agreement with Dirk Crawford (“Mr. Crawford”). For certain compensation, including a salary and signing bonus, Mr. Crawford would remain president of CTR for the term of his Employee Agreement. Mr. Crawford also received certain retirement and healthcare benefits relating to his Employee Agreement. No other employees have employment agreements at CTR, and they are at will employees.

 

 

Accrued Compensation:

 

At June 24, 2015 and June 30, 2014 the Company’s liabilities included an accrued bonus due to Mr. Crawford as part of his Employee Agreement. The signing bonus due to Mr. Crawford at June 24, 2015 and June 30, 2014, was $209,964 and $264,964, respectively.

 

Retirement Plan Contribution:

 

During the years ending June 30, 2015 and 2014 the Company contributed $5,246 and $4,574 in matching contributions to the Company’s IRA plan.

 

NOTE 9 – GOING CONCERN

 

As of June 30, 2015 the Company had an accumulated deficit of $434,514 and negative working capital of $499,685. These conditions raise substantial doubt about CTR’s ability to continue as a going concern.  The financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might be necessary should CTR be unable to continue as a going concern.

 

At the acquisition of the Company by Freestone Resources, Inc. the accrued management bonus of $209,964 was settled as of the acquisition date as detailed in Note 8. In addition the agreement with FDEP detailed in Note 9 will allow the company to dispose its scrap tire inventory relieving the environmental liability of $320,000 without the use of working capital.

 

Our future success and viability, therefore, are dependent upon our ability to generate revenues sufficient to cover our operating costs and expenses.  The failure to generate sufficient revenues or raise additional capital may have a material and adverse effect upon the Company.

  

NOTE 10 – SUBSEQUENT EVENTS

 

Management has evaluated subsequent events through September 8, 2015 and has identified the following subsequent events:

 

CTR Acquisition:

 

On June 24, 2015 CTR 100% of the stock in CTR was purchased by Freestone, and CTR became a wholly owned subsidiary of Freestone.

 

Dirk Crawford Employee Agreement Extension:

 

On June 24, 2015 CTR agreed to an extension of Mr. Crawford’s Employee Agreement (“Employee Agreement Extension”). The Employee Agreement Extension included an increased yearly salary, as well as a commission for tires sold. The aforesaid tire sales commission is limited to $40,000. All other retirement and healthcare benefits remained the same, and no other changes were made to the Employee Agreement.

 

 

 

Liability Settlement Related to Employee Agreement Bonus:

 

The Employee Agreement Extension, and the terms therein, eliminated the bonus owned to Mr. Crawford (see Note 9).

 

Major Agreements:

 

On June 24, 2015 CTR entered into an agreement with Freestone Dynamis Energy Products, LLC (“FDEP”) in order to provide tire derived fuel (TDF) and lease a warehouse to FDEP so that FDEP can pursue pyrolysis operation at the leased location.

 

 

 

 

Exhibit 99.4

 

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

On June 24, 2015 Freestone Resources, Inc. (“Freestone” or the “Company”) entered into a Stock Purchase Agreement (the “Agreement”) by and among the Company and IWSI Profit Sharing Plan (“IWSI”) for one hundred percent of the common stock of C.C. Crawford Retreading Company, Inc. (“CTR”).

The Unaudited Pro Forma Condensed Consolidated Financial Statements have been prepared for informational purposes only. The Unaudited Pro Forma Condensed Consolidated Balance Sheet and Statements of Operations include certain pro forma adjustments that do not reflect any operating efficiencies or inefficiencies that resulted from the purchase of CTR from IWSI. Thus, the pro forma data provided herein is not necessarily indicative of results that would have been achieved if the companies were combined during the periods presented in the pro forma presentation or results that the Company will experience in the future.

The historical financial information has been adjusted in the Unaudited Pro Forma Condensed Consolidated Financial Statements to demonstrate pro forma events that are (a) factually supportable, (b) directly attributed to the acquisition of CTR by the Company, and (c) with respect to the statements of earnings, are expected to have a continuing impact on the combined results of Freestone and CTR. The unaudited pro forma condensed consolidated financial statements should be read in conjunction with (i) the historical consolidated financial statements and the accompanying notes of the Company, which are included in the Company’s Annual Report on Form 10K for the year ended June 30, 2014; (ii) the historical condensed consolidated financial statements of the Company included in Company's Quarterly Report on Form 10Q for the quarter ended March 31, 2015; (iii) and the audited financial statements for CTR for the years ended June 30, 2015 and 2014 included in this Amendment No. 1 to Current Report on Form 8K.

