Note 3. Brunswick Terminal and Salisbury Terminal Asset Purchases

12 Months Ended

Mar. 31, 2012

Business Acquisition, Pro Forma Information, Description

3. BRUNSWICK TERMINAL AND SALISBURY TERMINAL ASSET PURCHASES.

Brunswick, GA Terminal

On July 15, 2010, we acquired the 161,000 barrel Brunswick Terminal, including storage tanks and other improvements for $1,800,000. The terminal consists of two 80,000 barrel leasable above ground storage tanks, and two 500 barrel leasable above ground storage tanks, an office building, a two-bay covered truck loading rack and other site improvements located on approximately 6.5 acres of land leased from the Georgia Ports Authority, including access to a shared ship dock.

The Brunswick Terminal when purchased in July 2010 included employees, long-term land and dock lease arrangements, permits, licenses, offices, procedures, systems, storage tanks, truck rack, piping, etc. and processes that had the ability to produce outputs; thus meeting the definition of a business as per ASC Topic 805-10-55, paragraphs 4 through 9. The terminal however, did not have any customers or contracts as of the acquisition date.

We commissioned and obtained a leasehold valuation appraisal (the “Brunswick Terminal Appraisal”) from a third-party independent appraisal firm, Nationwide Consulting Company. The Brunswick Terminal Appraisal concluded that the leasehold value of the Brunswick Terminal as of July 15, 2010 was $1,900,000. As per ASC Topic 805-30-25-4, we reassessed all identifiable assets acquired and liabilities assumed in the acquisition and subsequently valued the combined assets at the Brunswick Terminal for $1,900,000 and recorded a $100,000 “bargain purchase” gain for the difference, which is recorded in the Company’s consolidated statement of operations.

The following table sets forth the costs and final purchase price allocation related to the Brunswick Terminal acquisition.

Cost of the acquisition:
Cash paid from the proceeds of debt	$	1,750,000
Cash paid from cash on hand		50,000
Gain on bargain purchase of asset		100,000
	$	1,900,000
Purchase price allocation:
Property, plant and equipment, net		1,900,000
	$	1,900,000

Salisbury, Maryland Terminal

On December 22, 2011, we acquired the 172,000 barrel Salisbury Terminal, including storage tanks and other improvements for $1,600,000. The terminal consists of fourteen leasable above ground storage tanks (ranging in size from 2,500-50,000 barrels), two office buildings, a three-bay covered truck loading rack, a barge dock and other site improvements located on approximately 27 acres of land, located along the Wicomico River in Salisbury, Maryland.

The Salisbury Terminal when purchased in December 2011 included one employee, customer contracts, permits, licenses, offices, procedures, systems, storage tanks, truck rack, piping, etc. and processes that had the ability to produce outputs; thus meeting the definition of a business as per ASC Topic 805-10-55, paragraphs 4 through 9.

We commissioned and obtained a market valuation appraisal (the “Salisbury Terminal Appraisal”) from a third-party independent appraisal firm, Nationwide Consulting Company. The Salisbury Terminal Appraisal concluded that the market value of the Salisbury Terminal as of June 30, 2011 was $2,570,000.

As per ASC Topic 805-30-25-4, we reassessed all identifiable assets acquired and liabilities assumed in the acquisition and subsequently valued the combined assets at the Salisbury Terminal at $2,570,000 and recorded a $970,000 “bargain purchase” gain for the difference, which is recorded in the Company’s consolidated statement of operations. The Company determined that the market value of the Salisbury Terminal did not change materially from the date of the appraisal on June 30, 2011 and the date of the acquisition on December 22, 2011.

Included in the acquired assets is the tangible terminal assets described above; as well as four in-place customer contracts with a fair value of $287,766 and various prepaid permits and taxes with a fair value of $48,799. The fair value of the in-place customer contacts was determined using a discounted cash flow projection over the one-year life of the contracts and this amount will be amortized over a useful life of one-year.

The following table sets forth the costs and final purchase price allocation related to the Salisbury Terminal acquisition.

Cost of the acquisition:
Cash paid from the proceeds of debt	$	1,600,000
Less: fair market value of identifiable assets acquired		(2,570,000	)
Gain on bargain purchase of asset		(970,000	)

Purchase price allocation:
Property, plant and equipment, net		2,233,435
Intangible assets		336,565
Identifiable assets	$	2,570,000

Presented below are pro-forma consolidated statements of operations for the year ended March 31, 2012 and 2011, when considering the operating results of the Brunswick and the Salisbury Terminals, if acquired as of April 1, 2010.

BLACKWATER MIDSTREAM CORP.
CONSOLIDATED PRO-FORMA STATEMENTS OF OPERATIONS
(AUDITED)

	Year Ended 31-March-2012							Year Ended 31-March-2011

	Actual Blackwater Midstream, Westwego, Brunswick & Salisbury Terminals		Salisbury Terminal Pro-Forma for Period 1/Apr/2011-21/Dec/2011			Consolidated Pro-Forma		Actual Blackwater Midstream, Westwego & Brunswick Terminals		Brunswick Terminal Pro-Forma for Period 1/Apr/2010-14/Jul/2010			Salisbury Terminal Pro-Forma for Period 1/Apr/2010-31/Mar/2011		Consolidated Pro-Forma
Revenue	$	9,990,611	$	343,000		$	10,333,611	$	6,903,422	$	-		$	393,028	$	7,296,450

Net income	$	5,039,845	$	(984,075	)	$	4,055,770	$	1,003,842	$	(35,000	)	$	1,003,092	$	1,971,934

NET INCOME PER COMMON SHARE,
BASIC	$	0.09	$	(0.02	)	$	0.07	$	0.02	$	0.00		$	0.02	$	0.04
DILUTED	$	0.01	$	(0.02	)	$	(0.01)	$	0.02	$	0.00		$	0.00	$	0.00

Weighted average number of shares outstanding:
BASIC		55,783,597		55,781,119			55,783,597		54,616,489		54,616,489			54,616,489		54,616,489
DILUTED		65,724,878		55,781,119			65,724,878		65,817,436		54,616,489			65,817,436		65,817,436

- Definition

Description of the pro forma information, nature of adjustments made to historical information to arrive at pro forma amounts, amounts excluded from pro forma information, any material-nonrecurring items included in the pro forma information and limitations of pro forma disclosures.

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