Attached files
Exhibit 99.2
SKY DIGITAL STORES CORP. AND HONGKONG FIRST DIGITAL HOLDING LIMITED
TABLE OF CONTENT
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Pro Forma Condensed Combined Financial Statements (Unaudited)
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Page
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Notes to Pro Forma Condensed Combined Financial Statements (Unaudited)
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1
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Pro Forma Condensed Combined Balance Sheet As of December 31, 2010 (Unaudited)
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5 |
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Pro Forma Condensed Combined Statement of Operations for the Year Ended December 31, 2010 (Unaudited)
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6
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Pro Forma Adjustments (Unaudited)
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7
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1
1. Introduction to Pro Forma Condensed Combined Financial Statements (Unaudited)
The following unaudited pro forma condensed combined financial statements give effect to the transaction between SKY Digital Stores Corp. (the “Company” or “SKY Digital”) and HongKong First Digital Holding Limited (“First Digital”). In accordance with the Share Exchange Agreement, SKY Digital will acquire all of the outstanding shares of First Digital for the issuance of 23,716,035 shares of SKY Digital’s common stock. The Share Exchange will result in a change in control of SKY Digital, with First Digital owning approximately 97.56% of SKY Digital’s common stock after giving effect to the recapitalization of First Digital and a 1 for 200 reverse split of SKY Digital’s common stock.
On April 7, 2011, Shenzhen Xing Tian Kong Digital Company Limited (“Xingtiankong”), a wholly owned subsidiary of First Digital, entered into the Share Exchange Agreement with shareholders of Shenzhen Dasen Communication Technology Company Limited (“Shenzhen Dasen”), a company incorporated in the PRC on November 26, 2007.
On April 8, 2011, Xingtiankong entered into the Amended Share Exchange Agreement with shareholders of Shenzhen Dasen. Pursuant to the Share Exchange Agreement, Xingtingkong acquired all of registered capital of Shenzhen Dasen with total consideration for $1,213,629. As part of the agreement, Xingtiankong hired Guan, Yinyan, one of Shenzhen Dasen shareholders as its Business Consultant for three years, and will pay Mr. Guan $303,407 as total compensation for his three-year service.
Shenzhen Dasen holds 70% of the registered capital of Foshan Da Sheng Communication Chain Service Company Limited, a company incorporated in PRC on January 19, 2007.
2. Basis of Presentation
The unaudited pro forma combined balance sheet presents the accounts of SKY Digital as of January 31, 2011 and First Digital as of December 31, 2010 as if the Share Exchange Transaction and the 1 for 200 reverse stock split were consummated on December 31, 2010. The accompanying pro forma combined statements of operations presents the accounts of SKY Digital for the year ended January 31, 2011 and First Digital for the year ended December 31, 2010 as if the Share Exchange Transaction and 1 for 200 reverse split were consummated on January 1, 2010. For accounting purposes, the transaction is being accounted for as a recapitalization of First Digital.
The unaudited pro forma combined balance sheets of First Digital presents the accounts of First Digital and Shenzhen Dasen as of December 31, 2010 as if the acquisition of Shenzhen Dasen were consummated on December 31, 2010. The pro forma combined statements of operations presents the accounts of First Digital and Shenzhen Dasen for the years ended December 31, 2010 as if the acquisition of Shenzhen Dasen were consummated on January 1, 2010.
All unaudited pro forma condensed combined financial statements furnished herein reflect all adjustments which are, in the opinion of management, necessary to present a fair statement of the results for the year-ended periods presented. All such adjustments are of a normal and recurring nature. The unaudited condensed combined pro forma financial statements were prepared using the assumptions described below and in the related notes.
The unaudited condensed combined pro forma financial statements are provided for illustrative purposes only. They do not purport to represent what SKY Digital’s consolidated results of operations and financial position would have been had the transaction actually occurred as of the dates indicated, and they do not purport to project SKY Digital’s future consolidated results of operations or financial position.