 

FREESTONE RESOURCES, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 2015
										Pro Forma
		Freestone				CTR				Adjustments								Combined
ASSETS
Current Assets
Cash		$	91,850			$	25,349			$							$	117,199
Accounts receivable, net			1,520				82,996											84,516
Inventory			—				34,101				176,868		<C>					210,969
Prepaid and Other Assets			1,875				68,565											70,440
Total Current Assets			95,245				211,011											483,124
Property, plant and equipment, net			64,711				604,273				655,727		<C>					1,324,711
Deposits			8,010															8,010
Permits and Licenses											160,000		<C>					160,000
TOTAL ASSETS		$	167,966			$	815,284										$	1,975,845
LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities
Accounts payable and accrued liabilities		$	11,262			$	101,742										$	113,004
Accrued bonus payable			—				209,964				(209,964	)	<C>					—
Environmental liability			—				320,000				(288,000	)	< C>					32,000
Current portion of long term debt			—				56,051											56,051
Total Current Liabilities			11,262				687,757											201,055
Long term debt, less current portion							98,086				1,020,000		< B>					1,118,086
Asset Retirement Obligation			14,470															14,470
TOTAL LIABILITIES			25,732				785,843											1,333,611
STOCKHOLDERS' EQUITY
Common stock											5,000		< B>
			75,988				1,000,000				(1,000,000	)	< A>					80,988
											495,000		< B>
Additional paid in capital			18,986,768				(557,816	)			557,816		< A>					19,481,768
Accumulated deficit			(18,920,522	)			(412,813	)			412,813		< A>					(18,920,522	)
			142,234				29,371											642,234
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY		$	167,966			$	815,214										$	1,975,845
See notes to unaudited pro forma condensed consolidated financial statements

 

 

 

 

 

FREESTONE RESOURCES, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
NINE MONTHS ENDED MARCH 31, 2015
		Freestone				CTR				Pro Forma Adjustments				Combined
REVENUE
Tipping Fee Revenue		$	—			$	340,663			$					340,663
Tire Repair Revenue			—				344,611								344,611
Used Tire Sales			—				129,235								129,235
Oil & Gas Revenue			2,723				—								2,723
Scrap Material Sales			—				47,507								47,507
Total Revenue			2,723				862,016								864,739
COSTS OF REVENUE
Tipping Fee Operations			—				191,568								191,568
Tire Repair and Sales			—				113,403								113,403
Tire Disposal			—				123,515								123,515
Total Cost of Revenue			—				428,486								428,486
GROSS PROFIT			2,723				433,530								436,253
OPERATING EXPENSES
Lease Operating Cost			7,410				—								7,410
Selling			—				117,580								117,580
General and Administrative			186,856				257,819								444,675
Depreciation and Amortization			10,324				48,717								59,041
Gain on Sale of Asset			(1,064	)			—								(1,064	)
Total Operating Expense			203,526				424,116								627,642
INCOME (LOSS) FROM OPERATIONS			(200,803	)			9,414								(191,389	)
OTHER EXPENSES
Interest Expense, net			—				(8,248	)							(8,248	)
			—				(8,248	)							(8,248	)
INCOME (LOSS) BEFORE TAXES			(200,803	)			1,166								(199,637	)
PROVISION FOR INCOME TAXES			—				—								—
NET INCOME(LOSS)		$	(200,803	)		$	1,166			$				$	(199,637	)
Basic and Diluted Net Loss Per Share			(0.00	)											(0.00	)
Weighted Average Share Outstanding
Basic and Diluted			74,738,907												79,738,907
See notes to unaudited pro forma condensed consolidated financial statements

 

 

 

 

 

 

