Attached files
| file | filename |
|---|---|
| 8-K/A - CHINA MEDICINE CORP | v174816_8ka.htm |
| EX-99.1 - CHINA MEDICINE CORP | v174816_ex99-1.htm |
UNAUDITED
PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
On
October 26, 2009, China Medicine Corporation (“CMC” or the “Company”) entered
into an Equity Ownership Transfer Agreement (the “Transfer Agreement”) with
Sinoform Limited to acquire 100% of Sinoform’s equity interests in
LifeTech. Pursuant to the Transfer Agreement, Sinoform transferred
all of Sinoform’s equity interests in Guangzhou LifeTech Pharmaceuticals Co.,
Ltd (“LifeTech”), a wholly-owned subsidiary of Sinoform. LifeTech is
a developer and manufacturer of pharmaceutical products with a focus on vascular
medicines, anti-inflammatory medicines, women’s health and other general health
traditional Chinese medicines. The purchase price included cash
payments of RMB55,775,000 (approximately $8,182,000) in addition to the
assumption of RMB89,800,000 (approximately $13,146,720) of LifeTech’s
outstanding bank debt.
Concurrently,
CMC entered into a separate agreement with Mcwalts Investment Holdings Limited
(“Mcwalts”) to acquire 100% of Mcwalts ownership in Guangzhou LifeTech Medicine
Technology Co., Ltd. (“Technology”) for a cash payment of RMB 500,000
(approximately $74,000). Technology was under the development stage
and has no operation as of September 30, 2009. Both LifeTech and
Technology were under common control and ownership of Mcwalts. The
two acquisitions were considered as one acquisition and are referred to as the
“Transaction” below.
The
unaudited pro forma condensed combined statement balance sheet as of September
30, 2009 is presented as if the Transaction had been completed on September 30,
2009. The unaudited pro forma condensed combined statements of
operations for the year ended December 31, 2008 and for the nine months ended
September 30, 2009 are presented as if the Transactions had been completed on
January 1, 2008.
The
unaudited pro forma condensed combined financial statements are based on the
historical financial statements of CMC which appear in CMC’s previously filed
annual report on Form 10-K for the year ended December 31, 2008 and quarterly
report on Form 10-Q for the quarter ended September 30, 2009, and the combined
historical financial statements of LifeTech and Technology which appear in the
Form 8-K.
The
unaudited pro forma condensed combined financial statements do not purport to
represent what the Company’s results of operations or financial position
would actually have been had the Transactions occurred on the dates
described above or to project the Company’s results of operations or
financial position for any future date or period. The statements do
not reflect cost savings, operating synergies or revenue enhancements
expected to result from the Company’s acquisition of LifeTech and Technology
or the costs to achieve any such cost savings, operating synergies or
revenue enhancements.
The statements
reflect the Company’s preliminary estimates of the allocation of the purchase
price for the acquisitions based upon available information and certain
assumptions that the Company believes are reasonable under the circumstances,
and actual results could differ materially from these anticipated
results. The allocation of the purchase consideration, which is
subject to change based on obtaining additional information regarding tax
liabilities, will be finalized, and the actual results could differ from these
anticipated results.
CHINA
MEDICINE CORPORATION AND SUBSIDIARIES
UNAUDITED
PRO FORMA CONDENSED COMBINED BALANCE SHEETS
AS OF
SEPTEMBER 30, 2009
|
CMC
|
LifeTech
and Technology
|
PRO
FORMA
ADJUSTMENTS
|
PRO
FORMA
|
|||||||||||||
|
(Unaudited)
|
(1)
|
|||||||||||||||
|
ASSETS
|
||||||||||||||||
|
CURRENT
ASSETS:
|
||||||||||||||||
|
Cash
and cash equivalents
|
$ | 2,242,581 | $ | 1,882,932 | $ | (1,882,932 | ) (b) | $ | 2,242,581 | |||||||
|
Notes
receivable
|
146,700 | 6,337 | 153,037 | |||||||||||||
|
Accounts
receivable
|
14,943,092 | 755,034 | 15,698,126 | |||||||||||||
|
Other
receivables
|
1,760,400 | 66,158 | 1,826,558 | |||||||||||||
