Attached files
Exhibit 99.3
CHINA GROWTH CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
Summary of Transactions and Basis of Presentation
On December 15, 2010, China Growth Corporation (“China Growth” or the “Company”), a Cayman Islands company entered into a share exchange agreement (the “Exchange Agreement”) with Wealth Environmental Protection Group (“Wealth”), a British Virgin Islands company and shareholders of Wealth Environmental Protection (“Wealth Environmental Protection Shareholders”). Wealth is a private company incorporated under the laws of British Virgin Islands. Wealth owns 100% of the issued and outstanding capital stock of Wealth Environmental Technology Holding Ltd. (“Wealth Technology”), a company incorporated under the laws of Hong Kong, which holds all of the issued and outstanding capital stock of Jiangmen Huiyuan Environmental Protection Technology Consultancy Co., Ltd (“Huiyuan”), a wholly foreign owned enterprise incorporated under the laws of the People’s Republic of China.
Pursuant to the terms of the Exchange Agreement, Wealth Environmental Protection Shareholders transferred to the Company all of the issued and outstanding ordinary shares, a total of 7,000 shares, of Wealth Environmental Protection in exchange for the issuance of a total of 24,956,875 ordinary shares, par value $0.000128 per share, or 94.6% of the ordinary shares of the Company issued and outstanding after the Closing.
Concurrent with the Exchange Agreement, the Company also entered into certain agreements that have been given effect in the unaudited pro-forma consolidated financial statements as described below:
The Private Placement
On the Closing Date, the Company entered into a subscription agreement with a group of accredited investors (the “Subscription Agreement”), pursuant to which we issued to the investors an aggregate of 222,402 units, or the Units, for an aggregate purchase price of $6,672,032, or $30.00 per Unit (the “Private Placement”). Each Unit consists of (i) two (2) shares of our Class A 6% convertible preference share (the “Preference Share”) with each of the Preference Share convertible into five ordinary shares for a total of ten ordinary shares per Unit, and (ii) a warrant to purchase five (5) ordinary shares at an exercise price of $4.50 per share (the “Warrant”).The closing of the Share Exchange was conditioned upon all conditions set forth in the Subscription Agreement being met and the closing of the Private Placement was conditioned upon the closing of the Share Exchange. As soon as practicable, we shall effectuate a 1: 1.42610714 reverse stock split on all of the ordinary shares issued and outstanding at the closing of the Share Exchange (the “Reverse Split”).
Pursuant to the Subscription Agreement, we are obligated to file a registration statement covering the resale of the ordinary shares underlying the Preference Shares and the Warrants (the “Registrable Securities”) no later than thirty (30) days following the closing date. In the event that the registration statement is not timely filed, we are obligated to pay to each investor liquidated damages equal to 1% of each investor’s investment per month pursuant to the Subscription Agreement. In addition, we shall use our best efforts to cause the registration statement to be declared effective under the Securities Act as promptly as possible, but in no event later than 180 days following the Closing Date (the “Effective Date”). If the registration statement is not declared effective by the SEC on or prior to the Effective Date, then we are obligated to pay to each investor liquidated damages equal to 1% of such investor’s investment. The maximum aggregate liquidated damages payable to each Subscriber under this Agreement shall be seven percent (7%) of the purchase price paid by such Subscriber pursuant to this Agreement. However, such liquidated damages payable in the event that the Registration Statement is not declared effective by the Effective Date will be waived, provided that (1) we have responded to all SEC comments on the Registration Statement and its amendments within twenty (20) business days of their respective receipt, which shall be extended to thirty (30) business days if the SEC response cannot be submitted because we are required to provide updated financial statements pursuant to Regulation S-X; and (2) if we are current with the filing of all of our periodic reports under the Exchange Act. Based on the terms of our registration payment arrangement, we could become subject to cash damages of up to 7% of the $6,672,032 we raised under the Subscription Agreement or $467,042.
The securities shall only be treated as Registrable Securities if and only for so long as they (i) have not been sold (A) pursuant to a registration statement; (B) to or through a broker, dealer or underwriter in a public distribution or a public securities transaction; and/or (C) in a transaction exempt from the registration and prospectus delivery requirements of the Securities Act of 1933, as amended (the “Securities Act”) under Section 4(1) thereof so that all transfer restrictions and restrictive legends with respect thereto, if any, are removed upon the consummation of such sale; (ii) are not held by a holder or a permitted transferee; and (iii) are not eligible for sale pursuant to Rule 144 (or any successor thereto) under the Securities Act.