FREESTONE RESOURCES, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED JUNE 30, 2014
(Unaudited)
		Freestone				CTR				Pro Forma Adjustments				Combined
REVENUE
Tipping Fee Revenue		$	—			$	358,946			$					358,946
Tire Repair Revenue			—				377,459								377,459
Used Tire Sales			—				415,395								415,395
Oil & Gas Revenue			12,758				—								12,758
Scrap Material Sales			—				80,880								80,880
Total Revenue			12,758				1,232,680								1,245,438
COSTS OF REVENUE
Tipping Fee Operations			—				278,786								278,786
Tire Repair and Sales			—				207,924								207,924
Tire Disposal			—				146,167								146,167
Cost of Petrozine			5,511				—								5,511
Total Cost of Revenue			5,511				632,877								638,388
GROSS PROFIT			7,247				599,803								607,050
OPERATING EXPENSES
Lease Operating Cost			28,306				—								28,306
Selling			—				141,825								141,825
Revision to ARO estimate			(26,027	)											(26,027	)
Loss on Equity Method Investment			31,340												31,340
Impairment of Equity method Investment			38,660												38,660
General and Administrative			482,383				345,375								827,758
Depreciation and Amortization			17,181				74,099								91,280
Gain on Sale of Asset			(5,000	)			—								(5,000	)
Total Operating Expense			566,843				561,299								1,128,142
INCOME (LOSS) FROM OPERATIONS			(559,596	)			38,504								(521,092	)
OTHER EXPENSES
Interest Expense, net			—				(13,474	)							(13,474	)
			—				(13,474	)							(13,474	)
INCOME (LOSS) BEFORE TAXES			(559,596	)			25,030								(534,566	)
PROVISION FOR INCOME TAXES			—				—								—
NET INCOME(LOSS)		$	(559,596	)		$	25,030			$					(534,566	)
Basic and Diluted Net Loss Per Share			(0.01	)											(0.01	)
Weighted Average Share Outstanding
Basic and Diluted			70,197,385												75,197,385
See notes to unaudited pro forma condensed consolidated financial statements

 

 

1. BASIS OF PRESENTATION:

 

The accompanying Pro Forma Statement of Operations for the year ended June 30, 2014, and for the nine month period ended March 31, 2015, reflects the acquisition of CTR by the Company as if it had occurred on July 1, 2013 by combining the results of Freestone and CTR for the year ended June 30, 2014 and for the nine month period ended March 31, 2015.

 

The accompanying Pro Forma Balance Sheet as of March 31, 2015 gives effect to the purchase of CTR by Freestone as of March 31, 2015 by combining the balance sheets of both Freestone and CTR as of March 31, 2015. The CTR March 31, 2015 were derived from the historical accounting records of CTR.

 

2. CORRECTION OF AN ERROR:

 

Freestone has determined that the derivative liability reported as a result of the warrants issued as a result of the Aqueous Services, LLC transaction, were in fact not a derivative liability and the equity investment in Aqueous Services, LLC should have been written down to zero as of June 30, 2014. Management evaluated the impact of these errors on the year ended June 30, 2014 and the nine months ended March 31, 2015 both quantitatively and qualitatively, and determined that the errors were immaterial to the these financial statements. Pursuant to the SEC SAB Topic 108, the prior period numbers have been corrected in this filing and the derivative liability and the equity method investment and their impact on the statements of operations have been removed.

3. PRO FORMA ADJUSTMENTS:

The Pro Forma Financial Statements are based on the historical consolidated financial statements of the Company and CTR. The adjustments that were made are based on the information that is available and certain assumptions. Thus, actual adjustments may differ from the pro forma adjustments. These Pro Forma Financial Statements attached hereto have been prepared using the acquisition method of accounting for the combination of Freestone and CTR.

 

The adjustments made in the preparation of the Pro Forma Financial Statements are as follows:

 

(A)

The elimination of CTR’s Stockholder’s Equity

 

(B)

Acquisition Funding

 

The CTR acquisition was funded by the issuance of 5,000,000 shares of Freestone’s common stock for $500,000. The Proceeds from the stock sale were used as a down payment.The remainder of the purchase price was finance by a note payable to the seller IWSI in the amount of $1,020,000.

 

 

 

(C)

The preliminary allocation of the purchase price was based on estimates of the fair value of the assets and liabilities assumed and adjusted for certain liabilities not assumed as of June 24, 2015. The valuation of net assets acquired is as follows:

 

 

Cash		$	25,349
Account Receivable			82,996
Inventory			210,969
Prepaid Expenses			68,566
Land and Building			1,060,000
Machinery and Equipment			200,000
Permits and Licenses			160,000
Accounts Payable and Accrued Liabilities			(101,743	)
Environmental Liability			(32,000	)
Notes Payable			(154,137	)
		$	1,520,000