|
Other
receivables - related party
|
- | 395,887 | (395,887 | ) (b) | - | |||||||||||
|
Inventories
|
7,947,827 | 1,112,412 | 9,060,239 | |||||||||||||
|
Advances
to suppliers
|
8,392,320 | 48,348 | 8,440,668 | |||||||||||||
|
Other
current assets
|
237,336 | 18,377 | 255,713 | |||||||||||||
|
Total
current assets
|
35,670,256 | 4,285,485 | (2,278,819 | ) | 37,676,922 | |||||||||||
|
PLANT
AND EQUIPMENT, net
|
6,498,621 | 4,180,325 | 1,594,122 | (a) | 12,273,068 | |||||||||||
|
OTHER
ASSETS:
|
||||||||||||||||
|
Long
term prepayment
|
9,393,293 | - | - | 9,393,293 | ||||||||||||
|
Intangible
assets, net of accumulated amortization
|
1,482,225 | 1,477,169 | 14,626,385 | (a) | 17,585,779 | |||||||||||
|
Total
other assets
|
10,875,518 | 1,477,169 | 14,626,385 | 26,979,072 | ||||||||||||
|
Total
assets
|
$ | 53,044,395 | $ | 9,942,979 | $ | 13,941,687 | $ | 76,929,061 | ||||||||
|
LIABILITIES AND
SHAREHOLDERS' EQUITY
|
||||||||||||||||
|
CURRENT
LIABILITIES:
|
||||||||||||||||
|
Short
term Loan
|
$ | 2,934,000 | $ | 10,239,660 | $ | (10,239,660 | ) (b) | $ | 2,934,000 | |||||||
|
Accounts
payable, trade
|
304,279 | 1,163,603 | 1,467,882 | |||||||||||||
|
Other
payables & accrued Liabilities
|
29,159 | 195,602 | 224,761 | |||||||||||||
|
Customer
deposits
|
44,102 | 3,431,173 | 3,475,275 | |||||||||||||
|
Taxes
payable
|
249,360 | 668,586 | 917,946 | |||||||||||||
|
Liquidated
damages payable
|
44,003 | - | 44,003 | |||||||||||||
|
Total
current liabilities
|
3,604,903 | 15,698,624 | (10,239,660 | ) | 9,063,867 | |||||||||||
|
LONG
TERM LIABILITIES:
|
||||||||||||||||
|
Fair
value of warrant liabilities
|
2,399,910 | - | - | 2,399,910 | ||||||||||||
|
Other
payables - related parties
|
- | 2,282,669 | (2,282,669 | ) (b) | - | |||||||||||
|
Total
liabilities
|
6,004,813 | 17,981,293 | (12,522,329 | ) | 11,463,777 | |||||||||||
|
COMMITMENTS
AND CONTINGENCIES
|
||||||||||||||||
|
SHAREHOLDERS'
EQUITY:
|
||||||||||||||||
|
Preferred
stock, $0.0001 par value; 10,000,000 shares authorized, no shares
issued and outstanding
|
- | - | - | - | ||||||||||||
|
Common
Stock, $0.00001 par value, 90,000,000 shares authorized,
15,320,139 shares issued and outstanding as of September
30, 2009
|
1,531 | - | - | 1,531 | ||||||||||||
|
Paid-in-capital
|
12,750,025 | 4,449,635 | 13,976,067 | (c) | 31,175,727 | |||||||||||
|
Retained
earnings (deficit)
|
26,084,749 | (11,836,089 | ) | 11,836,089 | (c) | 26,084,749 | ||||||||||
|
Statutory
reserves
|
3,178,861 | 169,375 | (169,375 | ) (c) | 3,178,861 | |||||||||||
|
Accumulated
other comprehensive income (loss)
|
4,432,020 | (821,235 | ) | 821,235 | (c) | 4,432,020 | ||||||||||
|
Total
shareholders' equity
|
46,447,186 | (8,038,314 | ) | 26,464,016 | 64,872,888 | |||||||||||
|
NONCONTROLLING
INTERESTS
|
592,396 | - | - | 592,396 | ||||||||||||
|
Total
equity
|
47,039,582 | (8,038,314 | ) | 26,464,016 | 65,465,284 | |||||||||||
|
Total
liabilities and shareholders' equity
|
$ | 53,044,395 | $ | 9,942,979 | $ | 13,941,687 | $ | 76,929,061 | ||||||||
|
(1)
|
The
allocation of the purchase consideration, which is subject to change based
on obtaining additional information regarding tax liabilities, will be
finalized, and the actual results could differ from these anticipated
results. Due to the death of key management and changing
business strategies, Mcwalts wanted to dispose of its investments in
LifeTech and Technology. CMC engaged an independent consultant
who determined the fair value of fixed assets and intangibles, primarily
including land use rights and patents. Fair value of other
assets acquired and liabilities assumed approximated to their book
value. Net assets acquired after the fair value measurement
exceeded the purchase consideration. CMC reviewed the
procedures it used to identify and measure the assets acquired and
liabilities assumed and to measure the fair value of fixed assets and
intangibles and the consideration transferred. CMC determined
to reduce the excess to the value of intangible
assets.
|
|
(a)
|
Represents
adjustments to reflect fare value of the acquired assets based on an
evaluation by an independent
appraisal.