1
CHINA GROWTH CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
In connection with filing the registration statement, if the SEC limits the amount of Registrable Securities to be registered for resale pursuant to Rule 415 under the Securities Act, then the Company shall be entitled to exclude such disallowed Registrable Securities (the “Cut Back Shares”) on a pro rata basis among the holders thereof with a first priority given to the shares underlying the Warrants. The Company shall prepare, and, as soon as practicable but in no event later than the six months from the date the registration statement was declared effective, file with the SEC an additional registration statement (“Additional Registration Statement”) on Form S-1 covering the resale of all of the disallowed Registrable Securities not previously registered on an Additional Registration Statement hereunder. The Company shall use its best efforts to have each Additional Registration Statement declared effective by the SEC as soon as practicable. No liquidated damages hereof shall accrue on or as to any Cut Back Shares, and the required Filing Date for such additional Registration Statement including the Cutback Shares will be tolled, until such time as the Company is able to effect the registration of the Cut Back Shares in accordance with any SEC comments.
Make Good Escrow Agreement
In connection with the Private Placement, we entered into a make good escrow agreement, or Make Good Escrow Agreement with Star Prince, and Access America Investments, LLC as representative of the investors, pursuant to which Star Prince delivered into an escrow account share certificates evidencing 4,500,000 ordinary shares held by it (after giving effect to the Reverse Split), to be held in favor of the investors in order to secure certain make good obligations. Under the Make Good Escrow Agreement, we established minimum after tax net income thresholds (as determined in accordance with GAAP and excluding any non-cash expenses and one-time expenses related to the reverse acquisition of Wealth Environmental Protection and the private placement transaction) of $13.2 million for fiscal year 2010 and $18.09 million for fiscal year 2011 and minimum earnings per share thresholds (calculated on a fully diluted basis and including adjustment for any stock splits, stock combinations, stock dividends or similar transactions, and for shares issued in one public offering or pursuant to the exercise of any warrants, options, or other securities issued during or prior to the calculation period) of $0.58 for fiscal year 2010 and $0.66 for fiscal year 2011. If our after tax net income or earnings per share for either fiscal year 2010 or fiscal year 2011 is less than 90% of the applicable performance threshold, then the performance threshold will be deemed not to have been achieved, and the investors will be entitled to receive ordinary shares based upon a pre-defined formula agreed to between the parties. The parties agreed that, for purposes of determining whether or not any of the performance thresholds are met, the release of any of the escrowed shares and any related expense recorded under GAAP shall not be deemed to be an expense, charge, or any other deduction from revenues even if GAAP requires contrary treatment or the annual report for the respective fiscal years filed with the SEC by the Company may report otherwise.
Holdback Escrow Agreement
Also in connection with the private placement, we entered into a holdback escrow agreement, or the Holdback Escrow Agreement, with Anslow & Jaclin, LLP, the escrow agent, and Access America Investments, LLC, as representative of the investors, pursuant to which $2,167,203 was deposited with the escrow agent to be distributed upon the satisfaction of certain covenants set forth in the Subscription Agreement. Pursuant to the Holdback Escrow Agreement, the $1,500,000 will be released to the Company upon the hiring of a chief financial officer on terms acceptable to Access America Investments, LLC and $667,203 will be released to us upon appointment of the required independent directors to our board of directors.
IR Escrow Agreement
We also entered into an investor relations escrow agreement, or the IR Escrow Agreement, with Anslow & Jaclin, LLP, the escrow agent, and Access America Investments, LLC, as representative of the investors, pursuant to which $120,000 was deposited with the escrow agent to be distributed in incremental amounts to pay our investor relations firm, the choice of which is subject to the approval of Access America Investments, LLC, which approval cannot be unreasonably withheld.
Lockup Agreements
In connection with the Private Placement, we also entered into lockup agreements, or the Lockup Agreement, with Wealth Environmental Protection Shareholders, pursuant to which each of Wealth Environmental Protection Shareholders agreed not to transfer any of our capital stock held directly or indirectly by them for an eighteen-month period following the closing of the Private Placement, unless it is approved otherwise by Access American Investments, LLC.
