EX-99.2 3 ex_99-2.htm PRO FORMA FINANCIAL STATEMENTS ex_99-2.htm
 
 
EXHIBIT 99.2 
 
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
The following unaudited pro forma condensed consolidated statements of operations for the nine months ended April 30, 2008 and for the year ended July 31, 2007 present the Company’s results of operations assuming that the Purchase Agreement had been completed on August 1, 2006, the first day of the fiscal year ended July 31, 2007. The pro forma adjustments and assumptions are based on estimates, evaluations and other data currently available and, in the Company's opinion, provide a reasonable basis for the fair presentation of the estimated effects directly attributable to the Purchase Agreement. The adjustments set forth in the “Pro Forma Adjustments” column are described in the Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements.

The unaudited pro forma consolidated financial statements are provided for illustrative purposes only and are not necessarily indicative of what the results of operations or financial position would actually have been had the disposition occurred on the respective date indicated, nor do they represent a forecast of the results of operations or financial position for any future period or date.

All information contained herein should be read in conjunction the following:

·  
Historical consolidated financial statements of Commerce as of and for the year ended July 31, 2007, included in the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on October 29, 2007; and
·  
Historical consolidated financial statements of Commerce as of and for the nine months ended April 30, 2008, included in the Company’s Quarterly Report on Form 10-Q filed with the SEC on June 12, 2008.


Index to Unaudited Pro Forma Condensed Consolidated Financial Statements

 
Page
   
Unaudited Pro Forma Condensed Consolidated Balance Sheet as of April 30, 2008
F-2
Unaudited Pro Forma Condensed Consolidated Statement of Operations for the Nine Months Ended April 30, 2008
F-3
Unaudited Pro Forma Condensed Consolidated Statement of Operations for the Year Ended July 31, 2007
F-4
Unaudited Notes to Pro Forma Condensed Consolidated Financial Statements
F-5

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F-1
 


COMMERCE ENERGY GROUP, INC.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
(in thousands)


   
As reported
April 30, 2008
    
Pro Forma
Adjustments
    
Footnote
    
Pro Forma
April 30, 2008
  
ASSETS
                        
Current assets:
                        
Cash and cash equivalents
   $ 10,370     $ 10,195      
2
     $ 20,565  
Accounts receivable, net
     56,350       —               56,350  
Natural gas inventory
     2,561       —               2,561  
Prepaid expenses and other current assets
     10,391       —               10,391  
Total current assets
     79,672       10,195               89,867  
                                 
Deposits
     1,795       —               1,795  
Property and equipment, net
     10,755       (2,342 )     2       8,413  
Goodwill
     3,659       (489 )     2       3,170  
Other intangible assets
     4,303       (164 )     2       4,139  
                                 
Total assets
   $ 100,184     $ 7,200             $ 107,384  
                                 
LIABILITIES AND STOCKHOLDERS’ EQUITY
                                
Current liabilities:
                                
Energy and accounts payable
   $ 32,880     $ 600       2     $ 33,480  
Accrued liabilities
     6,815       (1,005 )     2       5,810  
Total current liabilities
     39,695       (405 )             39,290  
                                 
Stockholders’ equity:
                                
Common stock  $0.001 par value 150,000 shares authorized, 30,875 shares issued and outstanding at April 30, 2008
     61,376       —               61,376  
Other comprehensive loss
     198       —               198  
Retained earnings (accumulated deficit)
     (1,085 )     7,605       2       6,520  
Total stockholders’ equity
     60,489       7,605               68,094  
                                 
Total liabilities and stockholders’ equity
   $ 100,184     $ 7,200             $ 107,384  






The accompanying notes are an integral part of these pro forma condensed consolidated financial statements.
 
  F-2
 

COMMERCE ENERGY GROUP, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)

   
As reported
Nine Months Ended April 30, 2008
    
Adjustments
    
Footnote
    
Pro Forma
Nine Months Ended April 30, 2008
  
                         
Net revenue
   $ 319,485     $ (116,820 )     3 (A)   $ 202,665  
                                 
Direct energy costs
     269,698     $ (101,080 )     3 (A)     168,618  
                                 
Gross profit
     49,787       (15,740 )             34,047  
                                 
Selling and marketing
     11,446       (6,199 )     3 (B)     5,247  
General and administrative
     48,177       (17,444 )     3 (B)     30,733  
Impairment of intangibles
     1,426       —               1,426  
                                 
Loss from operations
     (11,262 )     7,903               (3,359 )
                                 
