Attached files
| file | filename |
|---|---|
| 8-K/A - Tanke Biosciences Corp | e608450_8ka-tanke.htm |
| EX-23.1 - Tanke Biosciences Corp | e608450_ex23-1.htm |
| EX-99.1 - Tanke Biosciences Corp | e608450_ex99-1.htm |
Exhibit 99.2
Pro Forma Financial Information
Background Information Regarding Pro Forma Financial Statements
On January 3, 2011 China Flying Development Limited, a Hong Kong incorporated company (“China Flying”), and Golden Genesis Limited, a British Virgin Islands company (“Golden Genesis”), the sole stockholder of China Flying, entered into a Share Exchange Agreement (the “Share Exchange”) with Greyhound Commissary, Inc., a Nevada corporation (“Greyhound”). The Share Exchange was consummated on February 9, 2011, and Golden Genesis exchanged 100% of its capital stock in China Flying for 10,758,000 shares of authorized, but previously unissued shares of Greyhound common stock. In connection with the Share Exchange, Greyhound also issued an aggregate of 1,993,000 shares of its authorized, but previously unissued common stock to Regeneration Capital Group LLC, a fund, and certain investors in the fund, the U.S. advisor to Tanke. As a result of the Share Exchange, China Flying became Greyhound’s wholly owned subsidiary. Simultaneous, with the consummation of the Share Exchange, Greyhound sold 6,669,627 units (the “Units”) for $7.67 million. Each Unit consisted of a $1.15 principal amount convertible note (the “Notes”) with an interest rate of 8% per annum and a three year warrant to purchase one share of Greyhound common stock. Each Note is convertible into Greyhound common stock at a conversion rate of $1.15 per share. As a result of the Share Exchange and the sale of Units, and assuming that the Notes are converted into shares of Greyhound common stock, Golden Genesis owns approximately 54% of the outstanding common stock of Greyhound, including the 2 million shares held in escrow pending achievement of certain performance goals, and the investors that purchased Units owned approximately 34% of the outstanding common stock of Greyhound.
The following unaudited pro forma combined balance sheets and statements of operation reflect the combination of China Flying and Greyhound. The unaudited pro forma combined balance sheet has been derived from historical financial statements of both China Flying and Greyhound. The unaudited pro forma combined balance sheets as of December 31, 2009 and September 30, 2010 were prepared as if the Merger had occurred on the balance sheet dates. The unaudited pro forma combined statements of operations were prepared as if the Merger had occurred on the first day of each period presented.
In the opinion of management, all adjustments necessary to present fairly the pro forma combined balance sheets have been made based on the terms and structure of the transaction. The unaudited pro forma combined statements of operations are not necessarily indicative of what actual results would have been had the transaction occurred at the beginning of the period nor do they purport to indicate the results of future operations of China Flying and Greyhound. The unaudited pro forma combined financial statements should be read in conjunction with the accompanying notes and historical financial statements and notes to the financial statements of China Flying and Greyhound.
Combined Pro Forma Balance Sheet as of December 31, 2010 (Unaudited) and Notes Thereto
|
Pro Forma Adjustments
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||||||||||||||||||||||||
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Guangzhou Tanke
Industry Co., LTD.
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Greyhound
Commissary, Inc.