Shares Issued for Services
On December 15, 2010, we issued 998,275 shares to Mr. Karlson Ka Tsun PO, at par value 0.000128 per share, as compensation for the services he provided to us in connection with the Share Exchange and Private Placement.
2
CHINA GROWTH CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
Shares Issued for Conversion of Debt
On December 15, 2010, we issued 998,725 shares to Access America Fund, LP in connection with the automatic conversion of the notes for an aggregate of $500,000 that we issued to Access America Fund, LP in the event of the Share Exchange.
Pro Forma Financial Statements
The unaudited pro forma consolidated financial statements of the Company in the opinion of management include all material adjustments directly attributable to the aforementioned share exchanges contemplated by the agreements and to the agreements and transactions entered into concurrently with those agreements as described above. The unaudited pro forma consolidated balance sheet reflects the financial position of the company had the share exchange occurred on September 30, 2010. The unaudited pro forma consolidated statements of income (loss) and comprehensive income (loss) were prepared as if the transaction was consummated on the beginning of the reporting periods. The Private Placement
These pro forma unaudited combined financial statements should be read in conjunction with the Registrant's historical financial statements and notes thereto and the consolidated financial statements of Huiyuan and its variable interest entity, Jiangmen Wealth Water Purifying Agent Company, Ltd. (“Wealth Water”) and Wealth Water’s wholly-owned and majority-owned subsidiaries, included elsewhere in this report. These unaudited pro forma consolidated financial statements have been prepared for comparative purposes only and do not purport to be indicative of the results of operations which actually would have resulted had the transaction occurred on the date indicated and are not necessarily indicative of the results that may be expected in the future.
Proforma Earnings per Share
The pro forma basic and dilutive net income per share is based on the weighted average number of shares of pro forma China Growth as if the shares issued to acquire Wealth had taken place at the beginning of each of the reporting periods.
3
|
CHINA GROWTH CORPORATION
|
|||||||||||||||||||
|
UNAUDITED PROFORMA CONDENSED COMBINED BALANCE SHEET
|
|||||||||||||||||||
|
China Growth
|
Wealth
|
||||||||||||||||||
|
as of
|
as of
|
||||||||||||||||||
|
September 30,
|
September 30,
|
Pro Forma
|
Pro Forma
|
||||||||||||||||
|
2010
|
2010 (4)
|
Adjustments
|
Combined
|
||||||||||||||||
|
ASSETS:
|
(As Restated)
|
||||||||||||||||||
|
Current assets:
|
|||||||||||||||||||
|
Cash and cash equivalent
|
$
|
1,426
|
$
|
25,839,474
|
$
|
4,384,829
|
(6
|
)
|
$
|
30,225,729
|
|||||||||
|
Restricted cash
|
-
|
2,167,203
|
(9
|
)
|
|||||||||||||||
|
120,000
|
(10
|
)
|
2,287,203
|
||||||||||||||||
|
Note receivable from affiliate
|
500,000
|
-
|
(500,000
|
)
|
(4
|
)
|
-
|
||||||||||||
|
Accounts receivable
|
-
|
1,431,175
|
-
|
1,431,175
|
|||||||||||||||
|
Inventories
|
-
|
816,543
|
-
|
816,543
|
|||||||||||||||
|
Other current assets
|
10,613
|
250,898
|
-
|
261,511
|
|||||||||||||||
|
Total current assets
|
512,039
|
28,338,090
|
6,172,032
|
35,022,161
|
|||||||||||||||
|
Property, plant and equipment and
|
|||||||||||||||||||
|
land use and mining rights, net
|
-
|
15,259,616
|
-
|
15,259,616
|
|||||||||||||||
|
Total Assets
|
$
|
512,039
|
$
|
43,597,706
|
$
|
6,172,032
|
$
|
50,281,777
|
|||||||||||
|
LIABILITIES AND SHAREHOLDERS' EQUITY:
|
|||||||||||||||||||
|
Current liabilities:
|
|||||||||||||||||||
|
Convertible notes payable, net
|
-
|