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2. Basis of Presentation (Continued)
The actual adjustments to the consolidated financial statements upon the closing of the acquisition of Shenzhen Dasen, the Share Exchange Agreement and 1 for 200 reverse split will depend on a number of factors, including additional information that becomes available. Therefore, the actual adjustments will differ from the unaudited pro forma adjustments, and the differences may be material.
The acquisition of Shenzhen Dasen will be accounted for under the acquisition method of accounting. For the purposes of determining the unaudited pro forma adjustments, the assets and liabilities of Shenzhen Dasen have been measured based on various preliminary estimates using assumptions that First Digital management believes are reasonable utilizing information currently available. The process for estimating the fair values of identifiable intangible assets, and certain tangible assets requires the use of significant estimates and assumptions, including estimating future cash flows and developing appropriate discount rates. Transaction costs are not included as a component of consideration transferred. The excess of the purchase price (consideration transferred) over the estimated amounts of identifiable assets and liabilities of Shenzhen Dasen as of the effective date of the acquisition will be allocated to goodwill. The purchase price allocation is subject to finalization of First Digital’s analysis of the fair value of the assets and liabilities of Shenzhen Dasen as of the effective date of the acquisition. Accordingly, the purchase price allocation in the unaudited pro forma condensed combined financial statements presented above is preliminary and will be adjusted upon completion of the final valuation. Such adjustments could be material. The final valuation is expected to be completed as soon as practicable but no later than one year after the consummation of the acquisition.
3. Common Stock Outstanding
The unaudited pro forma condensed combined statement of operations assumes the Share Exchange Transaction occurred as of the beginning of the year ended December 31, 2010. Therefore, the weighted average number of shares outstanding for the year ended December 31, 2010 equals the total number of shares outstanding upon completion of the Exchange Transaction as follows:
3
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Pre-Exchange Transaction Common Shares Outstanding
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115,335,576 | |||
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Reverse Stock Split (200 pre-shares for 1 post-shares)
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578,031 | |||
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Issuance of SKY Digital's shares for Recapitalization of First Digital
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23,716,035 | |||
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Issuance of SKY Digital's shares for its legal counsel
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15,000 | |||
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Post-exchange Transaction common Shares Outstanding
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24,309,066 |
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SKY DIGITAL STORES CORP. AND HONGKONG FIRST DIGITAL HOLDING LIMITED
PRO FORMA CONDENSED COMBINED BALANCE SHEET
As of December 31, 2010
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HongKong First
Digital Holding
Limited (A)
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Shenzhen Dasen Communication
Technology Co. Ltd. |
Adjustments
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Pro Forma
First Digital |
SKY Digital
Stores Corp. |
Pro forma
Adjustments |
Pro forma
Combined |
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As of December 31, 2010
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As of December 31, 2010
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As of December 31, 2010
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As of January 31,2011
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As of December 31, 2010
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(Audited)
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(Unaudited)
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(Unaudited)
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(Unaudited)
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(Unaudited)
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ASSETS
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Current Assets
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Cash
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$ | 38,216 | $ | 94,159 | $ | 132,375 | $ | 206 | $ | 132,581 | ||||||||||||||||||||
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Accounts receivable
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5,473,803 | 242,430 | 5,716,233 | - | 5,716,233 | |||||||||||||||||||||||||
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Inventories
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859,476 | 668,510 | 1,527,986 | - | 1,527,986 | |||||||||||||||||||||||||
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Trade deposit
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589,312 | 102,747 | 692,059 | - | 692,059 | |||||||||||||||||||||||||
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Prepaid expenses
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31,427 | - | 31,427 | - | 31,427 | |||||||||||||||||||||||||
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Other receivables
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18,236 | 26,607 | 44,843 | - | 44,843 | |||||||||||||||||||||||||
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Total Current Assets
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7,010,470 | 1,134,453 | 8,144,923 | 206 | - | 8,144,923 | ||||||||||||||||||||||||
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Property and equipment, net