Other income (expense), net
     (567 )     —               (567 )
                                 
Net loss
   $ (11,829 )   $ 7,903             $ (3,926 )
Net loss per common share – basic and diluted
   $ (0.39 )   $ 0.26             $ (0.13 )
Weighted average common shares outstanding – basic and diluted
   $ 30,537     $ —             $ 30,537  




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


 F-3
 
 


COMMERCE ENERGY GROUP, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)

   
As reported
Year Ended
July 31, 2007
    
Adjustments
    
Footnote
    
Pro Forma
Year Ended
July 31, 2007
  
                         
Net revenue
   $ 371,614     $ (174,333 )     3 (A)   $ 197,281  
                                 
Direct energy costs
     314,371     $ (161,379 )     3 (A)     152,992  
                                 
Gross profit
     57,243       (12,954 )             44,289  
                                 
Selling and marketing
     10,642       (7,941 )     3 (B)     2,701  
General and administrative
     37,291       (4,766 )     3 (B)     32,525  
                                 
Income from operations
     9,310       (247 )             9,063  
                                 
Other income (expense), net
     (3,657 )     —               (3,657 )
                                 
Income before provision for income taxes
     5,653       (247 )             5,406  
                                 
Provision for income taxes
     122       (5 )             117  
                                 
Net income
   $ 5,531     $ (242 )           $ 5,289  
Net income per common share – basic
   $ 0.18     $ (0.01 )           $ 0.18  
Net income per common share – diluted
   $ 0.18     $ (0.01 )           $ 0.18  
Weighted average common shares outstanding :
                                
Basic
   $ 29,906     $ —             $ 29,906  
Diluted
   $ 30,044     $ —             $ 30,044  






The accompanying notes are an integral part of these pro forma condensed combined financial statements.
 
F-4
 
COMMERCE ENERGY GROUP, INC.
NOTES TO THE UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS




1.   Basis of Pro Forma Presentation

The unaudited pro forma condensed consolidated balance sheet as of April 30, 2008 and the unaudited pro forma condensed combined statements of operations for the nine months ended April 30, 2008 and the year ended July 31, 2007 are based on the historical financial statements of Commerce, after giving effect to the Purchase Agreement.  

The unaudited pro forma condensed consolidated balance sheet as of April 30, 2008 presents the financial position of the Company assuming the Purchase Agreement had been completed on April 30, 2008.

The unaudited pro forma condensed consolidated statements of operations for the nine months ended April 30, 2008 and for the year ended July 31, 2007 present the Company’s results of operations assuming that the Purchase Agreement had been completed on August 1, 2006, the first day of the fiscal year ended July 31, 2007. The pro forma adjustments and assumptions are based on estimates, evaluations and other data currently available and, in the Company's opinion, provide a reasonable basis for the fair presentation of the estimated effects directly attributable to the Purchase Agreement.

The unaudited pro forma consolidated financial statements are provided for illustrative purposes only and are not necessarily indicative of what the results of operations or financial position would actually have been had the disposition occurred on the respective date indicated, nor do they represent a forecast of the results of operations or financial position for any future period or date.

All information contained herein should be read in conjunction the following:

·  
Historical consolidated financial statements of Commerce as of and for the year ended July 31, 2007, included in the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on October 29, 2007; and
·  
Historical consolidated financial statements of Commerce as of and for the nine months ended April 30, 2008, included in the Company’s Quarterly Report on Form 10-Q filed with the SEC on June 12, 2008.

2.  Purchase Agreement

The following table summarizes the total consideration received and the asset allocation of the Purchase Agreement (in thousands):

Sales price
   $ 11,200  
Less: customer deposits
     (1,005 )
Net cash received
     10,195  
Less: net assets sold or written off
        
Goodwill
     (489 )
Intangible assets
     (164 )
Property and equipment, net
     (2,342 )
Subtotal assets sold or written off
     (2,995 )
Short-term liabilities assumed (customer deposits)
     1,005  
Total net assets sold or written off
     (1,990 )
Less estimated transaction expenses
     (600 )
Gain on sale
   $ 7,605  



 
 
F-5
 
COMMERCE ENERGY GROUP, INC.
NOTES TO THE UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


3.  Pro Forma Adjustments

The following pro forma adjustments are included in the unaudited pro forma condensed consolidated financial statements:

(A) To eliminate net revenues and associated cost of net revenues assuming the Purchase Agreement was consummated August 1, 2006.

(B) To eliminate direct operating expenses assuming the Purchase Agreement was consummated August 1, 2006.




 
 
  F-6