$
|
125,000
|
$
|
375,000
|
(13
|
)
|
||||||||||||
|
(500,000
|
)
|
(4
|
)
|
-
|
|||||||||||||||
|
Note payable to affiliate
|
500,000
|
-
|
(500,000
|
)
|
(8
|
)
|
-
|
||||||||||||
|
Payable to related parties
|
12,876
|
250,000
|
-
|
262,876
|
|||||||||||||||
|
Accounts payable
|
1,302
|
1,528,257
|
-
|
1,529,559
|
|||||||||||||||
|
Accrued interest payable
|
10,617
|
10,347
|
-
|
20,964
|
|||||||||||||||
|
Accrued expense
|
-
|
487,404
|
-
|
487,404
|
|||||||||||||||
|
Value added taxes payable
|
-
|
361,676
|
-
|
361,676
|
|||||||||||||||
|
Other taxes payable
|
-
|
87,457
|
-
|
87,457
|
|||||||||||||||
|
Income tax payable
|
-
|
1,466,078
|
(396,500
|
) )
|
(12
|
)
|
1,069,578
|
||||||||||||
|
Total current liabilities
|
524,795
|
4,316,219
|
(1,021,500
|
)
|
3,819,514
|
||||||||||||||
|
Deferred income taxes
|
197,319
|
197,319
|
|||||||||||||||||
|
Total liabilities
|
524,795
|
4,513,538
|
(1,021,500
|
)
|
4,016,833
|
||||||||||||||
|
Commitments and contingencies
|
|||||||||||||||||||
|
Shareholders' equity (deficit):
|
|||||||||||||||||||
|
Preference shares
|
-
|
-
|
854
|
(6
|
)
|
854
|
|||||||||||||
|
Ordinary shares
|
128
|
7,000
|
(4,760
|
)
|
(1
|
)
|
|||||||||||||
|
90
|
(7
|
)
|
|||||||||||||||||
|
90
|
(8
|
)
|
2,548
|
||||||||||||||||
|
Additional paid-in capital
|
6,597
|
15,584,052
|
(14,721
|
)
|
(3
|
)
|
|||||||||||||
|
499,910
|
(7
|
)
|
|||||||||||||||||
|
1,210,910
|
(8
|
)
|
|||||||||||||||||
|
6,671,178
|
(6
|
)
|
23,957,926
|
||||||||||||||||
|
Subscription receivable
|
-
|
(7,000
|
)
|
(7,000
|
)
|
||||||||||||||
|
Accumulated other comprehensive income
|
-
|
4,085,940
|
-
|
4,085,940
|
|||||||||||||||
|
Retained earnings
|
(19,481
|
)
|
19,414,176
|
19,481
|
(2
|
)
|
|||||||||||||
|
(1,189,500
|
)
|
(11
|
)
|
18,224,676
|
|||||||||||||||
|
Total shareholders' equity (deficit)
|
(12,756
|
)
|
39,084,168
|
7,193,532
|
46,264,944
|
||||||||||||||
|
Total liabilities and shareholders' equity
|
$
|
512,039
|
$
|
43,597,706
|
$
|
6,172,032
|
$
|
50,281,777
|
|||||||||||
4
CHINA GROWTH CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
|
(1)
|
This adjustment gives effect to the Issuance of 17,500,000 ordinary shares of China Growth in exchange of the ownership of the 7,000 ordinary shares of Wealth. Under the terms of the Exchange Agreement with Wealth, and shareholders of Wealth named in the Exchange Agreement, Wealth transferred to China Growth all of the issued and outstanding ordinary shares of Wealth in exchange for the issuance of a total of 24,956,875 ordinary shares, par value $0.000128 per share, or 96.15% of the ordinary shares of the Company issued and outstanding after the Closing. China Growth has not effectuated the 1: 1.42610714 reverse stock split on all of the ordinary shares issued and outstanding at the closing of the Share Exchange that will ultimately result in Wealth shareholders owning 17,500,000 shares when effective.
|
|
|
(2)
|
Elimination of the accumulated deficit of China Growth, the accounting acquiree.
|
|
|
(3)
|
Net effects of notes (1) and (2)
|
|
|
(4)
|
This adjustment represents the elimination of intercompany balances. The $500,000 note payable to affiliate on China Growth's balance sheet is the result of Access America Fund, LP's $500,000 loan to China Growth to enable China Growth to loan Wealth $500,000 to pay costs of the restructuring. Access America Fund, LP's loan is convertible and includes an automatic conversion provision that was triggered by the event of the Share Exchange. The loan between China Growth and Wealth eliminate when the remaining $375,000 beneficial conversion discount is fully accreted.
|
|
|
(5)
|
Includes the accounts of Wealth's wholly owned and majorly owned subsidiaries and its variable interest entities.