|
|
(b)
|
Represents
adjustments to reflect the repayment of LifeTech's existing outstanding
debt and outstanding liabilities to related
parties.
|
|
(c)
|
Represents
adjustments to eliminate LifeTech's historical
equity.
|
CHINA
MEDICINE CORPORATION AND SUBSIDIARIES
UNAUDITED
PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME AND OTHER COMPREHENSIVE
INCOME
FOR THE
NINE MONTHS ENDED SEPTEMBER 30, 2009
|
CMC
|
LifeTech
and Technology
|
Pro
Forma Adjustments
|
Pro
Forma
|
|||||||||||||
|
(Unaudited)
|
||||||||||||||||
|
REVENUES:
|
||||||||||||||||
|
Product
sales
|
$ | 43,942,953 | $ | 5,090,975 | $ | $ | 49,033,928 | |||||||||
|
Medical
formula sales
|
366,475 | 703,632 | 1,070,107 | |||||||||||||
|
TOTAL
REVENUES
|
44,309,428 | 5,794,607 | - | 50,104,035 | ||||||||||||
|
COST
OF GOODS SOLD
|
32,167,242 | 2,439,645 | - | 34,606,887 | ||||||||||||
|
GROSS
PROFIT
|
12,142,186 | 3,354,962 | - | 15,497,148 | ||||||||||||
|
OPERATING
EXPENSES
|
||||||||||||||||
|
Research
and development
|
684,019 | 152,804 | - | 836,823 | ||||||||||||
|
Selling,
general and administrative
|
3,375,078 | 742,056 | 430,000 | (a) | 4,615,134 | |||||||||||
| 68,000 | (b) | |||||||||||||||
|
Total
operating expenses
|
4,059,097 | 894,860 | 498,000 | 5,451,957 | ||||||||||||
|
INCOME
FROM OPERATIONS
|
8,083,089 | 2,460,102 | (498,000 | ) | 10,045,191 | |||||||||||
|
OTHER
INCOME (EXPENSE), NET:
|
||||||||||||||||
|
Other
income (expense), net
|
(68,812 | ) | 82,703 | 13,891 | ||||||||||||
|
Financial
income (expense), net
|
- | (680,330 | ) | 680,330 | (c) | - | ||||||||||
|
Change
in fair value of warrant liabilities
|
(2,113,589 | ) | - | (2,113,589 | ) | |||||||||||
|
Total
other expense, net
|
(2,182,401 | ) | (597,627 | ) | 680,330 | (2,099,698 | ) | |||||||||
|
INCOME
BEFORE INCOME TAXES AND NONCONTROLLING
INTEREST
|
5,900,688 | 1,862,475 | 182,330 | 7,945,493 | ||||||||||||
|
PROVISION
FOR INCOME TAXES
|
2,331,457 | 240,070 | 56,000 | (d) | 2,627,527 | |||||||||||
|
NET INCOME
BEFORE NONCOTROLLING INTEREST
|
3,569,231 | 1,622,405 | 126,330 | 5,317,966 | ||||||||||||
|
Add:
Net loss attributable to noncontrolling
interest
|
242,953 | - | - | 242,953 | ||||||||||||
|
NET
INCOME ATTRIBUTABLE TO CONTROLLING INTEREST
|
3,812,184 | 1,622,405 | 126,330 | 5,560,919 | ||||||||||||
|
OTHER
COMPREHENSIVE INCOME:
|
||||||||||||||||
|
Foreign
currency translation adjustment
|
3,726 | 1,219 | - | 4,945 | ||||||||||||
|
Foreign
currency translation adjustment attributable to noncontrolling
interest
|
(183 | ) | - | - | (183 | ) | ||||||||||
|
COMPREHENSIVE
INCOME
|
$ | 3,815,727 | $ | 1,623,624 | $ | 126,330 | $ | 5,565,681 | ||||||||
|
Earnings
per share:
|
||||||||||||||||
|
Basic
|
$ | 0.25 | $ | $ | $ | 0.35 | ||||||||||
|
Diluted
|
$ | 0.25 | $ | $ | $ | 0.36 | ||||||||||
|
Weighted
average number of shares:
|
||||||||||||||||
|
Basic
|
15,241,333 | - | - | 15,241,333 | ||||||||||||
|
Diluted
|
15,305,452 | - | - | 15,305,452 | ||||||||||||
|
(a)
|
Represents
adjustment to reflect the allocation of the purchase price to intangible
assets identified from the respective acquisition, resulting in more
amortization expense. Amortization is computed on a
straight-line basis over the remaining useful
lives.
|
|
(b)
|
Represents
adjustment to reflect the allocation of the purchase price to plant and
equipment. Depreciation is computed on a straight-line basis
over the remaining useful lives, ranging from 5 to 50
years.