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Effect of
Share Exchange
Agreement
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Effect of
Private
Placement
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Effect of
Discontinued
Operation
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Pro Forma
Combined
|
|||||||||||||||||||
|
(unaudited)
[A]
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(unaudited)
[B]
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(unaudited)
[C]
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(unaudited)
|
|||||||||||||||||||||
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ASSETS
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||||||||||||||||||||||||
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Current assets:
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||||||||||||||||||||||||
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Cash and cash equivalents
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$ | 2,222,025 | $ | - | $ | 0 | $ | 5,815,761 | $ | 0 | $ | 8,037,786 | ||||||||||||
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Restricted cash
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- | - | 706,802 | 706,802 | ||||||||||||||||||||
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Note receivable - related parties, current portion
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2,033,622 | - | 2,033,622 | |||||||||||||||||||||
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Accounts receivable, net
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1,767,968 | - | 1,767,968 | |||||||||||||||||||||
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Inventories
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1,354,282 | - | 1,354,282 | |||||||||||||||||||||
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Deferred tax asset
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17,887 | 17,887 | ||||||||||||||||||||||
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Other receivables
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112,569 | - | 112,569 | |||||||||||||||||||||
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Other current assets
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164,846 | - | 1,624,002 | 1,788,848 | ||||||||||||||||||||
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Total current assets
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7,673,199 | - | - | 8,146,565 | - | 15,819,764 | ||||||||||||||||||
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Note receivable - related parties, long term portion
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974,532 | 974,532 | ||||||||||||||||||||||
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Property and equipment, net
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1,554,589 | 1,554,589 | ||||||||||||||||||||||
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Construction in progress
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2,777,417 | 2,777,417 | ||||||||||||||||||||||
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Intangible asset, net
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286,892 | 286,892 | ||||||||||||||||||||||
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Total assets
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13,266,629 | - | $ | - | $ | 8,146,565 | $ | - | $ | 21,413,194 | ||||||||||||||
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LIABILITIES AND STOCKHOLDERS' EQUITY
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Current liabilities:
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Accounts payable
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$ | 604,913 | $ | 8,520 | $ | 0 | $ | 0 | $ | (1,500 | ) | $ | 611,933 | |||||||||||
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Other payables and accrued liabilities
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192,298 | 192,298 | ||||||||||||||||||||||
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Advance from customers
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3,176 | 3,176 | ||||||||||||||||||||||
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Income tax payable
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699,637 | 699,637 | ||||||||||||||||||||||
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Convertible notes payable
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- | 2,021,370 | 2,021,370 | |||||||||||||||||||||
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Note payable related party
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- | 42,033 | (28,311 | ) | 13,722 | |||||||||||||||||||
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Accrued interest related party
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- | 5,538 | (2,415 | ) | 3,123 | |||||||||||||||||||
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Current portion of long-term borrowings
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905,975 | 905,975 | ||||||||||||||||||||||
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Total current liabilities
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2,405,999 | 56,091 | - | 2,021,370 | (32,226 | ) | 4,451,234 | |||||||||||||||||
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Government grant
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73,497 | - | 73,497 | |||||||||||||||||||||
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Long-term borrowings
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452,987 | - | 452,987 | |||||||||||||||||||||
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Total liabilities Total liabilities
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2,932,483 | 56,091 | - | 2,021,370 | (32,226 | ) | 4,977,718 | |||||||||||||||||
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Commitments and contingencies
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Stockholders’ equity:
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Common stock
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3,398 | 9,599 | 12,997 | |||||||||||||||||||||
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Additional paid-in capital
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51,201 | 1,337,432 | 6,125,195 | 7,513,828 | ||||||||||||||||||||
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Contributed capital
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1,427,856 | (1,427,856 | ) | - | ||||||||||||||||||||
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Retained earnings
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6,205,483 | (110,690 | ) | 80,825 | 32,226 | 6,207,844 | ||||||||||||||||||
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Accumulated other comprehensive income
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530,070 | 530,070 | ||||||||||||||||||||||
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Total stockholders' equity
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8,163,409 | (56,091 | ) | - | 6,125,195 | 32,226 | 14,264,739 | |||||||||||||||||
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Non-controlling interest in subsidiary
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2,170,737 | - | 2,170,737 | |||||||||||||||||||||
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Total equity
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10,334,146 | (56,091 | ) | - | 6,125,195 | 32,226 | 16,435,476 | |||||||||||||||||
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Total liabilities and stockholders’ equity
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$ | 13,266,629 | $ | - - | $ | - - | $ | 8,146,565 | $ | - | $ | 21,413,194 | ||||||||||||
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[A]
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The adjustment reflects the impact of the Share Exchange Agreement, the effect of which includes the issuance of 10,758,000 shares to Golden Genesis, 1,840,000 shares to Regeneration Capital Group, LLC, as well as 399,316 shares outstanding from previous shareholders of Greyhound Commissary, Inc. (post reverse split).
|
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[B]
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The above adjustment reflects the impact of funds raised from a planned private placement transaction, whereby the Company issued $7,670,061 of convertible notes payable, along with three year warrants to purchase up to 6,669,627 shares of common stock. The value of the warrants, amounting to $4,470,536, was allocated on a weighted average basis with the face value of the notes to arrive at an allocation of $2,834,350 representing the relative value of the warrants. This was recorded as additional paid-in capital, together with the beneficial conversion feature of the same amount. The warrants were valued using the following assumptions; 1) fair value per share of stock $1.15,2) exercise price of $1.40 per share, 3) volatility of 100%, 4) contractual life of 3 years, and 5) risk free rate of 1.34%. The balance in the restricted cash account represents amounts placed in escrow to pay investor relations and interest expenses to be incurred after the transaction. The balance in the other current assets accounts is the deferred finance costs, which will be amortized over the two year life of the notes.