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93,130 | 17,902 | 111,032 | - | 111,032 | |||||||||||||||||||||||||
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Intangible assets
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- | 10,707 | 10,707 | - | 10,707 | |||||||||||||||||||||||||
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Prepaid expenses-non current
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- | 2,043 | 2,043 | - | 2,043 | |||||||||||||||||||||||||
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Goodwill
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- | 243,793 |
(c)
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243,793 | - | 243,793 | ||||||||||||||||||||||||
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Total Assets
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$ | 7,103,600 | $ | 1,165,105 | $ | 243,793 | $ | 8,512,498 | $ | 206 | $ | - | $ | 8,512,704 | ||||||||||||||||
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LIABILITIES AND STOCKHOLDERS' EQUITY
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Current Liabilities
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- | |||||||||||||||||||||||||||||
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Accounts payable
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$ | 1,876,331 | $ | 25,631 | 1,901,962 | $ | 2,098 | $ | 1,904,060 | |||||||||||||||||||||
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Accrued expenses & other payables
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270,009 | 165,950 | 435,959 | 435,959 | ||||||||||||||||||||||||||
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Demand loan payable
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125,000 | 125,000 | ||||||||||||||||||||||||||||
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Income tax payable
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214,054 | - | 214,054 | - | 214,054 | |||||||||||||||||||||||||
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Due to shareholders-acquisition consideration
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- | - | 1,213,629 |
(c)
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1,213,629 | - | 1,213,629 | |||||||||||||||||||||||
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Total Current Liabilities
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2,360,394 | 191,581 | 1,213,629 | 3,765,604 | 127,098 | - | 3,892,702 | |||||||||||||||||||||||
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Commitments and Contingencies
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Stockholders' Equity
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Preferred stock
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- | $ | - | - | ||||||||||||||||||||||||||
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Common stock
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115,336 | (91,027 | ) |
(a)
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24,309 | |||||||||||||||||||||||||
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Additional paid-in capital
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20,109,496 | (16,147,142 | ) |
(a)
(b)
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3,962,354 | |||||||||||||||||||||||||
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Registered capital
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4,113,555 | 1,146,132 | (1,146,132 | ) |
(c)
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4,113,555 | - | (4,113,555 | ) |
(a)
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- | |||||||||||||||||||
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Retained deficit
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(50,687 | ) | (362,971 | ) | 362,971 |
(c)
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(50,687 | ) | (20,351,724 | ) | 20,351,724 |
(b)
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(50,687 | ) | ||||||||||||||||
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Statutory reserve
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228,457 | - | 228,457 | - | 228,457 | |||||||||||||||||||||||||
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Accumulated other comprehensive income
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451,881 | 186,767 | (190,271 | ) | 448,377 | - | 448,377 | |||||||||||||||||||||||
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Total Sky Digital (First Digital) Shareholders' Equity
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4,743,206 | 969,928 | (973,432 | ) | 4,739,702 | (126,892 | ) | - | 4,612,810 | |||||||||||||||||||||
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Non-controlling interest
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- | 3,596 | 3,596 |
(c)
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3,596 | - | 3,596 | |||||||||||||||||||||||
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Total shareholders' equity
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4,743,206 | 973,524 | (969,836 | ) | 4,746,894 | (126,892 | ) | $ | - | 4,620,002 | ||||||||||||||||||||
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Total Liabilities and Stockholders' Equity
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$ | 7,103,600 | $ | 1,165,105 | $ | 243,793 | $ | 8,512,498 | $ | 206 | $ | - | $ | 8,512,704 | ||||||||||||||||
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(A) Represents the Consolidated Balance Sheet of HongKong First Digital Holding Limited.("First Digital")and Subsidiaries as of December 31, 2010
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SKY DIGITAL STORES CORP. AND HONGKONG FIRST DIGITAL HOLDING LIMITED
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
For the Years Ended December 31, 2010
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HongKong First
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Shenzhen Dasen Communication
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Digital Holding
Limited (A)
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Technology Co. Ltd.