|
|
(c)
|
Represents
adjustment to reflect elimination of interest expense as LifeTech's
outstanding debt was repaid in connection with the
Transaction.
|
|
(d)
|
Reflects
the estimated income tax effect of the pro forma adjustments using an
estimated statutory tax rate of
12.5%.
|
CHINA
MEDICINE CORPORATION AND SUBSIDIARIES
UNAUDITED
PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME AND OTHER COMPREHENSIVE
INCOME
FOR THE
YEAR ENDED DECEMBER 31, 2008
|
CMC
|
LifeTech
and Technology
|
Pro
Forma Adjustments
|
Pro
Forma
|
|||||||||||||
|
REVENUES:
|
||||||||||||||||
|
Product
sales
|
$ | 52,307,211 | $ | 2,372,848 | $ | $ | 54,680,059 | |||||||||
|
Medical
formula sales
|
1,340,595 | 1,153,200 | 2,493,795 | |||||||||||||
|
TOTAL
REVENUES
|
53,647,806 | 3,526,048 | - | 57,173,854 | ||||||||||||
|
COST
OF GOODS SOLD
|
38,074,919 | 1,549,500 | - | 39,624,419 | ||||||||||||
|
GROSS
PROFIT
|
15,572,887 | 1,976,548 | - | 17,549,435 | ||||||||||||
|
OPERATING
EXPENSES
|
||||||||||||||||
|
Research
and development
|
840,437 | 172,974 | 1,013,411 | |||||||||||||
|
Selling,
general and administrative
|
3,804,585 | 1,093,481 | 573,000 | (a) | 5,561,066 | |||||||||||
| 90,000 | (b) | |||||||||||||||
|
Total
operating expenses
|
4,645,022 | 1,266,455 | 663,000 | 6,574,477 | ||||||||||||
|
INCOME
FROM OPERATIONS
|
10,927,865 | 710,093 | (663,000 | ) | 10,974,958 | |||||||||||
|
OTHER
INCOME (EXPENSE), NET:
|
||||||||||||||||
|
Other
income (expense), net
|
85,622 | 191,011 | 276,633 | |||||||||||||
|
Financial
income (expense), net
|
- | (829,770 | ) | 829,770 | (c) | - | ||||||||||
|
Total
other expense, net
|
85,622 | (638,759 | ) | 829,770 | 276,633 | |||||||||||
|
INCOME
BEFORE INCOME TAXES AND NONCONTROLLING
INTEREST
|
11,013,487 | 71,334 | 166,770 | 11,251,591 | ||||||||||||
|
PROVISION
FOR INCOME TAXES
|
2,006,137 | - | 2,006,137 | |||||||||||||
|
NET INCOME
BEFORE NONCOTROLLING INTEREST
|
9,007,350 | 71,334 | 166,770 | 9,245,454 | ||||||||||||
|
Add:
Net loss attributable to noncontrolling
interest
|
118,266 | - | - | 118,266 | ||||||||||||
|
NET
INCOME ATTRIBUTABLE TO CONTROLLING INTEREST
|
9,125,616 | 71,334 | 166,770 | 9,363,720 | ||||||||||||
|
OTHER
COMPREHENSIVE INCOME:
|
||||||||||||||||
|
Foreign
currency translation adjustment
|
2,305,499 | (635,764 | ) | 1,669,735 | ||||||||||||
|
Foreign
currency translation adjustment attributable to noncontrolling
interest
|
60,421 | - | 60,421 | |||||||||||||
|
COMPREHENSIVE
INCOME
|
$ | 11,491,536 | $ | (564,430 | ) | $ | 166,770 | $ | 11,093,876 | |||||||
|
Earnings
per share:
|
||||||||||||||||
|
Basic
|
$ | 0.60 | $ | $ | $ | 0.62 | ||||||||||
|
Diluted
|
$ | 0.60 | $ | $ | $ | 0.61 | ||||||||||
|
Weighted
average number of shares:
|
||||||||||||||||
|
Basic
|
15,173,113 | 15,173,113 | ||||||||||||||
|
Diluted
|
15,308,529 | 15,308,529 | ||||||||||||||
|
(a)
|
Represents
adjustment to reflect the allocation of the purchase price to intangible
assets identified from the respective acquisition, resulting in more
amortization expense. Amortization is computed on a
straight-line basis over the remaining useful
lives.
|
|
(b)
|
Represents
adjustment to reflect the allocation of the purchase price to plant and
equipment. Depreciation is computed on a straight-line basis
over the remaining useful lives, ranging from 5 to 50
years.
|
|
(c)
|
Represents
adjustment to reflect elimination of interest expense as LifeTech's
outstanding debt was repaid in connection with the
Transaction.
|