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[C]
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The adjustment represents the discontinuation of the operations of Greyhound Commissary, Inc.
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Combined Pro Forma Statement of Operations for the Year Ended December 31, 2010 (Unaudited) and Notes Thereto
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Pro Forma Adjustments
|
||||||||||||||||||||
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Guangzhou Tanke
Industry Co., LTD.
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Greyhound
Commissary, Inc.
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Effect of
Discontinued
Operation
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Effect of
Interest Expense
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Pro Forma Combined
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||||||||||||||||
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(unaudited)
[A]
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(unaudited)
[E]
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(unaudited)
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Net Sales
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$ | 20,097,784 | $ | - | $ | $ | $ | 20,097,784 | ||||||||||||
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Costs of sales
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12,697,326 | - | 12,697,326 | |||||||||||||||||
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Gross profit
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7,400,458 | - | - | - | 7,400,458 | |||||||||||||||
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Selling expenses
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1,885,845 | - | 1,885,845 | |||||||||||||||||
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Administrative expenses
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834,761 | 26,742 | (26,742 | ) | 834,761 | |||||||||||||||
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Depreciation and amortization
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47,159 | - | 47,159 | |||||||||||||||||
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Other operating expenses
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258,584 | - | 258,584 | |||||||||||||||||
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Income from operations
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4,374,109 | (26,742 | ) | 26,742 | - | 4,374,109 | ||||||||||||||
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Foreign exchange gains, net
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(1,899 | ) | - | (1,899 | ) | |||||||||||||||
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Interest income
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4,828 | - | 4,828 | |||||||||||||||||
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Interest expense - amortization of discount on notes
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- | (2,824,350 | ) | (2,824,350 | ) | |||||||||||||||
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Interest expense - amortization of deferred finance costs
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- | (812,001 | ) | (812,001 | ) | |||||||||||||||
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Interest expense
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(100,265 | ) | (3,123 | ) | 3,123 | (613,606 | ) | (713,871 | ) | |||||||||||
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Income before income taxes
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4,276,773 | (29,865 | ) | 29,865 | (4,249,957 | ) | 26,816 | |||||||||||||
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Income tax expense
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582,493 | - | - | - | 582,493 | |||||||||||||||
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Net income before non-controlling interest
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3,694,280 | (29,865 | ) | 29,865 | (4,249,957 | ) | (555,677 | ) | ||||||||||||
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Non-controlling interest in earnings of subsidiary
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(956,025 | ) | - | - | (956,025 | ) | ||||||||||||||
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Net income (loss) before discontinued operation
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2,738,255 | (29,865 | ) | 29,865 | (4,249,957 | ) | $ | (1,511,702 | ) | |||||||||||
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Discontinued operations
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Net loss
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29,865 | 29,865 | ||||||||||||||||||
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Gain on disposal
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56,091 | 56,091 | ||||||||||||||||||
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Net income (loss)
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$ | 2,738,255 | $ | (29,865 | ) | $ | 115,821 | $ | (4,249,957 | ) | $ | (1,425,746 | ) | |||||||
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Basic income (loss) per share before discontinued operation
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(0.07 | ) | 0.00 | (0.12 | ) | |||||||||||||||
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Discontinued operation
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0.01 | 0.01 | ||||||||||||||||||
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Net income (loss) per share - basic
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$ | (0.07 | ) | $ | 0.01 | $ | (0.11 | ) | ||||||||||||
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Diluted income (loss) per share before discontinued operation
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(0.07 | ) | 0.00 | (0.08 | ) | |||||||||||||||
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Discontinued operation
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0.00 | 0.00 | ||||||||||||||||||
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Net income (loss) per share - diluted
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$ | (0.07 | ) | $ | 0.00 | $ | (0.07 | ) | ||||||||||||
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Weighted average shares outstanding - basic
|
NA
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399,316 [B | ] | 12,598,000 [C | ] | 12,997,316 | ||||||||||||||
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Weighted average shares outstanding - diluted
|
NA
|
399,316 [B | ] | 19,267,627 [D | ] | 19,666,943 | ||||||||||||||
[A] This pro forma adjustment reflects Greyhound Commissary, Inc. as a discontinued operation.
[B] The weighted average shares outstanding for Greyhound Commissary, Inc. reflects the reverse 1 to 8.512 stock split on January 3, 2011.
[C] This reflects the new shares issued to Golden Genesis and Regeneration Capital Group, LLC in connection with the Share Exchange Agreement, and assumes these shares were outstanding the entire year.
[D] Includes the dilutive effect of shares relating to convertible notes payable to be issued with the planned private placement transaction.