|
|
|
(6)
|
This adjustment gives effect to the private placement of preferred shares and warrants completed on December 15, 2010, with a group of accredited investors, under which the Company which we issued to the investors an aggregate 222,402 Units for a purchase price of $6,672,032, or $30.00 per Unit. Each Unit consists of two Preferred Shares and a Warrant to purchase five ordinary shares after giving effect to the Reverse Split described in adjustment (1). The Warrants have a term of 5 years, bear an exercise price of $4.50 per share (subject to customary adjustments), are exercisable on a net exercise or cashless basis and are exercisable by investors at any time after the closing date.
|
|
|
(7)
|
This adjustment gives effect to the Company's December 15, 2010 issuance of 998,275 shares (700,000 post reverse split shares) to Mr. Karlson Ka Tsun PO, as compensation for the services he provided to us in connection with the Share Exchange and Private Placement. The foregoing securities were issued pursuant to the exemption from registration provided by Section 4(2) of the Securities Act for the offer and sale of securities not involving a public offering.
|
|
|
(8)
|
This adjustment gives effect to the Company's December 15, 2010 issuance of 998,725 shares (700,000 post reverse split shares) to Access America Fund, LP to in payment of $500,000 of convertible debt under an automatic conversion provision included in the notes, triggered by the event of the Share Exchange. The entire proceeds of this note were originally allocated to the embedded beneficial conversion feature resulting in a debt discount that was being accreted to interest expense over the one year term of the note. The unamortized portion of the discount or $375,000 was recognized as interest expense at the date of conversion.
|
|
|
(9)
|
This adjustment gives effect to the holdback agreement entered into at the time of the private placement, we entered into a holdback escrow agreement pursuant to which $2,167,203 was deposited with the escrow agent to be distributed upon the satisfaction of certain covenants set forth in the Subscription Agreement. Pursuant to the Holdback Escrow Agreement, the $1,500,000 will be released to the Company upon the hiring of a chief financial officer on terms acceptable under the agreement and $667,203 will be released to us upon appointment of the required independent directors to our board of directors.
|
|
|
(10)
|
This adjustment give effect to the investor relations escrow agreement, or the IR Escrow Agreement, with Anslow & Jaclin, LLP, the escrow agent, and Access America Investments, LLC, as representative of the investors, pursuant to which $120,000 was deposited with the escrow agent to be distributed in incremental amounts to pay our investor relations firm, the choice of which is subject to the approval of Access America Investments, LLC.
|
|
|
(11)
|
Effect of adjustments to income on retained earnings.
|
|
|
(12)
|
To record the tax effect of adjustments to income.
|
|
|
(13)
|
To accrete and recognize as interest expense the unamortized beneficial conversion discount on the debt to Access America Fund, LP
|
5
|
CHINA GROWTH CORPORATION
|
||||||||||||||||||||
|
UNAUDITED PROFORMA CONDENSED COMBINED STATEMENT OF INCOME (LOSS)
|
||||||||||||||||||||
|
AND COMPREHENSIVE INCOME (LOSS)
|
||||||||||||||||||||
|
Wealth
|
||||||||||||||||||||
|
China Growth
|
For the
|
|||||||||||||||||||
|
For The Three
|
Nine Months
|
|||||||||||||||||||
|
Months Ended
|
Ended
|
|||||||||||||||||||
|
September 30,
|
September 30,
|
Pro Forma
|
Pro Forma
|
|||||||||||||||||
|
2010
|
2010 (1)
|
Adjustments
|
Combined