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Pro Forma
First Digital |
SKY Digital
Stores Corp. (B) |
Pro forma
Adjustments |
Pro forma
Combined |
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(Audited)
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(Unaudited)
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(Unaudited)
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(Unaudited) |
(Unaudited)
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(Unaudited)
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Sales
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$ | 34,993,500 | $ | 1,552,005 | $ | 36,545,505 | $ | - | $ | 36,545,505 | ||||||||||||||
| - | ||||||||||||||||||||||||
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Cost of goods sold
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(31,290,164 | ) | (1,142,795 | ) | (32,432,959 | ) | - | (32,432,959 | ) | |||||||||||||||
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Gross profit
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3,703,336 | 409,210 | 4,112,546 | - | 4,112,546 | |||||||||||||||||||
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Operating expenses:
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General and administrative expenses
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(721,633 | ) | (388,409 | ) | (1,110,042 | ) | (63,778 | ) | 63,778 | (b) | (1,110,042 | ) | ||||||||||||
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Selling expense
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(378,867 | ) | (147,530 | ) | (526,397 | ) | - | (526,397 | ) | |||||||||||||||
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Total operating expenses:
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(1,100,500 | ) | (535,939 | ) | (1,636,439 | ) | (63,778 | ) | 63,778 | (1,636,439 | ) | |||||||||||||
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Operating income
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2,602,836 | (126,729 | ) | 2,476,107 | 2,476,107 | |||||||||||||||||||
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Other income (expense):
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- | |||||||||||||||||||||||
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Interest income
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5,468 | - | 5,468 | 1,835 | (1,835) | (b) | 5,468 | |||||||||||||||||
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Other expense
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- | (474 | ) | (474 | ) | (11,884 | ) | 11,884 | (b) | (474 | ) | |||||||||||||
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Total other income (expense)
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5,468 | (474 | ) | 4,994 | (10,049 | ) | 10,049 | 4,994 | ||||||||||||||||
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Income before income tax
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2,608,304 | (127,203 | ) | 2,481,101 | (73,827 | ) | 73,827 | 2,481,101 | ||||||||||||||||
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Income tax
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(568,082 | ) | (17,207 | ) | (585,289 | ) | - | - | (585,289 | ) | ||||||||||||||
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Net income (loss)
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2,040,222 | (144,410 | ) | 1,895,812 | (73,827 | ) | 73,827 | 1,895,812 | ||||||||||||||||
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Less: net income (loss) attributable to non-controlling interests
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- | 3,596 | 3,596 | 3,596 | ||||||||||||||||||||
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Net Income Attributable to SKY Digital Shareholders
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$ | 2,040,222 | $ | (140,814 | ) | $ | 1,899,408 | $ | 1,899,408 | |||||||||||||||
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Net income for common share
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Earnings per share-Basic
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$ | 0.08 | ||||||||||||||||||||||
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Earnings per share-Diluted
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$ | 0.08 | ||||||||||||||||||||||
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Weighted average common shares outstanding
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Basic
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24,309,066 | |||||||||||||||||||||||
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Diluted
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24,309,066 | |||||||||||||||||||||||
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(A) Represents the Consolidated Statements of Incomes of HongKong First Digital Holding Limited ("First Digital") and Subsidiaries for the year ended December 31, 2010
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(B) Represents the Statement of Operations of SKY Digital Stores Corp. (Formerly known as Yellowcake Mining, Inc.) for the year ended January 31, 2011
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6
Pro Forma Adjustments
The following adjustments would be required if the Share Exchange Transaction occurred as indicated above:
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(a)
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To record the issuance of an aggregate of 23,716,035 common shares of SKY Digital common stock for the Share Exchange Transaction and the one for two hundred (1 for 200) reverse stock split for SKY Digital;
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(b)
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To reflect the share exchange and recapitalization of First Digital;
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(c)
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To record the acquisition of Shenzhen Dasen for aggregate consideration of approximately $1,213,629 due three months from the effective date of the agreement.
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