|
|||||||||||||||||
|
Revenue, net of sales discount
|
$
|
-
|
$
|
36,024,913
|
-
|
$
|
36,024,913
|
|||||||||||||
|
Cost of revenue
|
-
|
18,548,682
|
-
|
18,548,682
|
||||||||||||||||
|
Gross profit
|
-
|
17,476,231
|
-
|
17,476,231
|
||||||||||||||||
|
Operating expense:
|
||||||||||||||||||||
|
Selling and marketing
|
-
|
1,133,482
|
-
|
1,133,482
|
||||||||||||||||
|
General and administrative
|
1,006
|
2,120,472
|
-
|
2,121,478
|
||||||||||||||||
|
Total operating expenses
|
1,006
|
3,253,954
|
-
|
3,254,960
|
||||||||||||||||
|
Income (loss) from operations
|
(1,006
|
)
|
14,222,277
|
-
|
14,221,271
|
|||||||||||||||
|
Other income (expenses):
|
||||||||||||||||||||
|
Cost of recapitalization
|
(1,211,000
|
)
|
(2
|
)
|
(1,211,000
|
)
|
||||||||||||||
|
Interest income
|
-
|
45,411
|
-
|
45,411
|
||||||||||||||||
|
Interest expense
|
-
|
(135,347
|
)
|
(375,000
|
)
|
(3
|
)
|
(510,347
|
)
|
|||||||||||
|
Total other expenses
|
-
|
(89,936
|
)
|
(1,586,000
|
)
|
(1,675,936
|
)
|
|||||||||||||
|
Income before provision for income taxes
|
(1,006
|
)
|
14,132,341
|
(1,586,000
|
)
|
12,545,335
|
||||||||||||||
|
Provision for income taxes
|
-
|
3,535,196
|
396,500
|
(4
|
)
|
3,138,696
|
||||||||||||||
|
Net income
|
(1,006
|
)
|
10,597,145
|
(1,189,500
|
)
|
9,406,639
|
||||||||||||||
|
Other comprehensive income-
|
||||||||||||||||||||
|
Foreign currency translation adjustments
|
-
|
794,237
|
-
|
794,237
|
||||||||||||||||
|
Comprehensive income (loss)
|
$
|
(1,006
|
)
|
$
|
11,391,382
|
$
|
(1,189,500
|
)
|
$
|
10,200,876
|
||||||||||
|
Weighted average number of shares outstanding -
|
||||||||||||||||||||
|
basic and diluted
|
998,275
|
7,000
|
17,493,000
|
(5
|
)
|
|||||||||||||||
|
700,000
|
(2
|
)
|
||||||||||||||||||
|
700,000
|
(3
|
)
|
19,898,275
|
|||||||||||||||||
|
Net (loss) income per common share - basic and diluted
|
$
|
-
|
$
|
1,627.34
|
$
|
0.47
|
||||||||||||||
6
CHINA GROWTH CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
|
(1)
|
Includes the accounts of Wealth's wholly owned subsidiaries and its variable interest entity, Wealth Water, and Wealth Water's wholly owned and major owned subsidiaries.
|
|
(2)
|
This adjustment gives effect to the Company's December 15, 2010 issuance of 998,275 shares (700,000 post reverse split shares) to Mr. Karlson Ka Tsun PO, as compensation for the services he provided to us in connection with the Share Exchange and Private Placement. The foregoing securities were issued pursuant to the exemption from registration provided by Section 4(2) of the Securities Act for the offer and sale of securities not involving a public offering.
|
|
(3)
|
To accrete and recognize as interest expense the unamortized beneficial conversion discount on the debt to Access America Fund, LP
|
|
(4)
|
To recognize the tax effect of adjustments (1) and (2)
|
|
(5)
|
This adjustment gives effect to the Issuance of 17,500,000 ordinary shares of China Growth in exchange of the ownership of the 7,000 ordinary shares of Wealth. Under the terms of the Exchange Agreement with Wealth, and shareholders of Wealth named in the Exchange Agreement, Wealth transferred to China Growth all of the issued and outstanding ordinary shares of Wealth in exchange for the issuance of a total of 24,956,875 ordinary shares, par value $0.000128 per share, or 96.15% of the ordinary shares of the Company issued and outstanding after the Closing. China Growth has not effectuated the 1: 1.42610714 reverse stock split on all of the ordinary shares issued and outstanding at the closing of the Share Exchange that will ultimately result in Wealth shareholders owning 17,500,000 shares when effective.
|
7
|
CHINA GROWTH CORPORATION
|
|||||||||||||||||||
|
UNAUDITED PROFORMA COMBINED STATEMENT OF INCOME (LOSS) COMPREHENSINCOME (LOSS)
|
|||||||||||||||||||
|
AND COMPREHENSIVE INCOME (LOSS)
|
|||||||||||||||||||
|
China Growth
|
Wealth
|
||||||||||||||||||
|
For the Year Ended
|
For the Year Ended
|
||||||||||||||||||
|
December 31,
|
December 31,
|
Pro Forma
|
Pro Forma
|
||||||||||||||||
|
2009
|
2009 (1)
|
Adjustments
|
Combined
|
||||||||||||||||
|
Revenue, net of sales discount
|
$
|
-
|
$
|
38,975,961
|
-
|
$
|
38,975,961
|
||||||||||||
|
Cost of revenue
|
-
|
20,703,600
|
-
|
20,703,600
|
|||||||||||||||
|
Gross profit
|
-
|
18,272,361
|
-
|
18,272,361
|
|||||||||||||||
|
Operating expense:
|
|||||||||||||||||||
|
Selling and marketing
|
-
|
1,454,054
|
-
|
1,454,054
|
|||||||||||||||
|
General and administrative
|
2,374
|
2,251,883
|
-
|
2,254,257
|
|||||||||||||||
|
Total operating expenses
|
2,374
|
3,705,937
|
-
|
3,708,311
|
|||||||||||||||
|
Income (loss) from operations
|
(2,374
|
)
|
14,566,424
|
-
|
14,564,050
|
||||||||||||||
|
Other income (expenses):
|
|||||||||||||||||||
|
Cost of recapitalization
|
-
|
-
|
(1,211,000
|
)
|
(2
|
)
|
(1,211,000
|
)
|
|||||||||||
|
Interest expense
|
(500,000
|
)
|
(3
|
)
|
(500,000
|
)
|
|||||||||||||
|
Interest income
|
-
|
43,649
|
-
|
43,649
|
|||||||||||||||
|
Total other expenses
|
-
|
43,649
|
(1,711,000
|
)
|
(1,667,351
|
)
|
|||||||||||||
|
Income before provision for income taxes
|
(2,374
|
)
|
14,610,073
|
(1,711,000
|
)
|
12,896,699
|
|||||||||||||
|
Provision for income taxes
|
-
|
3,652,518
|
427,750
|
(4
|
)
|
3,224,768
|
|||||||||||||
|
Net income
|
(2,374
|
)
|
10,957,555
|
(1,283,250
|
)
|
9,671,931
|
|||||||||||||
|
Other comprehensive income-
|
|||||||||||||||||||
|
Foreign currency translation adjustments
|
-
|
4,043
|
-
|
4,043
|
|||||||||||||||
|
Comprehensive income (loss)
|
$
|
(2,374
|
)
|
$
|
10,961,598
|
$
|
(1,283,250
|
)
|
$
|
9,675,974
|
|||||||||
|
Weighted average number of shares outstanding -
|
|||||||||||||||||||
|
basic and diluted
|
998,275
|
7,000
|
17,493,000
|
(5
|
)
|
||||||||||||||
|
700,000
|
(3
|
)
|
|||||||||||||||||
|
700,000
|
(4
|
)
|
19,898,275
|
||||||||||||||||
|
Net (loss) income per common share - basic and diluted
|
$
|
-
|
$
|
1,565.94
|
$
|
0.49
|
|||||||||||||
8
CHINA GROWTH CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
|
(1)
|
Includes the accounts of Wealth's wholly owned subsidiaries and its variable interest entity, Wealth Water, and Wealth Water's wholly owned and major owned subsidiaries.
|
|
(2)
|
This adjustment gives effect to the Company's December 15, 2010 issuance of 998,275 shares (700,000 post reverse split shares) to Mr. Karlson Ka Tsun PO, as compensation for the services he provided to us in connection with the Share Exchange and Private Placement. The foregoing securities were issued pursuant to the exemption from registration provided by Section 4(2) of the Securities Act for the offer and sale of securities not involving a public offering.
|
|
(3)
|
To accrete and recognize as interest expense the unamortized beneficial conversion discount on the debt to Access America Fund, LP
|
|
(4)
|
To recognize the tax effect of adjustments (1) and (2)
|
|
(5)
|
This adjustment gives effect to the Issuance of 17,500,000 ordinary shares of China Growth in exchange of the ownership of the 7,000 ordinary shares of Wealth. Under the terms of the Exchange Agreement with Wealth, and shareholders of Wealth named in the Exchange Agreement, Wealth transferred to China Growth all of the issued and outstanding ordinary shares of Wealth in exchange for the issuance of a total of 24,956,875 ordinary shares, par value $0.000128 per share, or 96.15% of the ordinary shares of the Company issued and outstanding after the Closing. China Growth has not effectuated the 1: 1.42610714 reverse stock split on all of the ordinary shares issued and outstanding at the closing of the Share Exchange that will ultimately result in Wealth shareholders owning 17,500,000 shares when effective.
|
9